The Commonwealth of Virginia has established the Tourism Development Financing Program (TDFP), a gap financing program for Virginia localities with deficiencies in tourism product and visitor spending.
These deficiencies are well researched and substantiated in a community’s Comprehensive Community Plan, and through independent market studies.
Prospective projects filling such deficiencies must generate Virginia sales and use tax, such as lodging, dining, meeting space rental and catering, and limited, project-specific retail.
The TDFP’s Gap Financing reallocates a quarterly percentage of state collected sales and use taxes from a certified project created via TDFP.
In the TDFP program, the Locality is the Applicant, while the Developer assumes all debt with Lenders. If a Locality’s deficiency is proven, the Developer must secure all the lending required to finance the project, with the agreement that the State, Locality and Developer will each pay an equal third of the Developer’s gap financing loan to the gap Lender.
The TDFP provides two different tiers of financing to compensate for a shortfall in project funding. Eligible projects with a total cost of less than $100 million fall into Tier 1, while eligible projects with a total cost of $100 million or more fall into Tier 2. The image below highlights the program’s two tiers of financing.
The purpose of the program is to provide a gap financing mechanism for projects that cannot, otherwise, find 100% funding or lending for a project.
The image below outlines the TDFP payment process once the qualified business has opened and started generating revenue.