TIF and Special Taxing Districts

Many states can create and/or enable the creation of special taxing districts in limited geographic areas to support development goals. We advise communities on the establishment of these districts and incorporate such considerations as boundary definition and eligibility, competitive considerations (when the district includes an increase in tax rate), and fiscal implications for other taxing bodies. We also help formulate plans to guide the use of these districts and support community outreach and education regarding these special districts.

In particular, our firm has core expertise in the use of tax increment financing (TIF) to facilitate high-quality development, redevelopment and infrastructure projects. We have been a member of the Illinois Tax Increment Association (ITIA) for over 10 years, and have senior personnel serving as national TIF curriculum advisor and instructor for the Council of Development Finance Agencies (CDFA), as well as lead editor of its 2009 “Advanced Tax Increment Finance Reference Guide.” Since the conception of our firm, we have advised both public and private sector clients on TIF issues, ranging from conducting eligibility studies to providing support in the TIF application and negotiation process.

Eligibility Studies, Plans and Amendments

The firm has led the establishment of over 75 TIF districts in multiple states under multiple statutes, and has also assisted communities in making “major” and “minor” amendments to existing TIF districts- to add or subtract parcels, expand budgets and for other reasons. Depending on the specific state TIF statutory requirements and local community policies, these services have included conducting detailed assessments of physical conditions on a parcel-by-parcel, building-by-building basis to establish eligibility and preparing redevelopment plans. These TIF designation processes have also generally included economic evaluations of the proposed TIF area based on trends in property valuation, vacancy rates, building obsolescence and others. In addition, we have managed the public consensus-building process for TIF districts prior to their adoption. Finally, we routinely perform up-front TIF capacity analyses to help clients determine how much investment a proposed TIF may be able to support.

Revenue Projections

Our firm has prepared TIF cash flow projections for more than 200 districts and projects covering residential, retail, office, research, industrial, hotel, parking, sports facility and other land uses. These projections are based on the incremental values to be added by specific development projects as well as general changes in property value in the district as a whole. Our firm takes a rigorous approach to projecting future TIF revenues based on comparable property research, detailed understanding of local assessment methodology, and studies of trends in tax rates, property appreciation and other relevant indices. Our projections are routinely used in the sizing of revenue and TIF-backed general obligation bonds, as well as privately placed TIF revenue notes.

TIF Application Services

SB Friedman has assisted many developers through the TIF application and negotiation process. This includes review/presentation of project financials (including project costs, revenues and profit levels), estimate of project-specific and TIF-wide incremental taxes, and preparation of the formal application for TIF assistance. Our presentations clearly articulate the need and rationale for TIF assistance, as well as the appropriate structure for the assistance. We also provide ongoing support for our clients after submittal of the TIF application, as needed, to assist in bringing the deal to full agreement and closing.

Negotiation Support/Term Sheet

The main goal in TIF negotiation is to strike a business agreement that is clear, fair and complete. Often, this agreement is best captured in a term sheet that serves as the backbone of the final legal TIF agreement between the municipality and applicant. SB Friedman has assisted clients in crafting term sheets for TIF grants and loans, as well as negotiating an appropriate TIF financing package. We provide analytical support to help clients articulate their case, as well as rigorous term sheet drafting to ensure that the business terms are clear, concise and complete.

TIF Administration and Compliance

We have experience in assisting communities with such “nuts and bolts” TIF issues as: Annual Joint Review Board and state reporting support, tracking district revenues over time, reviewing delinquency/collection rates, reviewing parcel lists to ensure accurate revenue capture, reviewing and certifying TIF-eligible costs, estimating the impact of pending appeals, and tracking/projecting assessment ratios, equalizers and tax rates.