Infrastructure Development Districts

NAIOP began exploring the possibility of bringing this infrastructure building tool to the state in 2022. While initially inspired by conversations with the City of Franklin around alternatives to impact fees, it became apparent that this tool had benefits beyond just alleviating impact fees. Nearly every county and city across the state is struggling to fund much needed infrastructure. With NAIOP’s leadership, a law to enable the use of special assessment districts was introduced during the 2025 legislation session. 

On May 13, 2025, the Governor signed the “Real Estate Infrastructure District Act into law. The Primary Goal of this act is to provide Tennessee cities, counties, and metro governments with mechanisms to finance infrastructure (e.g., roads, utilities, parking, parks...) through Infrastructure Development Districts (IDDs) where property owners pay via assessments and bonds rather than traditional taxes. 

Infrastructure Development Districts enhance Tennessee's infrastructure financing toolkit. By establishing economically sensible, transparent, and accountable commercial development districts, the law supports local governments and private developers in managing growth, funding critical infrastructure, and preserving municipal budgets—all while ensuring community oversight and fair cost-sharing. 

Process: 

• Developer petitions a municipality requesting an infrastructure district 
• Municipalities hold public hearing 
• Local government must pass a resolution establishing an infrastructure district by a majority vote 
• Municipalities give authority to take out bonds to local industrial development board or public building agency Bonds are issued to pay for infrastructure 
• Special assessments payments are paid by owners of the newly built properties in order to repay bonds