How To Reap Returns From Urban Renewal
“Economically depressed areas have plagued cities for years. One tool used for redeveloping these blighted areas is called Tax Increment Financing (TIF). These bonds raise funds to build out, refurbish and enhance troubled areas. Sometimes they’re tax-free, and sometimes they’re not. The bonds rely on the appreciation of the new or renovated buildings and areas as well as on incremental tax revenues from the projects to pay investors their timely principal and interest. TIF bonds are 100% dependent on the success of a particular project.
All 50 states use TIF financing. The key for investors is assessing the viability of the project being financed. These days courts favor pensioners (voters) over general obligation bondholders, so TIFs, with no pension obligations and a dedicated revenue stream, have a distinct advantage.
Here’s one TIF bond I like. Portland, Ore. has a 351-acre parcel within the Downtown Waterfront Urban Renewal Area. This is a mature project with 65% of the properties being used for commercial activity. There is little vacant land left, and this redevelopment area has been transformed into several high-density urban neighborhoods. The issuer did a refunding in 2012 by coming to market with taxable and tax-exempt municipals.”
Full Article in Forbes 26 July 2016/
Forbes 6 July 2016.