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CHAPTER 13 - ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS <br />FIGURE 13.01-3 <br />A CRITICAL EXAMPLE OF TIF <br />V <br />A <br />L <br />4 <br />Activities would have <br />Increasing value, happened without TIF <br />no blight <br />TIF plan is 1 <br />enacted <br />TIF terminated <br />(Captured value hijacked <br />from other jurisdictions) <br />Original <br />taxable <br />value <br />Value hijacked from other <br />taxing jurisdictions <br />TIME <br />Typical Uses of TIF <br />TIF traditionally was used as a means of redeveloping urban areas that had old or worn-out buildings in <br />need of replacement or rehabilitation. It was initiated as a tool to help with urban renewal (redeveloping <br />"slums" and "blighted" areas). Its use has spread to other purposes. TIF in Minnesota is generally used <br />to: <br />• Redevelop areas occupied with substandard buildings <br />• Build housing for low-income and moderate -income families <br />• Clean up pollution <br />• Provide general economic development incentives <br />• Finance public infrastructure, such as streets, sewer, water, sidewalks, and similar improvements. <br />An Example of How TW is Used <br />A developer is considering building an office building. The city would like to redevelop a site that <br />consists of three parcels of property (parcels A, B, and C in the figure below). Parcel A is vacant and <br />parcels B and C contain substandard commercial buildings. Parcel D contains a building in good shape. <br />Construction of the office building will require demolition of the two buildings, new utilities (sewer and <br />water), and closing an alley. The cost of acquiring the property, demolishing the substandard buildings, <br />and putting in the utility and alley improvements is $1.5 million. However, the developer could obtain a <br />comparable site elsewhere in the area for $500,000, including special assessments for utilities. The three <br />parcels have a tax capacity of $24,000 and pay $33,600 a year in property taxes (at a 140.000% tax rate). <br />TAX INCREMENT FINANCING <br />REVISION DATE: NOVEMBER, 2010 <br />13.01 3 <br />