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'1 -21- I ! Our recommendation for iahasing cut tax-increment financing is contingent th~ establis~nt of the z~devecpment fund, as recommended above. ~4e would not support elimination of tax-increment financirg without a satisfactory replacement. ~e r~nd that the Legislature in 1986 impose the following restrictions on th~ use ~f tax-inc~-e,~nt financing.. I I I I I I I Repeal the provisior~ of tax-increment finar~irg which allow districts to be formed where no rede;ek?ment is occurrin~--~e Legislature should repeal an existirg provision which allows tax-increment to be captured for ~p to eight years in so-called ':e~oncmic develol~nent': areas. This is a provision ~f law which allows tax-increment to be used in locations where any fir~irg of redevelopment nee~ is impcesible, bemuse nothing can be redeveloped. Require that a city goverrm~-nt psrtially reimburse the state for the statels loss of revenue because of tax-increment financir~--Tne amount need r~t be very large, but even a small a ~m0unt of reimbursement likely would er~-~ura~e prudenoe by cities in usirg tax-increment. Such action should be required for all additional improvements authorized in existirg tax-increment districts as well as for all n~N or expar~ed districts. The mechanics of partial reimbursement oould be accc~plished by ~ state'.s deductirg a portic~ of lo~al gove~-~ent aid to the affected city government. (Th~ fact that the Legislature provides state aid for tax-increment districts may not be widely understood. It occurs indirectly, through the formula which provides state aid for schools. In 1983 the state l~dd an additional $10.3 million in aid to sc_toD1 districts because the captured value in tax-increment districts is not eounted as local wealth in the aid fon~ula, accordirg to Dennis E~no, assistant state oc~missio~ of revenm. ) I I Disal]c~ aocumulation of sur$1uses in future tax-increment authorizations, excel~t as outlined above--Th~ amount of-revenue captured for tax-increment purposes should be the amount ~-~ed to pay expenses authorized when tt~ tax-increment district was created, no more. Once those dollars have been ao~umulated, no more tax-incr~ent dollars shc~ld be c~ptured, and tb~ property wculd be returned to the tax rolls, with o~e exceptio~ allc~d. ~ exception that we would allow, as noted above in our r _eco~_~ation c~ the s~_~rees of revenue for the redevelopment fur~, is that a city cculd capture ~ to three years'. additional tax-increment revenm in a district for the redevelcpment fund. Such a capture would be possible only if revenues are accumulated enough years before tl~ legally-prescribed expiration date for tax-increment districts. We wculd not prolite an extension of that expiration date. Discontinue l~oolin~ tax-increment dollars other than the poolin9 that w~uld be made ~ossible by a transfer of limited tax-increment dollars to the redeve~t fu~.--~ Legislature slx)uld repeal existing laws which allow revenue generated in a tax-i~rement district to be used for expenses in areas outsiae the originally-established tax-increment project area. Tb~ followirg types of poolir~ approact~s plus any others w~uld be disoontinued and no additional such approaches would be allowed: (a) so-called m~ter project tax-increment plans, in which re%~nues from all tax-incr_~--nt districts in a city may be used anywhere in the city, irrespective of the district where the dollars were