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64 Guidebook for Developing and Leasing Airport Property than public funding, though the legal requirements and costs, especially on smaller projects, may be significantly less and save the development project other expenses. Again, tax-exempt funding can also originate from private-funding sources. It is not at all uncommon to see a mix of public- and private-funding sources for the same project. Some costs of the development, such as feasibil- ity studies, marketing, and start-up, may be difficult to finance through traditional public or pri- vate sources because they are difficult to collateralize. Those development costs are routinely either paid for with the developer's cash or are funded with venture capital, which typically comes with a higher interest rate. The equity portion of the development project may fall into a similar category in that equity is generally required to come from cash. The developer must either have cash to sat- isfy the equity portion or borrow money from another source, often venture capital, to satisfy that portion of the development cost. 5.5 Incentives, Abatements, and Deferrals Incentives can assist in the overall financial pro forma as well by lowering the operating cost of the project. For example, a third-party developer may construct buildings and improvements on a piece of airport real estate and sublet to a tenant. An incentive such as ground rent abate- ment or deferral of airport fees may improve the cash position of the developer for a period of time while marketing occurs or during the period of time that the developer passes incentives along to the tenant as an enticement for the tenant to occupy facilities. Beyond grants and incen- tives, the developer is left with cash and debt to satisfy the development costs and operating expenses of the new facility. Incentives, abatements, and deferrals can come from a variety of stakeholders. As described above, the airport sponsor can provide incentives and abatements but other stakeholders often contribute as well. In some cases, cities, counties, states, school districts, and other governmen- tal and/or quasi-governmental authorities can offer abatement of certain taxes. Economic devel- opment agencies may have the ability to offer cash, low or no-cost financing, relocation assistance for employees, or job training. Also, local industry and businesses often step up to the plate to provide incentives, cash, or in-kind services. In fact, a broad pallet of incentives, abate- ments, and deferrals exist, but will vary from community to community. The best strategy for the airport sponsor is to meet with all of the stakeholders within the community, early in the development project, to explore how appropriate assistance might be applied. 5.6 Funding Sources Because development on airports is often synonymous with development on publicly-owned property, funding of the project has its challenges from a collateral standpoint. In traditional real estate development, the developer has the luxury of encumbering the title of the property as col- lateral and the lender has the ability to place a lien on the real estate to secure his/her financial position. Airports are typically precluded from clouding the title of airport property and are unable to offer that security to the source of funds for a specific development. The lender is there- fore left with the improvements on the property, the length of the lease term, and the strength of any sublease or revenue source to collateralize the debt. Funding challenges represent one rea- son that incentives or grants are used to assist the development of a project. For example, a grant can mitigate the need for borrowing and effectively improve the coverage ratio on the loan. In other words, the grant can be used as equity and satisfy a percentage of the development cost, thus reducing the need for both cash and debt.