There are a number of tools available to developers and communities through the city, county and state governments that will turn a development venture that is considered a lemon into lemonade. The past ventures you turned down or turned away because you were sure they were lemons now deserve a second look. However, look at them in a new light, using Public Development Financing as a tool.
Communities today are competing in a global economy. No longer is their greatest competitor the neighboring municipality, instead it’s the municipality in India, China, Mexico or Indonesia and may other places around the world. Consequently, many municipalities are looking for ways to attract or keep existing developments within their city limits. Developers and Communities can establish a partnership that can turn impractical ventures into competitive opportunities.
Public Development Financing is the use of unrealized public dollars to finance private development projects through public-private partnerships. This type of financing is nothing new, however, may smaller communities have not taken advantage of the tools available to them and many developers are not aware of the opportunities for this type of financing in smaller communities.
For example, Tax Increment Financing (TIF) has been a local tool for development in the State of Texas since the late 1970’s. However, not until recently, have communities with populations under 100,000 used this tool to attract new development. Still many communities are unaware of the benefits of Tax Increment Financing to attract new development ventures.
For a small community, Tax Increment Financing creates new infrastructure and development without having to use any existing general fund money. Instead, the community uses the developer’s money to fund projects that otherwise would not be viable or would have taken years to complete. The TIF projects spur growth in the community, attract industry, encourage entrepreneurship, provide quality housing or improve quality of life. Through TIF, the community creates incentives for development, while improving the lives of their residents.
For a developer, Tax Increment Financing is a project saver because it can take an otherwise unprofitable project and make it a viable venture. Many times what makes a venture unprofitable is securing reasonable financing for a project. Developers can use reimbursements from TIF incentives to secure conventional financing for a development project at a much more reasonable rate. Because of TIF, developers can take a look at smaller communities as viable places to locate their projects.
Like Tax Increment Financing, there are a number of local, county and state tools that developers and communities can use to create public-private partnerships to generate opportunities for development to benefit residents.