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10/1/94 Memo To: Roseville City Council From: Harlan M. Smith Re: TIF Financing Evidently I am not alone in not understanding TIF financing fully, and was disappointed that it was not fully explained at the public hearing on the Twin Lakes project. Today I learned more from the Citizens League Journal. (1) I understand the city can agree to pay (subsidize) developers for certain "qualified" costs of development, after developers have incurred those costs, by selling general revenue bonds or tax increment bonds (or other obligations) (Le. borrowing the money the city gives developers) hoping that tax increments on the developed properties will pay the interest on the bonds & redeem them in full at maturity, the city using tax increments only after 25 years to meet ongoing costs of services (police, fireman, etc.) to the developed properties, or (2) the city can provide that the developers be reimbursed within 25 years for the qualified costs (they had incurred) out of tax increments on the completed developments, with the city receiving the tax increments only after that time. (A city gift to developers is still involved, but it is made over 25 years (or less) & does not involve the city going into debt for that long, which it certainly should not do right now.) Both are alternatives to the city doing the entire development itself with borrowed funds at a more appropriate time, and using all the tax increments for each part when finished, if it decides at some time in the future that the area might never be developed by any private developers. The city would be taking far less risk at any time if some developer will agree to procedure (2) above rather than (1 ), though the city gift to developers should be small in any case relative to their investment. When the city and state are having trouble meeting normal obligations is simply not a proper time for it to borrow a single dollar and provide it as a gift to developers, just to get the area developed as quickly as possible , rather than waiting until economic conditions for the city and everybody are much better. Someone testifying seemed to imply that the developers could not proceed very far until the city had completed the cleanup of the pollution. That may have been wrong, but it was not obvious that the city would not bear some cleanup costs in the first place, rather than simply reimbursing developers. What is true? Exactly what $ costs will the city agree to bear? Of course the final contract is what determines everything. If the two lawyers on the council & the city attorney don't all agree on exact terms the city would agree to if it signed that contract, contract attorneys (not connected with either party) should be consulted.