Tax Increment Financing
Tax Increment Financing Districts Resources
- Overview of Tax Increment Financing (PDF)
- Summary of Tax Increment Financing in Minnesota (PDF)
- 2018 Disclosure of Tax Increment Districts-Summary Publication (PDF)
Tax Increment Financing District 1
- Established in 1990 to help with land acquisition and public improvements to facilitate the development of the Park Vista townhomes
- Decertified in 2015
- Development District 1 and Tax Increment Financing District 1 (PDF)
Tax Increment Financing District 2
- Established in 1997 to help fund the construction of Stieger Lake Lane Bridge and land acquisition and site preparation for the Stieger Lake condominiums
- Decertified in 2016
- Amendment 1 of Development District 1 and Amendment 1 of Tax Increment Financing Districts 1 & 2 (PDF)
Tax Increment Financing District 3
- Created in 2002 to fund new streets in the downtown, streetscaping and burying powerlines
- Will decertify in 2028
- Tax Increment Financing Plan, Districts 1-3 (PDF)
Tax Increment Financing District 4
- Created in 2008 to develop a grocery store in Victoria
- Will decertify in 2036
- Contract for Private Development-11/13/08 (PDF)
Tax Increment Financing District 5
- Created in 2016 to help facilitate the redevelopment of the Mainstreet building and construction of the public parking lot along Rose Street
- Will decertify in 2043
- Tax Increment Financing District 5-Area Coverage Test Map (PDF)
- Tax Increment Financing Plan, Districts 1-5, Rose Street (PDF)
Tax Increment Financing District 6
- Created in 2016 to assist in the redevelopment of the Victoria Flats apartment building and the Stieger Lake Lane improvements
- Tax Increment Financing, Victoria Flats, Presentation to City Council on 10/24/2016 (PDF)
- Tax Increment Financing District 6 Map-Victoria Flats (PDF)
- Tax Increment Financing Plan-Victoria Flats (PDF)
Tax Increment Financing District 7
- Created in 2019 to assist in the development of Bethesda Cornerstone Village community living for active seniors and independent adults with a developmental disability
- Will decertify in 2046
- Tax Increment Financing Map for District 7-Bethesda Lutheran Communities, Inc. (PDF)
- Tax Increment Financing Plan for District 7-Bethesda Lutheran Communities, Inc (PDF)
- Tax Increment Financing, Bethesda Lutheran Communities, Inc,,: Presentation to City Council July 8, 2019 (PDF)
Tax Increment Financing
When a city creates a TIF district, the assessed property values in that district are "frozen" at their current level. As development occurs and property values rise, the city captures the increased local property taxes (city, county, school, and special taxing jurisdictions) to pay for any public improvements or to help finance development and redevelopment projects. State property taxes and referendum taxes are not captured within TIF.
Tax increment financing, often called TIF, is a financial tool cities may use to assist development, which otherwise would not occur but for the use of tax increment assistance. The purpose of TIF is to create jobs, provide affordable housing, redevelop declining areas or clean up environmentally contaminated sites.
TIF may also be used to finance public infrastructure--such as streets, sewer, water or parking facilities--that is related to the development. In some cases, the developer would be required to pay for this infrastructure though special assessments or other charges. In other cases, all taxpayers would pay though general city taxes.
TIF may also be used to finance public infrastructure--such as streets, sewer, water or parking facilities--that is related to the development. In some cases, the developer would be required to pay for this infrastructure though special assessments or other charges. In other cases, all taxpayers would pay though general city taxes.
When a city creates a TIF district, the assessed property values in that district are "frozen" at their current level. As development occurs and property values rise, the city captures the increased local property taxes (city, county, school, and special taxing jurisdictions) to pay for any public improvements or to help finance development and redevelopment projects. State property taxes and referendum taxes are not captured within TIF.
No. Taxes paid by a development continue to be directed in the same manner. Residents do not pay taxes that are used by a TIF project. Only new dollars created by the project can be used to assist the project. In some cases, existing taxpayers may be relieved of financial burdens if additional public improvements are financed with the increment created by a project.
A TIF district is a designated area in the city in which the city is trying to attract development to increase the tax base, create jobs or provide affordable housing.
No, but it can help. A business must be able to make money at a specific location. A TIF district can help by decreasing development costs.
TIF funds can only be used for land acquisition and physical improvements, such as infrastructure, buying land or demolishing buildings. TIF funds cannot be used for loans to businesses for working capital, machinery or equipment.
A TIF plan is a planning document, which describes why the area is eligible to be a TIF district and describes the proposed projects and activities. The TIF plan also includes the estimated tax increments to be generated and the proposed use of the tax increments. Specific terms for assistance to a private developer are not included in the TIF plan; these terms are part of a separate development assistance contract known as a TIF agreement.
Before creating a TIF district, the city council must consider the "but-for" test; this test asserts that the project would not go forward as proposed “but for” the requested assistance. The city council must find that the market value of the TIF development will be higher, after subtracting the value of the TIF assistance, than what would occur on the site if TIF were not used.
There is a mismatch between when most TIF costs must be paid versus when tax increment dollars are received. The former occurs at the beginning of the development and the latter occurs after the development is built. Three basic financing techniques are used to finance the upfront costs.
Bonds
The city may issue its bonds to pay these upfront costs and use the tax increment to repay the bonds. Often, extra bonds are issued to pay interest on the bonds (“capitalizing” interest) until receipt of increments begins.
Interfund Loans
The city may advance money from its own funds, such as a development fund or sewer or water fund, and use the tax increments to reimburse the fund.
Pay-as-you-go Financing
The developer may pay the costs with its own funds; the tax increments are used to reimburse the developer for these costs. The reimbursement occurs as property taxes are paid by the property and tax increment is available to make payment to the developer. Under pay-as-you-go financing, the developer assumes the risk that future tax increments will be sufficient to repay the costs.
Bonds
The city may issue its bonds to pay these upfront costs and use the tax increment to repay the bonds. Often, extra bonds are issued to pay interest on the bonds (“capitalizing” interest) until receipt of increments begins.
Interfund Loans
The city may advance money from its own funds, such as a development fund or sewer or water fund, and use the tax increments to reimburse the fund.
Pay-as-you-go Financing
The developer may pay the costs with its own funds; the tax increments are used to reimburse the developer for these costs. The reimbursement occurs as property taxes are paid by the property and tax increment is available to make payment to the developer. Under pay-as-you-go financing, the developer assumes the risk that future tax increments will be sufficient to repay the costs.
The duration of a district depends on the type of district. An economic development district can last for nine years; a redevelopment district can exist for up to 26 years. The most common types of TIF districts in Minnesota are the following.
Redevelopment; Renewal; Renovation
Generally, for a city to create any of these districts, the area must be 'blighted' within the meaning of the state statutes. The area must be at least partially developed and a percentage of the buildings must be structurally substandard.
Housing
The housing project must be intended for occupancy in part by persons or families having low to moderate income.
Economic Development
TIF can be used when 85% or more of the new buildings in the district will be used for manufacturing, storage, distribution (excluding retail sales), certain research and development, telemarketing and tourism.
Redevelopment; Renewal; Renovation
Generally, for a city to create any of these districts, the area must be 'blighted' within the meaning of the state statutes. The area must be at least partially developed and a percentage of the buildings must be structurally substandard.
Housing
The housing project must be intended for occupancy in part by persons or families having low to moderate income.
Economic Development
TIF can be used when 85% or more of the new buildings in the district will be used for manufacturing, storage, distribution (excluding retail sales), certain research and development, telemarketing and tourism.