Agenda - Council Work Session - 08/27/2013

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25:8 Minn. Stat. §§ 469.174 - 179. Handbook, Chapter 21. "Tax Increment Financing." House Research Short Subject, Oct. 2010. Minn. Stat. § 444.075. Minn. Stat. § 444.075, subd. 2. Minn. Stat. § 444.075, subd. 3(b). LMC information memo, Securing Payment of Utility Charges. Minn. Stat. § 444.075. Minn. Stat. § 444.075, subd. 3(h). Minn. Stat. § 444.075, subd. 3c(b). CHAPTER 25 Abatement bonds are not subject to referendum approval and are excluded from debt limits. In any year, the total amount of property taxes abated by a city may not exceed 10 percent of the net tax capacity of the political subdivision for the taxes payable year to which the abatement applies or $200,000, whichever is greater. F. Tax increment financing Tax increment financing (TIF) is a broadly applicable financing tool that funds more than local improvements. Basically, it segregates certain tax dollars from a defined area in the city for use in developing and improving the area, which can include local improvements. TIF takes advantage of the increases in tax capacity and property taxes from development or redevelopment before the development actually occurs to pay for public development or redevelopment costs. The difference in the tax capacity and the tax revenues the property generates after new construction has occurred, compared with the tax capacity and tax revenues it generated before the construction, is the captured value. The taxes paid on the captured value are called "increments." Unlike property taxes, increments are not used to pay for the general costs of cities, counties, and schools. Instead, increments go directly to the development authority to repay public indebtedness or upfront costs the city incurs in acquiring the property, removing existing structures, or installing public services. TIF requires extensive planning, implementation, and reporting in consultation with the appropriate financial and legal professionals. IV. Funds for specific purposes A. Waterworks systems Cities may acquire and operate waterworks systems including sewer systems and storm sewer systems. Cities may use any of the following tools or a combination of them to fund construction, maintenance, or improvement of any of these systems or parts of these systems. Cities may also use special assessments to pay for waterworks, sewer and storm sewer systems, discussed subsequently. In statutory and charter cities, even if a charter indicates otherwise, charges made for services must be, as nearly as possible, proportionate to the cost of furnishing the service. 1. Availability fees Water and sewer availability fee, sometimes known as WAC and SAC fees, may be set to cover the eventual costs of improvements to local waterworks infrastructure including construction, reconstruction, repair, or enlargement of the system. Cities may charge use and availability fees for waterworks services even against properties not currently connected to the system. Collecting charges to build up revenue is reasonable, according to the law, even well before a city starts a planned waterworks or sewer project. This chapter last revised 12/1/2012 LEAGUE OF MINNESOTA CITIES