TIF revenue (Tax Increment Financing) is the financing tool ("financing tool" being another way to say "tax revenue
") the City will use in the hope of paying off the $4,890,000 in municipal bond debt. Why do we say hope? Because a TIF is not, nor is it ever, guaranteed to cover all the debt of a loan to the City.
The guesstimate of the TIF revenue from the City’s contracted Financial Adviser has to make assumptions on the assessed valuation of this office complex (what the complex is guessed to be worth at the start) and the growth prospects of the complex so they can put a price on the deal. This very first assessed valuation from the City and its Adviser turns out to be a projection that has been priced higher than the nearby commercial office buildings that share the same tax rating, which means this initial projection is already pumping up the anticipated $$$ from the TIF revenues from the very start. And which also means there is a great deal of potential to set up the City for the possibility to fall short of covering the debt it owes on the $4.5 million in bonds it has to guarantee (much like the
Power & Light District, Prairie Fire or Zona Rosa, for example).
The City’s calculation also assumes there will be no residential prospects for the development. But if the office complex finds itself falling short of its goals and has to convert a portion, or even all of the project into residential real estate, the TIF revenue could fall significantly short of the interest payments of the bonds issued (the debt on the loan). Commercial is assessed at 25% of its value for property taxes. Residential is assessed at 11.5%.
That 13.5% may not sound like much, but that is a big difference in tax revenue for the City.