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CHAPTER 13 - ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS the opportunity to shift city costs to school and county taxpayers located outside of the city, As a result, the law limits use of TIF for general government purposes, Public Improvements TIF is frequently used for public improvements, such as sewer, water, roads, sidewalks, and similar improvements. In many cases, these improvements are directly related to or part of the real estate developments that generate the tax increments, However, there is no explicit requirement that these improvements relate to the development generating the increments or be located within the TIF district, Increments cannot be used to finance the construction of government buildings, The law prohibits use of increments for a building that is used "primarily and regularly for conducting the business of a" governmental unit, M.S. 469.176, subd. 4g. This prohibition applies to virtually any type of governmental unit, whether local, state, or federal, Excess Increments In general, excess increments rules apply in situations when the total increments that have been collected from a district exceed the authorized expenditures of tax increments under the TIF plan. The excess increment rules are intended to ensure that overlapping taxing districts (i.e., the county and school district) share in the taxes generated by the TIF district that are not needed to fund the TIF plan. Note that the excess increments in this discussion, sometimes referred to as "surplus TIF," are different from "excess taxes" (or "excess TIF") caused by the original tax rate provision discussed earlier in Section 13.01. How Excess Increments Are Calculated The law establishes an elaborate set of rules to determine whether a district has excess increments, It is perhaps easiest to understand these rules by expressing them as a series of calculation steps. Step 1, Determine the total amount of increments collected from the district since its inception or certification. This is based on the broad definition of increments and includes developer repayments of amounts funded with increments, investment income earned on increments, and so forth, Step 2, Subtract any amount of excess increments that were distributed in a prior year to the city, county, and school district, Since excess increments are calculated for the life of the district, this subtraction is made to prevent double counting of increments that previously wore distributed. Step 3. Subtract the total amount of costs authorized by the TIF plan to be paid with increments. This is the basic calculation; has the district collected more increments than it is authorized to spend? If so, it has excess increments, (the amount of authorized costs is adjusted as provided in steps 4 through 6. The total amount of these adjustments cannot exceed the amount of authorized costs, though.) Step 4. Add the amount of the authorized costs that were paid with non -increment revenues, For example, if part of the authorized costs were paid with a federal or state grant, then increments are not TAX INCREMENT FINANCING REVISION DATE; NOVEMBER, 2010 13.01 .27