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Multi-Print Viewer Page 1 of 3 4 . ; Inc.' America's Newspapers Number of TIF districts rose in '01 - Use of the redevelopment tool grew even as legislative changes made it less productive. Star Tribune: Newspaper of the Twin Cities(Minneapolis, MN)-Saturday, July 27, 2002 Author:Dan Wascoe Jr. ;Staff Writer Minnesota cities are increasing their use of a controversial redevelopment tool called tax-increment financing despite state tax changes that were expected to reduce the amount of revenue it will generate. The number of cities and towns with tax-increment districts -areas pegged for redevelopment-rose from 417 in 2000 to 418 in 2001,and the number of districts rose from 1,673 to 1,751, according to figures compiled by the Citizens League, a nonprofit research organization based in Minneapolis. Cities that use the tax-increment tool(called TIF)use increased property taxes in a TlF district to pay for public redevelopment costs-buying and clearing land, cleaning up polluted soil and changing roads to serve the project. TIF projects are controversial because the increased tax revenue is not available for general government functions such as snowplowing and police and fire protection until the TIF district expires-after as many as 25 years. It also is not available to school districts and other government bodies that normally share those revenues. But many cities, urban and rural,consider TIF an important tool to renew blighted areas. In 2001, there were 611 districts in the seven-county metro area last year and 1,140 in the rest of the state, the report says. TIF has been around for three decades in Minnesota. It has been amended often by the Legislature, and two cases involving the use of TIF by Richfield drew split decisions this year from the Minnesota Supreme Court. ecent tax changes by the Legislature were expected to change cities'use of TIF. The Legislature altered property-tax ormulas for commercial and industrial property. It also took over most costs of public schools, previously paid in large part from local property taxes. One result of the changes was expected to be a reduction of up to 40 percent in the money that TIF districts generated to repay development costs. But Joel Michael,a longtime tax analyst for the Minnesota House, said Friday that a lively real-estate market fueled mostly by low interest rates has sustained the enthusiasm of cities or developers for using tax-increment financing. Even if cities have less TIF revenue to dangle in front of potential developers, ''developers don't want to leave money on the table,"he said. He also said that although the stock market has declined precipitously, "We haven't had a real- estate recession yet." He added that because property taxes are lower, developers may have more leeway in the rents they can charge business tenants in the redeveloped areas. One complication is that legislators this year also eliminated a fund targeted at cities where TIF districts do not generate enough revenue to repay city bonds.The fund, which had not been tapped as much as expected, was dropped as part of legislators'broad budget reductions last spring,Michael said. He said that cities have learned to shift some risk to developers. Even so, he said, some local governments are nervous about the removal of the state safety net. He said he expects cities to ask the Legislature to extend the term of tax- increment districts to allow the refinancing of TIF debt at lower amounts over a longer period. The new report shows that, in the metro area, Carver County had the greatest share of its tax base in TIF districts-18.6 percent, compared with an average of 8.1 percent for the area as a whole. In nonmetro areas, 3.4 percent of cities'tax base was in active TIF districts. The statewide average was 6.4 percent. -Dan Wascoe Jr. is at dwascoe@startribune.com. • • http://infoweb.newsbank.com/iw-search/we/InfoWeb 12/9/2010