|
The term "TIF Plan"
stands for Tax Incremental Financing
Plan. The classic use of the Tax Incremental Financing Plan approach to commercial real estate development financing for
the construction phase capital expenditures. The Tax
Incremental Financing Plan works
on the basis of a given county or municipality utilizing a portion of
the future property tax income stream as collateral to support the
funding of a commercial real estate development project. The most
common use of the Tax Incremental Financing Plan is to develop new
retail projects (neighborhood shopping centers all the way up to
regional power centers) because:
-
The
shopping center's tenants will create jobs and jobs are important
enough to subsidize in the eyes of regulators; and
-
The
sales of goods and services by the shopping center tenants creates
an additional stream of tax revenues the governing authority
(municipality and/or county) would not otherwise enjoy; and
-
The
plan is based upon the difference between the current real property
tax stream and the new real property tax stream the resulting
development will create on a direct basis (i.e.: new construction)
and an indirect basis (i.e.: surrounding property value increases
created by the project). When the financing is paid off, the
resulting taxing district will then be remitting all of the tax
receipts back to the government as if the plan had never been in
effect; and
So, what does it mean to you - the developer and/or owner/operator?
You can finance a host of project types (not just shopping
centers) with this funding method.
This method provides take-out financing for construction.
You must obtain a construction loan and provide the sums necessary to
defray your pre-construction capital expenses.
This method is limited by the amount of new property tax receipts
the resulting district will generate for the purposes of providing debt
service of the resulting bond float.
If you have questions regarding the use and/or advisability of
funding your commercial real estate project with this approach, please
contact Rainmaker Marketing Corporation.
|
