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CHAPTER 13 - ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS a resolution of the authority or municipality, passed before the loan is made. The terms of the loan must be in writing and include the principal amount, term, and interest rate. A land write-down occurs when the development authority transfers property to a developer at less than authority's acquisition cost. For example, an HRA may acquire a parcel for $1 million and spend an additional $100,000 demolishing a building on the property. If the HRA sells the property to a developer for $500,000, the price of the land is "written down" from the HRA's $1.1 million cost to $500,000. The authority may give the land to the developer---i.e., "write it" down to zero. A municipality is the general purpose governmental unit required to approve new TIF districts, issuance of bonds, and other major TIF decisions made initially by the development authority. M.S.§ 469.174, subd. 6; 469.175, subd 3. In most cases, the municipality is the city in which the project is located but it may be a township or a county. For projects located outside of a city or for certain multi -county projects, the municipality is the county. Original tax capacity is the tax capacity of the TIF district when the TIF district is established. (hazardous substance subdistricts are an exception to this rule. For these subdistricts, the original tax capacity value is reduced by estimated cleanup costs.) This value is occasionally referred to as the frozen value. The original tax capacity is subject to adjustment if tax exempt property in the district becomes taxable, taxable properties become tax exempt, the legislature modifies the class rates of properties in the district, or parcels are added to or deleted from the district. Original local tax rate is the sum of the tax rates imposed by all the taxing districts (e.g., city, county, and school district) in the year the TIF district is created. This rate is multiplied by the captured tax capacity to determine the amount of tax increment. These rules apply only to post -1988 districts. For pre -1988, increment is determined using the current year local tax rates. Local tax rates are after adjustment for any disparity reduction aid. The original local tax rate never changes. Pay-as-you-go financing relies on the private developer or property owner to initially finance the costs of the TIF improvements. A development agreement between the authority and the developer, then, provides the developer will be repaid as tax increments are collected. This method of financing allows the city or authority to avoid borrowing money (e.g., by issuing bonds) to pay for the costs of up -front or to "capitalize interest." the developer bears these costs until increments are collected. The developer may only be reimbursed for costs that can be financed with TIF. Pay-as-you-go financing has become more popular after the federal tax law made it more difficult to use tax exempt bonds to finance many TIF costs. Pooling of increments is permitted under the TIF act for post -1982 TIF districts. M.S. 469.175, subd. 1 and 4; 1982 Minn. Laws 888-92, chap. 523, art. 38 " 3, 5, and 10. Pooling allows increments collected from a TIF district to be expended on activities geographically located outside the district or functionally um -elated to the development in the district, if the activities are within the same project area. The activities may or may not be located in another TIF district. There are a variety of different mechanical means of pooling increments, including use of large project areas, "master projects," and other mechanisms. TAX INCREMENT FINANCING 13.01 - 37 REVISION DATE: NOVEMBER, 2010