Structuring Your TIF: What It Means for Kansas and Municipal Finance Advisors

For Kansas municipal financial advisors, structuring a TIF Bond that a capital provider can purchase is the technical exercise that determines whether a developer-backed transaction delivers its intended benefits. Here is the framework for structuring special obligation TIF Bonds under KSA 12-1774(a) with taxpayer agreements under HB 2737 that Hageman Capital can purchase.

Bond Structure Requirements

Hageman Capital purchases special obligation bonds structured as private placements — non-recourse to the city, payable from pledged ad valorem increment (excluding 20 mills for school districts and 1.5 mills for the state), local sales tax increment, franchise fees, and secured by a taxpayer agreement. Key parameters include amortization schedule, interest rate, maturity (within the 20-year TIF period), and coverage ratio. Kansas’s multi-revenue-stream framework provides layered security that enhances the bond’s value — but each stream must be modeled independently with conservative assumptions.

The Taxpayer Agreement as Security

Under HB 2737, the taxpayer agreement creates a binding guarantee enforceable as delinquent real estate taxes. Written consent from existing mortgage holders is required before execution. The agreement does not constitute public debt, does not pledge the city’s credit, and does not count against debt limitations. For capital provider underwriting, the key evaluation points are the developer’s financial capacity, the guarantee calculation methodology, and the enforceability provisions. The mortgage holder consent requirement should be factored into your closing timeline.

Increment Modeling for Multi-Stream Revenue

Your model should project ad valorem increment (excluding protected mill levies), local sales tax increment (if pledged — at the governing body’s discretion), and franchise fee revenue separately. Account for development timeline risk, assessment lag, sales tax volatility, and tenant occupancy assumptions. The feasibility study must document these projections and demonstrate the but-for case. Hageman Capital’s underwriting team reviews projections independently, but a well-documented, conservative model streamlines the process.

Coordinating Bond Documents

Documentation includes the bond resolution, the bond or note, the redevelopment agreement, the taxpayer agreement, the security agreement pledging revenues, and bond counsel’s opinion. The two-thirds supermajority vote must adopt the project plan before bonds are issued. Bond counsel should verify statutory compliance with both KSA 12-1770 and HB 2737, including the eligible area designation, feasibility study requirements, and taxpayer agreement recording provisions.

Engage Hageman Capital During Structuring

Having the capital provider at the table during structuring prevents costly rework after governing body approval. Hageman Capital provides guidance on coverage expectations, multi-stream revenue pledging, taxpayer agreement terms, and timing — at no cost to the municipality. Connect with Whitney Peterson for a technical consultation on the transaction in front of you.