Tax Increment Financing – A Developer's Playbook

I. INTRODUCTION.

Project development carries with it its own set of challenges. When assessing a project, a developer is constantly calculating the risks and rewards. This becomes even more of a concern when a project is located in an economically distressed or blighted area. Where this occurs, the combination of traditional debt and equity frequently comes up short in covering the project's development costs, requiring a search for other sources of capital to fill the gap. Often a financing gap like this is bridged by federal, state, and local governmental incentives. One such incentive is Tax Increment Financing ("TIF").

TIF is a popular, sometimes contentious, economic development tool designed for state and local governments to finance public improvements or attract private capital into areas that would not otherwise be redeveloped but for public support.¹ By definition, TIF relies on the increase in tax revenues, known as "tax increments" which are produced