Development Finance Toolbox
Development Finance Toolbox
There are many different tools in the development finance toolbox. This page will help you understand what development finance is, how it can be used, and different types of tools, including bonds, Property Assessed Clean Energy (PACE), Tax Increment Financing (TIF), tax credits, and tax abatement. If you need more information on financial terminology please refer to the Business & Financial Literacy page
for additional resources.
What is Development Finance?
Development finance is the efforts of local communities to support, encourage, and catalyze the physical development, redevelopment, or expansion of a business or industry. This is done through both public and private investment in projects that benefit the long-term health of a community. Development finance includes a broad spectrum of tools such as bonds, Property Assessed Clean Energy (PACE), Tax Increment Financing (TIF), tax credits, and tax abatement, revolving loan funds, special assessment districts, and capital lending tools. The Council of Development Finance Agencies (CDFA) provides more information and examples development financing in their series of food systems white papers: Food Systems & Development Finance, Food Systems & Access to Capital, Food Systems & Bonds, Food Systems & Targeted Tools, and Food Systems & Investment Tools.
What is a Development Finance Agency?
Development Finance Agencies (DFAs) provide or support development finance through various direct and indirect financing programs. DFAs may issue bonds, provide credit enhancement programs, and offer direct lending, equity investments, or access to other kinds of capital financing. DFAs can be formed at the state, county, township, or municipal level and often times can provide financing across jurisdictional boundaries. In Ohio, DFAs are called “port” and/or “financing” authorities.
What else should I know?
The Development financing tools discussed on this page are not likely to be useful for startup businesses. We suggest starting with the Access to Capital - Loans and Access to Capital - Equity & Ownership pages.
Types of Development Financing
In its simplest form, a bond is a loan or debt incurred by a qualified borrower. Tax-exempt bonds have been used to help build roads, bridges, sewers, dams, city halls, prisons, schools, hospitals, libraries, low-income housing, and thousands of other public and private projects. Bonds are a beneficial source of financing, especially for large projects, because they offer a low-cost source of capital. In the food system, bonds can be used for food processing facilities, food banks, grocery stores, cold storage facilities, and more. Here’s some additional information on a couple of types of bonds that can be used for food-related purposes:
- Industrial Development Bonds - IDBs, also referred to as Manufacturing Bonds, are issued for qualified manufacturing projects, with a total bond issuance limit of $10 million. These bonds can support expansion and investment in existing manufacturing facilities, as well as the development of new facilities and the purchase of new machinery and equipment. IDBs may be used for food-related manufacturing, processing, and agricultural facilities.
- Nonprofit Bonds - Projects financed with Nonprofit Bonds are owned and used by not-for-profit corporations that qualify for exemption under Section 501(c)(3) of the IRC. Organizations using Nonprofit Bonds may include: universities and private colleges, independent and charter schools, food banks, hospitals, agriculture and food research facilities, not-for-profit food hubs and communal kitchens.
The Council of Development Finance Agencies (CDFA) provides additional information and resources on bonds at the Bond Finance Resource Center and in the Food System & Bonds White Paper.
The Columbus-Franklin County Finance Authority provides creative and timely financial solutions for economic projects in Central Ohio. Here are a few of the bond programs offered by the Columbus-Franklin County Finance Authority:
Property Assessed Clean Energy (PACE)
Property Assessed Clean Energy (PACE) financing can be used to support new energy efficiency upgrades, retrofitting, and/or energy generation on both commercial properties (C-PACE) and residential properties (R-PACE). In both C-PACE and R-PACE, qualified property owners are given an affordable loan to make energy improvements to their home or business. These loans are provided by private lenders, though the loan payments are collected by municipalities via regular yearly property tax payments. The energy savings reduce overall costs for a business or project, freeing up dollars to be used elsewhere. C-PACE financing can be utilized for nearly every business within the food system that is seeking capital for sustainable upgrades to the facility.
The Council of Development Finance Agencies (CDFA) provides additional information and resources on bonds at the PACE Resource Center and in the Food System & Targeted Tools White Paper.
The Columbus-Franklin County Finance Authority provides creative and timely financial solutions for economic projects in Central Ohio, including PACE financing through the Energy Loan Program.
Tax Increment Financing (TIF)
Tax Increment Finance (TIF) is an economic development mechanism available to local governments in Ohio to finance public infrastructure improvements. TIF uses expected future tax benefits of real estate improvements to pay for the present cost of those improvements. TIF has been a tool used to finance public markets and infrastructure for other large food-related developments. Increases in economic activity over time for the property or within the district generate greater tax revenues, which become the repayment stream for the debt used to finance the original improvements.
The Council of Development Finance Agencies (CDFA) provides additional information and resources on bonds at the TIF Resource Center and in the Food System & Targeted Tools White Paper.
TIF is implemented at the local level and may be created by a township, municipality, or county. In Franklin County, we recommend discussing TIF with your local jurisdiction.
A tax credit is a dollar for dollar reduction of a taxpayer’s liability. A tax credit is different from a deduction because it works by directly reducing tax liability. For example, if a taxpayer has $100,000 of post-deduction tax liability and $20,000 in tax credits, the taxpayer’s net tax liability will be reduced to $80,000. There are many tax credit programs available at the federal, state, and municipal levels, and these programs can be deployed to creatively fill a financing gap for many agriculture and food-related businesses. However, these programs are highly technical and have extremely complex requirements so it is best to consult with an expert before proceeding.
The Council of Development Finance Agencies (CDFA) provides additional information and resources on bonds at the Tax Credit Resource Center and in the Food System & Investment Tools White Paper.
- InvestOhio - Provides a non-refundable personal income tax credit to investors that provide new equity (cash) into Ohio small businesses to acquire an ownership interest in the company
- Ohio Historic Preservation Tax Credit Program - Provides a tax credit for the rehabilitation expenses to owners and lessees of historically significant buildings.
- Ohio New Markets Tax Credit Program - Provides an incentive for investors to fund businesses in low-income communities. These "new markets" are traditionally underserved by private sector capital.
City of Columbus Programs (contact your local jurisdiction for information on small business tax credit):
- Job Creation Tax Credit - City of Columbus program that provides a non-refundable tax credit for eligible new employees and applied toward the company's municipal tax liability. The credit rate and term are based upon the amount of new investment and the number of jobs created as a result of the project. In order to receive this credit, the State of Ohio must also grant an Ohio Job Creation Tax Credit.
- Jobs Growth Incentive - City of Columbus program that provides a cash payment based on eligible new employees for businesses locating or expanding outside of the Columbus Downtown area. The rate and term are based on the number of new employees, the investment amount, and the lease term.
- Downtown Office Incentive - City of Columbus program that provides a cash payment to eligible businesses locating or expanding in Downtown Columbus based on new jobs created and retained within Downtown Columbus.
Tax abatement is an indirect financing tool created by local government that eliminates or reduces tax liabilities for qualified projects, investments, or other business activities. In a traditional tax abatement program, a business agrees to make a significant investment in return for the elimination or reduction of certain taxes for a set period of time. Tax abatement programs can provide an incentive for businesses to expand, invest, or relocate in targeted local communities.
The Council of Development Finance Agencies (CDFA) provides additional information and resources on bonds at the Incentives Resource Center and in the Food System & Targeted Tools White Paper.
Local Programs (contact your local jurisdiction for information on tax abatement):
- City of Columbus - The City of Columbus may offer tax abatement on new property taxes for eligible businesses located in the City of Columbus that (1) are located in a designated Community Reinvestment Area (CRA) or Enterprise Zone (EZ) and (2) invest in new building construction and/or improvements to existing land and buildings.
- Franklin County - Franklin County may offer tax abatement on new property taxes for eligible businesses located in unincorporated Franklin County that (1) are located in a designated Community Reinvestment Area (CRA) or Enterprise Zone (EZ) and (2) invest in new building construction and/or improvements to existing land and buildings.
Learn more about the Franklin County Food Business Portal
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