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

For Tennessee municipal financial advisors, structuring a TIF Bond that a capital provider will purchase is the technical exercise that determines whether a developer-backed TIF transaction delivers its intended benefits. The deal that works — upfront capital for the developer, zero credit exposure for the municipality, and a completed project that grows the tax base — depends on getting the bond structure right. Here is the framework for structuring TIF Bonds that Hageman Capital can purchase.

Bond Structure Requirements

Hageman Capital purchases developer-backed TIF Bonds structured as private placements — issued by the TIF agency directly to the developer, who assigns the bond to Hageman Capital at closing. The bond must be non-recourse to the TIF agency and municipality, payable solely from tax increment revenues and secured by a taxpayer agreement under SB 1760. Key structural parameters include the amortization schedule (which must align with projected increment timing), the interest rate (negotiated based on market conditions and deal-specific risk), the maturity (within Tennessee’s 20-year IDB or 30-year Housing Authority limits), and the coverage ratio (the margin by which projected increment exceeds required debt service).

The Taxpayer Agreement as Security

The taxpayer agreement is the instrument that makes developer-backed TIF Bonds purchasable. From a capital provider’s perspective, the agreement must include a clear taxpayer direct payment calculation (the positive difference between the next-due debt service and available increment), a recorded lien with first-priority status that runs with the land and survives foreclosure, enforcement provisions that allow collection as real property taxes, and the anti-acceleration provision specified in SB 1760 (ensuring existing mortgage holders cannot call their loans solely due to the taxpayer agreement). The developer’s financial capacity to honor the guarantee is evaluated through balance sheet review, track record analysis, and assessment of their other outstanding obligations.

Increment Modeling for Capital Provider Underwriting

The increment projection is the foundation of the bond’s valuation. Your model should account for the development timeline (including conservative assumptions about construction delays and assessment lag), the assessed value increase based on the project’s expected market value at completion, the applicable tax rate and any millage rate changes, and the increment calculation methodology specified in the TIF plan (aggregate vs. parcel-by-parcel). Hageman Capital’s underwriting team will review these projections independently, but starting with a conservative, well-documented model streamlines the process and builds confidence.

Coordinating Bond Documents

The loan documentation for a developer-backed TIF Bond transaction typically includes the bond or note itself, the redevelopment agreement, the taxpayer agreement, a security agreement pledging TIF revenues to the bondholder, and bond counsel’s opinion. Bond counsel should review all documentation to ensure statutory compliance under the Uniformity Act and SB 1760. The TIF agency’s filing obligations — recording the taxpayer agreement with the register of deeds, notifying the county trustee, and filing parcel data with the Comptroller — must also be completed on schedule.

Why Engage Hageman Capital During Structuring

The most efficient path to closing is having the capital provider at the table during the structuring phase — not after the bond documents are finalized. Hageman Capital can provide guidance on coverage ratio expectations, amortization preferences, taxpayer agreement terms that meet our underwriting standards, and timing considerations. This front-end collaboration prevents costly restructuring after governing body approval and gives all parties — the municipality, the developer, and the lender — certainty that the deal will close.

Hageman Capital works alongside Tennessee municipal financial advisors as a specialized TIF resource at no cost. Connect with Whitney Peterson, our Director – Government Relations, for a technical consultation on the transaction in front of you.