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PUBLIC · FINANOIAL SYSTEMS The UN-Official Statement Volume 2, Number I December lgB4 TAX INCREMENT F I NANCI NG . Tax Increment Financing can either be a boon or a bane to your city. Ideally, tax Increment financing is one of the most useful economic development tools available to local government. However, a poorly conceived flnanclng plan can leave a city with many headaches. In simplest terms, tax Increment financing captures the addltional property tax revenue from new development (the "tax Increment"). The added tax revenue Is used as a catalyst for development. The rationale for this process is that without this assistance the development would not have occurred. Tax Increment financing Is used In three basic policy areas: Economic Development - Encouraging new business opportunities. Redevelopment - Encouraging the reuse of bi Ighted or otherwise undevelopable areas. ~ - Promoting safe, decent and affordable houslng opportunities. The specific uses of tax increment flnanclng depend on the l lmltatlons Imposed by state law. Each state treats tax Increment in a slightly different manner. Some of the bas lc projects to consider for tax Increment financlng Include: land acqulsltlon, site preparation, and public improvement~. In some cases, tax Increment funds can also be used for credit enhancements and Interest reduction programs. FINANCING JAIL FACILITIES Perhaps the most presslng Issue facing county government Is the construction and financing of new jall faclllties. ^ recent article in The Bond Buyer estimated that over 400 counties natlon-wide are under court order to Improve on a variety of Jail conditions, ranging from Inadequate sanitary facll ltles to overcrowding. The tradltlonal response to financing these facll Itles has been to seek .... authority to Issue general obi Igation i.?ii bonds through a referendum. This remalns the most common approach to jail projects. (Public Financial Systems recently assisted Todd County (MN.) with a successful referendum on a $1.4 mllllon jail improvement.) However, the time, cost and uncertainty of the referendum process have caused many counties to look for other methods of finance. An alternatlve finance tool that is gaining popularity is lease-revenue flnanclng. Lease-revenue financing can take several forms. Statutory Au~hority, Lease-revenue financing can occur without referendum in several states. State law al lows another unlt of government to serve as the issuer of bonds for the Jail, while the county leases the factllty for the term of the financing. The approach provides both iow cost and Iow rlsk. No~.-J=rof i t Corporat Ion. Lease-revenue flnancing can occur through the estab I lshment of a non-prof it corporation (63-20). This corporation (Please see Jncrement, Page 2) (Please see JalJs, Page 3)