TIF creation for single-site projects

The process for creating TIF sites and TIF bonds all boils down to the “But For” test unique to each municipality. Tax increment financing allow developers to capture incremental property tax payments generated from their new development. Historically, this has been to help pay for community improvements (like public parking garages) and are awarded to enable non-viable projects to move forward. Developments that cannot be feasibly and commercially built without a TIF incentive, that also demonstrate tremendous public value are often granted TIFs.

Securing TIF bonds can be a substantial benefit to the feasibility of your project.

Capital and structuring for TIF

Make projects feasible by lowering contributed equity with Hageman Capital

Hageman Capital is your private source for TIF funding, sell your bond and help projects become financially feasible. With our real estate and financial expertise, we have the tools needed to help assess the TIF bond’s value, and structure the deal to generate maximum proceeds. Get an estimate on the TIF bonds today.

Calculate your TIF's proceeds

Turn an infeasible project into a driver of returns

Balancing the feasibility of your project takes time, and access to upfront capital from monetizing TIF bonds can bolster financial performance. Selling your TIF bonds to Hageman Capital enables your project to cover additional costs.

Development feasibility factors

Real estate development infeasible, without TIF

Overall, municipalities have restrictions on when TIF can be used. However, if a municipality determines a project can pass the “But for” test, the municipality can grant TIF as an incentive to support the project. However, “But for” standards may come in many different forms.

One example is a municipality may require a project to meet certain architectural standards. Certain other municipalities may require a developer to improve upon existing infrastructure, or build additional community assets (like park improvements, or parking garages). Any of these will cause higher project costs that make it financially infeasible for any developer to build.TIF not only allows municipalities to incentivize projects in areas that have not seen new development, it also allows for a higher standard of development to ensure quality projects a community can be proud of. All of these examples can fall under the “But for” test.

Taking in consideration of any municipal requirements, if the project cannot move forward “but for” the creation of a TIF incentive, the municipality and the developer can work together to create a TIF district to support the project. In most instances, prior to any TIF award, municipalities will require a detailed pro-forma of the proposed project, along with costs, conceptual designs, etc. For example, a multifamily project may include the amount of units, construction timeline and rent income.

Municipal requirements for your TIF

Municipalities are careful when providing TIF incentives to developers, as future property taxes will be captured to pay the bond holder instead of being collected for municipal and governmental use. Not just any development project can be approved for a TIF; the project must be advantageous for the community’s vision of an area, and potentially even show how the surrounding tax base can grow because by building the project.

TIFs are usually approved at the local government level and have regulations that limit based on the jurisdiction. State laws can also affect the tax increment itself or level of financing available. Additionally, there may be certain jurisdictions that require multiple bodies to approve any TIF incentives, and who ultimately controls the approval process may vary based on the project and the location.

Knowing these nuances and how to navigate them are critical for a developer to secure TIF, and being able to turn it into usable, upfront capital. Hageman Capital can serve as a resource when it comes to navigating the details of your local TIF, and ultimately help you turn your incentives into upfront capital.

The TIF approval and issuance process

After submitting a development plan plus required documentation, as well as having negotiated the general terms of any Economic Development Agreement or Project Agreement with the appropriate redevelopment commission, most municipalities may be ready to move your TIF proposal through municipal hearings for approval. This process will vary depending on the state and the municipality.

–Municipal commissions and economic development area creation: separate governing bodies may be created to manage the specific sites targeted for economic growth, charged with reviewing and approving declaratory resolutions and development plans.

–Public hearing on TIF awards: with plans and resolutions initially approved, governing bodies may hold public hearings for confirmation, modification or rescinding development plans.

–Filings to the county auditor and local government finance: if established and confirmed, filing are then made to government finance offices.

–Bond creation and issuance: with plans, resolutions and filings approved and submitted, the TIF bond is ready to be issued for the planned development

Experts in TIF, for real estate projects

With a unique approach to bond sizing and structuring, Hageman Capital has the capabilities and capital to monetize TIF bonds and maximize much needed upfront capital. Contact us to learn more.

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Even more on TIF

How TIF is created and used

Anytown USA needs development

Anytown, USA has a vacant lot downtown that has stayed unoccupied for years. The Mayor of Anytown realizes that if a new building were to be built on that lot, it would pay more taxes in the future than the current vacant land would. The Mayor and City council believes that a 200 unit apartment building, and some first floor restaurants will help drive activity to downtown, and possibly promote future development in their town.

However, ABC Development Co (a local developer), is not interested in developing such a large project on this parcel right now. The costs of building materials have been increasing, and because of the lower rents in the area, the returns this apartment will generate for their investors does not make sense for them to start the project in the first place. There exists a financing gap between the current cost, and what a project needs to cost for the developer to start the project.

To bridge the development gap, and to incentivize ABC Development Company to build this apartment (which would increase the taxes the Town would collect), Anytown is allowing ABC to capture 90% of the future taxes of their development for 25 years, but only taxes above and beyond the current taxes (the “Tax Increment”), and use a debt instrument to secure that cash flow (the “Financing” and the “Bond”).

ABC Development Company then finds an investor willing to buy the Bonds for a lump sum on that potential future cash flow to provide the necessary capital to fill the development gap.

Because of the TIF, the apartment building is able to be completed, and generate more than enough tax increment revenue to support the TIF bond investor’s yearly debt service. The project is a huge success, and Anytown is able to keep the additional incremental tax revenues to support and fund other projects.

After the bond investor is paid off in 25 years, Anytown keeps the full amount of taxes that will be generated from the project, and adds it to their existing tax base for future generations. This is how Tax Increment Financing allows for new development that would have never been able to take place to become viable for a developer.

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January 18