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Although the 15 year contribution to Cottage Villas will be completed, the City can extend the Cottage Villas TIF District an additional ten years to the 25 year statutory maximum. If extended, the revenue generated by the district could be used elsewhere in the community to fund housing projects for low to moderate income households. Cottage Villas would not receive any additional revenue from the TIF District. On October 12, 2009, the City Council adopted Resolution 2009-028 to begin the process of modifying TIF District No. 3 to extend the district an additional ten years. The City Council will be holding a public hearing on December 14, 2009, to consider approval of the TIF District extension. Prior to that, the Planning Commission must review the extension to make a recommendation on whether the proposed extension is in compliance with the recently adopted 2030 Comprehensive Plan. The Planning Commission is not evaluating the use of TIF for any particular project, the merits of using TIF, or whether TIF should be used in the future. Tax Increment Financing Basics The State Statutes related to TIF are complex and have many different provisions. Abasic outline that was prepared by the Minnesota Legislature explaining how and why TIF is used is attached (Attachment B). A TIF District basically uses a portion of the property taxes generated by the development to finance the development. For example, assume that a property is generating $5,000 per year in property taxes prior to being redeveloped. Then assume the property will generate $50,000 per year in property taxes after redevelopment. A tax increment financing district essentially allows a city to use the new increment of $45,000 to help finance the redevelopment. The original $5,000 is still distributed to the appropriate taxing authorities, including the City, County, and the school district. The information in Attachment B explains how the new increment is used to cover the costs of development. All TIF requests undergo a detailed financial analysis by the City to determine if and how much public financing is needed for a project to move forward. Even if a project demonstrates a need for public financing, using TIF is still at the discretion of the City. Cities are not obligated to use TIF; however, it can be a powerful and flexible tool when used appropriately. 2030 Comprehensive Plan Review As noted, the Planning Commission is being asked to determine if the TIF extension is in conformance with the Comprehensive Plan. Revenue generated by the proposed TIF extension could only be used to create low to moderate income housing. Chapter 7, Housing, of the Arden Hills 2030 Comprehensive Plan includes the following goal and policies related to housing: City of Arden Hills Planning Commission Meeting for December 9, 2009 \\Metro-inet.us\ardenhills\Planning\Economic Development\Business Subsidy & Public Financing\TIF\Cottage Villas\12-09-09 - PC Report - Cottage Villas TIF Extension Memo.doc Page 2 of 4