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CHAPTER 13 - ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS needed to pay these costs, This adjustment does not apply to revenues, such as advances or interfund loans, that are to be repaid with increments. Step 5. Add nonincrements revenues that have been received and are dedicated to pay these costs, but that have not actually been used to pay the costs (and thus are not counted under step 4). Similar to step 4, to the extent these noninerement revenues have been received to pay authorized costs, increments are not needed to do so. Step 6. Add the amount of principal and interest payments that are due on bonds in future years and that have not been prepaid. (under the excess increment rules, future principal and interest obligations are counted in the year when they are due or when they are prepaid.) The resulting amount is the excess increment for the district, When Excess Increments Are Determined The law requires the development authority to determine whether a district has excess increments at the end of each calendar year. This determination is made based on revenues actually received by year end. Permitted Uses of Excess Increments Excess increments must be used for either of two basic purposes: 1. Prepaying outstanding bonds -- this can be done directly (if permitted by the bond agreement) or by funding an escrow account for the bonds or otherwise discharging the bonds. 2. Distribution to the city, county, and school district in proportion to their respective tax rates. The county auditor makes these distributions. If there are no bonds outstanding, this is the only permitted use of excess increments. If all of the contractual obligations of the district have been satisfied, the authority could also decertify the TIF district early, For pre -1990 districts, the authority may wish to amend the TIF plan to authorize new uses of increments, This would allow only future increments to be used for these new purposes, since past increments would still be considered to be excess increments. Distribution of Excess Tax Increment The TIF authority must annually determine the amount of excess increment, if any, for a TIF district. The determination must be based on the TIF plan in effect on December 31 of the year and the increments and other revenues received as of December 31 of the year. The authority must use the excess increment only to: (1) prepay any outstanding bonds; (2) discharge the pledge of tax increment for any outstanding bonds; (3) pay into an escrow account dedicated to the payment of any outstanding bonds; or (4) return the excess amount to the county auditor who must distribute the excess amount to the city or town, county, and school district in which the TIF district is located in direct proportion to their respective local tax rates. Special Reporting Requirements That Apply To Excess Increments Within 30 days after making a distribution of excess tax increment to a school district, the County Auditor must report to the Department of Education the amount of excess tax increment the school district received, This is intended to allow re -computing of the school's state aid. TAX INCREMENT FINANCING 13.01 •28 REVISION DATE: NOVEMBER, 2010