Kingsport Spirit

Tax Increment Financing (TIF) has been in the local news recently, so I’d like to take the time to explain how this governmental funding tool works and where it’s been used in Kingsport in the past.

Tennessee, like all 50 states, uses TIF to assist eligible development projects. In simple terms, TIF is borrowing against a property’s future taxes to pay for extraordinary upfront development costs. But how does TIF actually work?

A local government determines that a project is desirable for meeting its goals of developing or redeveloping a district or neighborhood. The developer then presents a binding financial analysis that is used by a lending entity (an economic development board or housing authority) to obtain a loan for 20 years or more to pay for the agreed-upon upfront costs and administrative fees.

A portion of the tax increment is used to pay for those expenses and the rest goes to the city’s and/or county’s general fund as new revenue. The new revenue can then be used to pay off the loan quicker or it can be used for the city and/or county’s other needs.

Does the developer pay taxes?

Yes, the developer pays all the current and future taxes. The development is subject to all future property reappraisals, too. The only difference is that a portion is set aside to pay off the loan and up to 5% of administrative expenses for the economic development board, county assessor, and county trustee.

Are all the taxes abated?

No, it is a negotiated amount. The Tennessee Comptroller’s Office projects that 60%-80% of the tax increment is used on any given project in the state.

Why does the developer need TIF?

When a developer is estimating the economics of development, there can be extraordinary expenses that might otherwise cause the project to be undesirable. For example, the demolition and disposal of existing buildings require a large upfront cost that is difficult to bear in one lump sum.

Existing buildings may contain asbestos, underground tanks, lead paint and pipes, or other materials that were used in common construction that are now considered environmentally sensitive. All of these materials are costly to mitigate.

Where has TIF been used in Kingsport before?

TIF has been used at East Stone Commons (the old Kingsport Mall that is now anchored by Hobby Lobby, Ross, & TJMaxx), Crown Point (Food City Shopping Center on Eastman Road), Villas at Riverbend (265 apartments behind Fort Henry Walmart), Overlook at Indian Trail (168 apartments behind the old Kmart), The Blake (senior living and memory care on Holston Hills Drive), and Stonegate (90 single family homes on the old Walmart site).

Each of these TIF projects has proven to be a desirable infill development that turned former greyfield sites, or defunct projects into desirable destinations. The entire Downtown and Riverfront districts have been deemed eligible for TIF, but to date, no one has taken advantage of the opportunity.

In summary, Tax Increment Financing (TIF) plays a vital role in spurring redevelopment and revitalization and when used properly, enables the transformation of brownfield and greyfield sites into thriving commercial and residential developments.

TIF should be used conservatively and sparingly, and each project should be evaluated on a case-by-case basis, just as Kingsport’s past track record shows.

Alongside other incentives such as PILOT (payment in lieu of taxes) and the Border Region District, TIF contributes to Tennessee’s dynamic toolkit for development, offering diverse options to stimulate growth and investment across the state.

Through strategic partnerships and innovative approaches, these incentives drive sustainable progress and unlock the full potential of Tennessee’s communities for a brighter future.