TIF Expertise: Common Pitfalls for Tennessee Mayors to Avoid

Tennessee’s new developer-backed TIF Bond framework is a powerful tool — but like any complex financial instrument, the details matter. For mayors championing TIF-supported development in their communities, there are common missteps that can undermine a project’s success, erode public trust, or leave value on the table. Hageman Capital works with municipal leaders across Tennessee to help navigate these challenges, and we have seen the same patterns repeat. Here are the pitfalls worth watching for — and how to avoid them.

Pitfall 1: Approving a Project Without a Clear “But-For” Justification

Tennessee’s TIF framework requires that the project would not be economically feasible without TIF assistance. This is not a formality — it is the legal and political foundation of the entire transaction. If a project would have proceeded anyway, using TIF is giving away future tax revenue unnecessarily. Mayors should insist on a genuine feasibility analysis that demonstrates the funding gap and confirms TIF is the tool that closes it. If the developer cannot articulate why the project fails without TIF, the incentive may not be warranted.

Pitfall 2: Not Understanding the Difference Between Housing Authority and IDB Structures

Choosing the wrong TIF agency can limit your project’s flexibility or introduce unnecessary approval requirements. Housing Authorities offer 30-year allocation periods and broader eligible cost authority for blighted areas, but require a blight determination. IDBs offer 20-year periods and do not require blight, but need state approval for private property improvements. A mayor who does not understand this distinction may inadvertently delay a project or miss out on a more favorable structure. Working with experienced TIF advisors early in the process prevents this.

Pitfall 3: Failing to Negotiate Strong Taxpayer Agreement Terms

SB 1760 authorizes taxpayer agreements, but the legislation does not dictate every term — many details are negotiated in the redevelopment agreement. Mayors should ensure the taxpayer agreement includes clear shortfall guarantee provisions, enforceable performance milestones, financial reporting requirements, and meaningful remedies for default. A weak taxpayer agreement undermines the protections the legislation was designed to provide.

Pitfall 4: Poor Public Communication

TIF is often misunderstood by the public. Constituents may believe TIF diverts existing tax revenue from schools and services, or that it amounts to a handout to developers. Neither is accurate, but if you cannot explain TIF clearly at a town hall, you will face opposition based on misconceptions rather than facts. The key messages are simple: TIF does not create new taxes, does not redirect existing revenue, and under the developer-backed structure, the city carries zero financial risk. Preparing clear talking points before the public hearing is essential.

Pitfall 5: Going It Alone Without Expert Support

Tennessee’s TIF legislation is new, and the taxpayer agreement framework adds legal and financial complexity that most municipal staff have not encountered before. Mayors who try to navigate the process without experienced partners risk structural errors, missed deadlines, or terms that do not adequately protect the municipality. This does not mean you need to hire expensive consultants — Hageman Capital provides TIF structuring expertise to Tennessee mayors at no cost. We work alongside your existing financial advisors, legal counsel, and economic development staff to ensure the structure is right.

Start the Conversation

If you are evaluating a TIF opportunity or simply want to understand how the new legislation applies to your city, Hageman Capital is here to help. Our Director – Government Relations, Whitney Peterson, works directly with mayors across Tennessee to provide education, structuring guidance, and deal support at no charge. Request a meeting with Whitney Peterson and make sure your community’s next TIF project is structured right from day one.