CCP 11-24-1997 - Laserfiche WebLink

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C./11 I 4- Mi""esc(J SolucioGs , .' I Common Misconceptions -- 1. For every dollar of taxes caotured in a tax increment financina district. state education I costs increase. Opponents of tax increment Nnancing calculate the state's irceased education costs on the false assumption that all property tax value captured in :ax increments I Nnancina districts would have occurred somewhere In the state without oublic s~bsidy. This - . is misleading for two reasons. First of all. it assumes that the "but for" test is ,ce'ler valid. Secondly, it ignores the fact that the public does have an interest in fostering redevelopment I in certain areas within the state. 2. As lona as a business locates in Minnesota. the state should plav no role in the locational choices a business makes. The state does have an interest in fos;ering I redevelopment, which is "leveling the playing Neld" between development of greenNelds and redevelopment. Reuse of existing public infrastructure, job creation in older cities where social problems and unemployment are exacerbated by abandoned industrial property, I declining property values, and transportation and environmental issues all justify the public investment. The private sector will not undertake demolition, relocation and remedial aotivities -- as well as the liability issues related to these actions -- when undeveloped sites I are readily available. 3 All tax increment financing districts are created equal. The "rules of the game" vary .. according to the type of tax increment financing district and date of certification. Increments generated in a redevelopment district, for instance, rarely cover the costs of preparing a site for development and are not used to subsidize the construction costs. In addition, increments I generated in tax increment financing districts certified prior to the 1990 changes in tax increment law can be used in a number of ways no longer allowed. There are no restrictions regarding the type of development that ultimately takes place within a redevelopment district I because the public subsidy is used to prepare the site for development. Economic development districts, on the other hand, are subject to some restrictions because I increments generated in this type of tax increment financing district are used as developer incentives and it has been determined that, for the most part, retail will locate where there's a market and no public subsidy is warranted in this case. I Cities are usina tax increment financina to build Taraet Stores in cornfields. Following 4. the changes in tax increment financing law in 1990, a cornfield can not meet the criteria I required for designation as a redevelopment district. An economic development district, under some circumstances, can still be used for retail and is a tool for greenfield development. I The use of tax increment financing causes existina businesses within a citv to 5. subsidize comoetitors. Tax increments generated in a redevelopment district can be used I to prepare a site that ultimately gets developed by a competitor to an existing business. The public subsidy itself, however, does not go to the developer but to the purpose of preparing the site for any type of development. An economic development district can be used to -I subsidize the developer of a competing business. November 19. 1997 I