Tax Increment Financing (TIF) Guarantee Program

The local issuer of TIF bonds or the Commonwealth Financing Authority (CFA) may obtain a loan guarantee from the program to serve as a credit enhancement for a TIF bond issue, thereby allowing the bonds to be sold on more favorable terms.

Usually, a city or county takes the lead role in approving a TIF project. Each local government that levies a property tax: (1) city/municipal; (2) county; and (3) school district, determine whether or not to apply a portion of future tax dollars to repay the TIF bond.

Eligible projects should generate economic growth and redevelop brownfields, revitalize downtowns and otherwise strengthen existing communities. A project is eligible for the loan guarantee if it utilizes an abandoned or underutilized industrial, commercial, military or institutional site or building or another site planned and zoned for development. In addition, businesses or private developers must agree to create a certain number of permanent full-time jobs within the TIF district.

An eligible project will receive priority consideration if it is located in an area with a particular need for economic development, or if it is identified for priority investment in a local or regional economic development plan or strategy, which is consistent with a county comprehensive plan.

The TIF Guarantee program will be administered by the CFA.

Sometimes. School districts are particularly strapped for cash and are reluctant to remove tax dollars from the funding stream. However, as the new development would not occur absent the TIF funding mechanism, the school district is not really “losing” tax funds because it would not receive the new development tax revenues absent the project occurring in the first place. The school district can also agree that a portion of TIF funds (less than 100 percent) will be used to repay the TIF bond, thereby creating some immediate new revenue for the school district. TIF districts are designed to generate other new development and increase property values outside of a TIF district, which also results in new and immediately accessible tax revenue for a school district. When school districts become educated regarding these aspects of a TIF project, they understand that the project will create a net tax gain and create an immediate positive financial impact for the district.

The terms of the financing and repayment will be determined by the TIF lender and issuer of the debt.

While each project will be different, TIF projects will be able to access complementary financing programs administered by DCED and other agencies, in order to control costs and make effective use of public dollars.

Because of the significant impact this financing mechanism can have, the state wants to promote increased use of tax increment financing by local governments statewide as a tool for economic development.

The TIF Guarantee Program will be a $100 million fund to provide loan guarantees for TIF projects, up to $5 million per TIF project. All interest earned on fund investments and any other funds derived from any other source would be deposited into the fund and would be made available for future guarantees as well as administrative costs associated with the program.