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CHAPTER 17 Tax increment financing is a funding technique that takes advantage of the increases in tax capacity and property taxes from development or redevelopment to pay public development or redevelopment costs. The difference in the tax capacity and the tax revenues the property generates after new construction has occurred, compared with the tax capacity and tax revenues it generated before the construction, is the captured value. The taxes paid on the captured value are called increments. Unlike property taxes, increments are not used to pay for the general costs of cities, counties, and schools. Instead, increments go to the development authority and are used to repay public indebtedness or current costs the city incurred in acquiring the property, removing existing structures, or installing public services. Thus, the property owner in a TIF district continues to pay the full amount of properly taxes. Tax increment financing involves only the increased property taxes generated within the district. It does not pre-empt the amount of property taxes currently derived from the redevelopment area, nor does it directly affect the amount or rate of general ad valorem taxes the city levies. The result of a TIF project is an increased tax base that will benefit all local taxing jurisdictions. Additionally, TIF districts usually create new jobs and help stimulate the economy. . Tax increment financing is used to encourage four general types of private development: redevelopment, renovation and renewal, growth in low- to moderate-income housing, and economic development. Minn. Stat. § 469.175, subs. s. The city using tax increment financing must report annually to the county board, the county auditor, the school board, and the state auditor as to the status of the TIF district or districts and publish the report. The state auditor has established a uniform system of accounting and financial reporting for TIF districts. The city must annually submit to the state auditor a financial report in compliance with these standards. Minn. Stst. ~ 4G9. t 771, subas. 1 The state auditor may audit TIF districts. If the state auditor notifies a TIF ana 2b. authority of an alleged violation, a copy of the notice i3 also forwarded to the county attorney. If no action is brought within one year, the county attorney must notify the state auditor, who then notifies the attorney general. If the attorney general finds a substantial violation, the attorney general will petition the state tax court to suspend the authority's power to use TIF for a period of up to five years. • 17-14 1"lA1`IABOOK FOR MINNESOTA CITIES ~3