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I I I I I I I I I I I I I What is the rationale fo~ requirin~ a city to provide partial ~eimbursement to tte state ifa tax-increment district is created or exported? ~his is our way to make sure that a city goverm~ent some of its on-budget resources to a tax-increment district. The state would withdr~w scm~ of its regular aid to th~ city'.s operating budget. Oonsequently, the city ~overnment would be required to adjust some of its spendirg priorities, ~r increase its local tax levy, if it chooses to use tax-increment financirg. Would taxpayer understandir~ of tax-increm .ent financin~ be bellied if the mill-equivalent of th~ tax-increment levy appeared on the property tax statement? Possibly. Our recommendation is not specific on how taxpayers would be informed of the way the tax-increment burden actually is distributed. ~pressirg the mill-equivalent on the tax statement certainly would elevate the level of taxpayer interest. ~e are callin9 for dmanges in ~ de%~_lopment assistance system for the follc~irg reasons: Accountability is ]acking--Today'.s system of financing redevelopment offers little a~countability to the voters. Elected officials don'.t debate how much mo~ey to invest in rede~_lcgment relative, say, to public safety c~ street maintenance. Instead, the dollars for rede~lc~ment are made available from separate revenue streams which don'.t flc~ through the regular cperatir~ cr capital budgets of city governments. Some businesses lose when favored treatment is given to others--Ur~ubsidized hotels, offices, retail stores, warehouses and other establishments exist side-by-side with subsidized competitors. The result can be that reduced interest rates, ~ write-downs or other types of assistar~e rake it possible fDr the subsidized firms to enjoy a competiti%~ advanta~3e over those that are unsubsidized. This problem is not universal, by any means. In fact, substantial evider~e is available that an entire downtown, for example, receives benefits when new buildirgs are oor~tructed with subsidies. Thus the possibility that certain fi~ could receive special advantage over their ~tition doe~'.t call for doing away with public assistance. It does, t~ever, mean that the tools of assistar~, should be used with great care. Existirg rules governing the major tools available to cities (ir~ustrial re~_nue bond~ and tax-increment financing) are not sufficiently restrictive to protect unsubsidized businesses from consequences of overly-generous subsidies to others. I I I I Too much tax base may be captur.ed--Elected officials may be cc~mitting excessive amounts of tax base for tax-increment purposes. The amount of tax base captured for tax-increment (t.hat is, held out of the official assessed valuation ar~ not available for regular city, school ar~' county govez-~-,,ent exper~e) is growing very fast. No restrictions are present on the amount that can be (~ptured. Statewide, the captured assessed valuation in 1985 exceeds ~600 million, which is equivalent to the tax base of tbe entire city of Edina. At present rates of growth the amount easily can exceed ~1 billion before th~ ena of th~ decade. Minneapolis is m~ ~aviest user. For 1985, 8.8 percent of Minm_Aoolis'. assessed valuation is captured in tax-increment districts. This percentage is projected to grow to 9.7 percent in 1986 ar~ to 10.3