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#2 ¨³¸ ®¥ ¬²¤¸ %¢®®¬¨¢ $¤µ¤«®¯¬¤³ 0±®©¤¢³ &¨ ¢¨¦ 4®®«² TAX INCREMENT FINANCING (TIF) Tax increment financing works by capturing an increment of local property taxes generated from a new project; then redirecting said tax increment and applying to eligible project costs. Often times, project costs include land/building acquisition and development improvements. Requires a TIF agreement. TIF is a statutory tool used to promote economic development, redevelopment, and housing in areas where it otherwise would not occur; governed by MN Statute 469.174 to .1793 A TIF authority, typically a city, a county, or an entity created by a city or county, captures the increase in the net tax capacity resulting from new development within a designated geographic area called a TIF district. The TIF authority uses tax increments, which are the property taxes on the captured increase in net tax capacity, to pay for TIF-eligible costs of the new development that generated the increase in the net tax capacity. Property taxes generated by the new development are used to pay development costs that the owner, developer, or local government otherwise would have paid. Examples of TIF-eligible costs: Land and building acquisition Demolition of structurally substandard buildings Site preparation, installation of utilities, road improvements Construction of low- or moderate-income housing Costs eligible to be paid from tax increment vary depending on the type of TIF district created and the year in which the district was created. Up-front costs of TIF-subsidized development frequently are financed with the proceeds of general obligation bonds, revenue bonds, or inter-fund loans. Debt service on those obligations is paid with tax increment generated by one or more TIF districts. An alternative to bonded debt or inter-fund loans, known as pay-as-you-go financing (PAYGO), also is used. Under PAYGO, the property owner or developer pays the development costs up front and is reimbursed if, and when, the TIF district generates tax increment. Under this method, the risk of insufficient tax increment to reimburse all of the TIF-eligible costs rests with the property owner or developer, rather than with the TIF authority. -particular project would not move forward. Use of TIF requires Ramsey EDA and City Council approval.