2015-01-27_PWETC_AgendaPacket - Laserfiche WebLink

Home

REQUEST FOR COUNCIL ACTION Attachment C Date: Nov. 17, 2014 Item No.: 14.e Depa nt roval City Manager Approval Item Description: Tax Increment Financing (TIF) Status 1 BACKGROUND 2 The City of Roseville has 7 active TIF districts in the City (Attachment A). Four of these TIF 3 districts will be expiring in the next 4 years (expiration dates and the types of TIF districts are 4 indicated in the map legend). s TIF is an economic development tool created by the legislature to help projects get over the s financial gap "Catch 22" that can sometimes occur with development and redevelopment 7 projects. TIF is commonly used to remove extraordinary costs associated with redevelopment e and blight removal, significant job creation, public infrastructure related to development and s redevelopment projects and affordable housing. All such redevelopment projects generally lo include costs of redeveloping a property for the owner/developer that exceed the value of doing 11 nothing. TIF recognizes that doing nothing can have an opportunity cost to the public because if 12 the property were redeveloped, the increased taxes could significantly exceed the financial gap 13 standing in the way of that redevelopment. 14 Decades ago, Minnesota had TIF laws that were lax in some ways which led to perceived abuses 15 and gave the financial tool a bad name that was not the case in other parts of the country. These 16 laws have been revised several times to limit the flexibility for use of the tool while still allowing n communities to meet their policy objectives for projects that require using TIF. Even with the ie law changes some of the negative attitudes towards the use of TIF remain. A brief overview of 19 TIF in Minnesota prepared by the nonpartisan Research Department of the Minnesota House of 20 Representatives is Attachment B. This overview also outlines the various types of TIF districts 21 which are used for different policy objectives and include different expiration dates. 22 TIF is often accomplished in one of two ways: 23 1. As a "pay as you go" TIF which requires the developer to finance the monetary gap up 24 front and then is paid back over time by the increase in taxes created by the development 25 2. As an "up front' payment where the public finances the monetary gap, generally public 26 improvements and infrastructure costs, at the beginning of the process and then collects 27 the annual increment to pay back the obligation. The public finance can either be via 2e interfund loan or bonds which may be issued to preserve City funds with certain security 29 provisions included that assist to mitigate City risks. Taxability of the bonds is subject to 30 certain use and security limitations resulting from the 1986 federal tax law changes that 31 included additional restrictions on the use of bond proceeds. 32 No matter which method of TIF is used, the City, County, School District and other taxing 33 authorities will continue to receive the same amount of pre -development taxes they did before 34 the TIF district until the district is closed. At the time of closure, the captured tax capacity will Page I of 5