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CHAPTER 13 - ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS authorities (EDAs), housing and redevelopment authorities (HRAs), port authorities, and rural development finance authorities. The most common development authorities are HRAs and EDAs. Developer payments are repayment (or payment for) by a developer of assistance financed with tax increments. The recipient development authority must treat these payments in the same manner as increments, i.e., they may only be spent on items that the law permits increments to be spent on. M.S.S 469.174, subd. 25; 469.1766. District area is the area containing properties from which increment is collected. M.S. 469.174, subd. 9. The area is defined by the TIF plan and need not be contiguous. The total property tax value (tax capacity) of the properties in the district is certified when the district is created. This value is the original tax capacity for the district. Economic development authorities (or EDAs) are special purpose governmental entities authorized to exercise a variety of development powers, including tax increment financing powers. M.S.S 469.090 - 469.108; 469.174, subd. 4. EDAs are typically created by a city, although most counties are now also permitted to establish EDAs either under special or general law. See M.S. 469.1082 (general law authority for counties located outside of the twin cities metropolitan area). An economic development district is a type of TIF district that may be established in any geographic area. M.S. 469.174, subd. 12. They are not restricted to "blighted areas" or to areas with development difficulties. Economic development districts may only be used to retain a business in Minnesota or the city, to increase employment in the state, or to preserve and enhance the state's tax base. Put another way, an economic development district is not to be used to assist a development that otherwise would locate in Minnesota, unless it is done to prevent a business from leaving the city and moving elsewhere in Minnesota. The duration of an economic development district is limited to eight years from the receipt of the first increment. M.S. 469.176, subd. 1(e). Increments from economic development districts may be used to assist limited types of business facilities: (1) manufacturing, (2) warehousing, (3) research and development, (4) telemarketing, and (5) tourism in tourism counties. M.S. 469.176, subd. 4c(a). Excess increments are increments that exceed the amount needed to pay the costs authorized under the TIF plan for the year. M.S. 469.176, subd. 2. Increments are not excess increments if the TIF plan still permits additional expenditures. The law requires excess increments either to be used to pay outstanding bonds or to be shared proportionately among the city, county, and school district. Excess increment distributions to a school district trigger recalculations of the school's state aid payments. Excess taxes must be distinguished from excess increments. Excess taxes are created when the tax rate imposed on properties in a TIF district exceeds the certified original local tax rate. M.S. 469.177, subd. 9. The amount of excess taxes equals the actual tax capacity rate, less the original local tax rate, multiplied by the captured tax capacity. Excess taxes are distributed to the three main taxing districts (city -town, county, and school district) in proportion to the respective increases in their tax rates. If a school district is a recipient of a distribution of excess taxes, the school's state aid is recalculated. The four-year knock -down rules require development activity to occur on a parcel located in a TIF district within four years after its creation or the parcel will be dropped from the tax increment district. TAX INCREMENT FINANCING 13.01 - 34 REVISION DATE: NOVEMBER, 2010