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Tax Capacity & Tax Rate The City's tax capacity represents the taxable value within the City. It is determined by applying the State-wide property tax formula for each parcel, then adding each parcel's tax capacity. The citywide tax capacity is then applied to the proposed levy to determine the local tax rate. The change in tax capacity relative to the change in the levy determines how property taxes will be affected. If the City's net tax capacity (Gross tax base, less fiscal disparities and TIF) increases more than tax levy, property taxes on individual properties will go down (holding all other factors equal). In contrast, if the increase in net tax capacity is less than the increase in the levy, property taxes on individual properties will increase. Fiscal Disparities The Fiscal Disparities Program was created as a means of sharing the growth of the commercial/industrial tax base throughout the Metro Area. Under the current formula, 40% of all new commercial/industrial tax base is contributed into a pool. The taxes paid are then redistributed back to the participating communities based on their market value per capita. Due to its relatively strong tax base, Roseville contributes more tax base to the pool than it receives in return. Approximately 10% of the City's tax base is effectively distributed to other communities. Fiscal disparities are deducted before applying the City's tax levy for purposes of calculating the local tax rate. Tax Increment Financing (TIF) When new development occurs, additional tax base is created. As a result, a larger base is created for which the City's tax levy can be spread. In certain circumstances, cities can "capture" the new tax base, and the taxes that are paid (referred to as tax increment) that resulted from the new development, and use the monies for a specific purpose such as job creation, housing initiatives, and brownfield cleanups. Final Comments The information provided above is designed to facilitate initial budget discussions. Staff will provide additional information and clarification throughout the upcoming budget meetings.