Why do local governments opt to issue non-rated TIF Bonds?
• Many issuers opt to offer TIF financings on a non-rated basis. Keep in mind that it is virtually impossible to secure a rating on a TIF project upfront without recourse to the local governments credit. Non-rated TIF financings provide a means of risk management for balancing competing public policy concerns. Sophisticated municipal issuers perceive non-rated TIF bonds as an appropriate way to manage risk in certain circumstances. • This approach provides upfront financial incentives to the desired project. • Allows for strong capitalization via TIF bonds at the initial stage of development, when the project requires assistance. • “Fire-wall of Risk”: since the bonds are non-recourse, a local government’s general credit and tax payers are not placed at risk for payment of debt service. • Rather, institutional bond purchasers shoulder this risk, and are compensated for doing so in the form of yield. • Some local governments re-finance (i.e. take out) the non-rated TIF bonds with their
