Agenda - Council Work Session - 10/26/2010

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City of Ramsey October 12, 2010 Page 10 Impact of Fiscal Disparity Calculation: When a TIF District is established, the City must choose whether to elect for the fiscal disparities contribution generated from new commercial - industrial property be made from within the district (Option B) or from properties outside the district (Option A). Choosing Option B typically reduces the impact to other taxpayers within the City because all fiscal disparities contribution amounts are paid by properties within the district. However, it also results in reduced tax increment revenues captured. Electing Option A will maximize revenue collections within the district, but may have an impact on properties outside of the district, resulting in am estimated levy increase and tax rate increase to offset the required contribution amounts. MN statute allows for the City to change the election of the fiscal disparities contribution from outside of the district to properties within the district once during the term of the TIF District. However it does not allow for the reverse scenario, of electing to have the contribution be from within the District to outside the district. The impact of the fiscal disparities election is illustrated in the chart below and in the proposed budgets for the new district. Historically the City has created TIF Districts electing both Option A and B. The City's existing TIF District Nos. 1, 2, 4, & 8 have all been established under Option A and the remaining districts elected Option B. As a result of the districts previously established under Option A, we estimate the City's total levy amount has been increasing, to make up for the collection of TIF on the Fiscal Disparity portion of those districts. Based on available information, we have prepared projections of this estimate for taxes payable 2011 of $380,860, which is shown under the existing levy amount columns for both Option A and B. We have estimated the annual levy amounts through the remaining terms of the districts and as the districts are decertified the annual levy amounts should decrease. The chart bellows illustrates the estimated impact to the City of electing Option A (fiscal disparities contribution outside the district) as opposed to Option B (fiscal disparities contribution from properties within district). With Option A, we estimate the City would have the additional annual TIF revenues as increased revenues (shown in the third column) resulting from the portion that would be used as the fiscal disparities contribution. If Option A is elected the result is increased revenues available in the district, however there is also estimated to be a need to levy a certain amount to offset the cost of the new district. The illustration of the estimated new levy amount is indicated under Option A (titled New Levy Amount).. With decertification of existing districts, the total estimated levy amount will be lower than the 2011 amount from 2012 through 2018. As commercial - industrial development occurs within the district, under Option A the estimated New Levy Amount will increase through the term of the district. With Option B we assume the City would not capture the increased TIF revenues illustrated in the third column. In addition, we include estimated existing annual levy amounts (same as Option A) with decreases in the existing levy amount as existing districts decertify. With Option B there would be less impact on properties outside the district but no capture of the additional TIF revenues provided under Option A. This difference is reflected in the two TIF Plan budgets shown above.