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Abstract: 

Since 2000, municipalities have used more than $55 billion of development district bonds to finance infrastructure for new development, including more than 2,000 land-secured special tax bonds totaling $27 billion and 1,300 TIF bond issues totaling $28 billion. As of January 1, 2014, 31% (by dollar volume) of land-secured bonds issued in Florida since 2000 and 52% of these bonds in four adjoining states were in payment default. For the other 45 states, the combined incidence of default was 2.4%, including 0.5% in California, where the majority of these bonds were issued. Two key differences relate to the nature of the issuers and to appraisal standards. The overall incidence of default on TIF bonds was 0.9%. California, which had accounted for 67% of TIF volume, recently abolished the agencies authorized to issue these bonds to save the state from the cost of backfilling lost local tax revenues, a cost not covered by most other states. Other than for California TIF bonds, the volume of development district bonds is expected to increase in the coming years.

Keywords: TIF, tax increment, land-secured bonds, special tax, special assessment

Affiliations:  1: Stifel, Nicolaus & Company, Inc..