Today's economy requires creative investment strategies by local governments.

This is the first in a series of Nation's Cities Weekly articles drawing on the resources and expertise of NLC's Corporate Partners.

As local officials know all too well, the state of the national economy is not only a national issue. Its impact is felt most directly in the nation's cities and towns, where people live and work, and as a result, city leaders are finding it necessary to create their own "economic stimulus packages" to keep their local economy strong.

Local officials also know that today's economy is not their grandparents' economy. Cities and towns are operating on a different economic playing field, with different rules and requirements, different players and different expectations As a result, officials are looking for innovative economic development programs and strategies.

One economic development tool that local governments have increasingly used is Tax Increment Financing (TIF) to finance diverse infrastructure projects for their communities. Today, 49 states and the District of Columbia have TIF enabling statutes to finance projects including retail, mixed-use, housing, transportation, brownfield remediation and community amenity development.

To help local elected officials and economic developers understand and appropriately implement TIE the Council of Development Finance Agencies (CDFA) and the International Council of Shopping Centers (ICSC) recently released a resource, Tax Increment Finance Best Practices Reference Guide, to address these elements The Reference Guide--the first of its kind--will serve a variety of public and private sector needs as a reference manual for public officials, financiers and real estate developers looking to fully understand this powerful tool.

"ICSC welcomed the opportunity to partner with CDFA on the Tax Increment Finance Guide," said ICSC President Michael R Kercheval. "Its guiding principles and case studies will help local communities and developers better understand this important yet complicated redevelopment tool."

According to CDFA Executive Director Toby Rittner, TIF can be seen as a transformational tool that resurrects blighted and abandoned communities and encourages new private sector investment and the Reference Guide will help foster and promote purposeful and appropriate application.

The four-chapter Reference Guide defines TIE its basic mechanics, best practice principles and financing variations. Furthermore, the Reference Guide presents best practices in TIF throughout the country to direct communities in the transparent and deliberate actions required for appropriate TIF use. The final chapter compiles 26 case studies to highlight a variety of TIF uses and applications.

An electronic version of The Tax Increment Finance Best Practices Reference Guide is available on the CDFA and ICSC websites at www.cdfa.net and www.icsc.org free of charge.

In addition to this useful tool, many communities have used a variety of incentives to help facilitate projects, In essence, they represent a community's investment in their own future. The returns to the local government can be outstanding: creating sales tax revenues, property taxes and significant payroll for a community's residents.

Examples of creative investment programs include local, state and federal elements. Wellprepared local governments can put packages together that make it very attractive to recruit the kind of development that meets or exceeds the economic development goals of the community.

Other examples of funding assistance besides TIF include:

CDBG--Community Development Block Grant--States can allot federal money to help offset development costs if a company is developing infrastructure (roads, water, etc.) to its site that other businesses or homes can use.

Creative City Administrators utilize grant funds to stimulate interest on the part of developers without impacting their budgets. This is an effective tool to assist in a city's economic development while helping a developer off-set the high cost of infrastructure. A city must make use of a creative grant writer who specializes in economic development to improve its ability to access these funds. There are more than 100 authorized uses of CDBG funds. For more information on CDBG, go to www.hud.gov/offices/cpd/communitydevelopment/programs/.

STSA--Sales Tax Sharing Agreement--The local government agrees to share part of the sales tax generated to offset the construction cost of the project.

This is an excellent example of public/private partnership. Without the project in question, there would be no sales tax generated. Because a progressive community is willing to share its benefit with the developer and/or retailer, the project is facilitated. The revenue increase is shared one time with the developer and/or retailer. All parties benefit from this arrangement. For more information and examples of the benefits of STSA agreements, go to www.taxcreditmanagement.com.

Rebates/Abatements--Fee in Lieu/Tax Abatement--The property tax is eliminated or reduced for a period of time.

These incentives help the developer attract retailers to the project in question. The community benefits due to the jobs created and sales tax revenues that become available for additional investment. Most rebate/abatement programs are done locally with the approval of the city or county council. For an example, contact Madison, Ala., for its water and sewer abatement program for retailers.

IDA--Industrial Development Authority--Issues bonds that are paid out to an independent local government organization with funds that would otherwise go toward property tax.

In some states, this incentive helps finance projects with upfront bond issues that are paid back out of property taxes generated. For more information on IDA/IRB Bonds, go to the state government website and look for Industrial Revenue Bonds.

Brownfield--Partial payment for industrial clean-up for sites that are contaminated or otherwise environmentally hazardous.

This is a federal program that can be activated for projects to redevelop unsightly properties within city or county boundaries. There are also state funds available to help redevelop sites that are a community liability. Without these types of incentives, it is very difficult for a developer to justify a project on a contaminated site. The returned investment is never attractive enough. For more information on brownfield incentives, go to www.epa.gov.

NMTC--New Market Tax Credit--Allows for low interest loans and loan forgiveness of up to 30 percent of the project costs.

The NMTC mission is to expand the capacity of financial institutions to provide credit, capital and financial services to the underserved populations in communities in the United States For more information on NMTC, go to www.cdfifund.gov.

With the right combination of incentives and the right project to be developed, a community can see a one-year payback on its investment. This makes good economic sense and represents a productive policy.

Cynthia E. Stewart is director, community relations, for the International Council of Shopping Centers and vice chair of the NLC Corporate Partners Leadership Council. ICSC member Bruce Ryals, president, Tax Credit Management, Charleston, S.C., contributed to this story.