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<br /> Because of the effect of decisions by counties and schools on city development activities, <br /> these boards should also confer with cities regarding their plans for capital and tax levy <br /> . decisions. <br /> LE-7. LGA/HACA Penalties for Using TIF <br /> Problem: The LGAlHACA aid penalties have resulted in fewer, smaller, cheaper, and less <br /> challenging tax increment financing (TIF) districts being created. Although the use of TIF <br /> generally improves the state's tax base and economic vitality, cities are now penalized for <br /> trying to create jobs, redevelop decay, or clean up pollution. <br /> Solution: The aid penalty is punitive and should be eliminated, "But for" tax <br /> increment financing, development, redevelopment, pollution clean up, and housing <br /> creation would not have occurred and benefitted the state's economy. The state does <br /> not impose the penalty on qualified housing and hazardous substance subdistricts, and <br /> these penalties should be removed on all other districts. <br /> . All economic development (manufacturing) districts should be exempt because <br /> they are necessary to attract new jobs to the state, and particularly to support <br /> the economic viability of smaller rural cities. <br /> . Hazardous substance subdistricts and soils condition districts are needed across <br /> . the state to clean up pollution to protect the state's environment and to create <br /> viable development opportunities within developed cities and should not be <br /> subject to any penalty, <br /> . Renewal and renovation districts should also not be penalized because they offer <br /> the best opportunity for proactive efforts to prevent blight and redevelop <br /> decaying urban areas, <br /> . The phased-in penalty on redevelopment districts restricts the ability of cities to <br /> address the problems of advanced urban decay and blighted neighborhoods, <br /> LE-8. Restrictions on Revenue to Pay LGA/HACA Penalties <br /> Problem: There are many restrictions on the sources of revenue available for cities to use <br /> to pay the LGA/HACA penalty that is imposed on most new TIF districts. <br /> Solution: If the LGA/HACA penalty is intended to reimburse the state for additional <br /> costs for the school aid program, state restrictions on the source of the "pen'alty" are not <br /> appropriate, There should be no limitations on the city's payment of the penalty; tax <br /> increments, developer participation, or other sources should be eligible. <br /> . <br /> 1995 City Policies 9 <br />