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City of Little Canada, MN Management Review & Analysis – Tax Increment Financing Districts 2 Executive Summary Overview Tax Increment Financing (TIF) is a financing tool that allows cities, counties, and authorities to attract business, redevelop blighted or obsolete areas, clean up polluted sites, and develop affordable housing. TIF allows authorities to capture the value of new development for a limited period of time to pay for costs associated with that development. TIF is used to fill demonstrated financial gaps in project funding, often due to extraordinary costs associated with redevelopment or reduced revenue streams associated with affordable housing. In most instances, the developer pays for TIF eligible costs during project construction and the community pledges to use a portion of the future tax increment generated by the project to repay the developer. At other times, the community will pay up-front costs and repay itself from the annual tax increment received. Revenue from TIF districts is a financial asset of the City of Little Canada. The revenues must be used primarily to remediate blight or contamination, construct affordable housing or address the redevelopment needs of parcels in the TIF district. A portion (but not all) of the TIF revenues can be used for administrative costs and to participate in other eligible development projects. Over the years, the City has utilized unobligated revenues from its TIF districts to assist the following projects:  TIF 3-2 Rice Street Redevelopment: Rutzick Interfund Loan The management of TIF districts is an ongoing activity. TIF requires administrative oversight for reporting to the State, tracking parcel information, maintaining compliance with use restrictions in the TIF law and the development agreements, and matching TIF revenue to debt service. The factors that produce tax increment revenues such as tax rates, assessor’s values, and class rates change every year. Up to 10% of TIF revenues from each district are available to pay for costs associated with the administration of the district. The purpose of this TIF Management Review and Analysis is to assess opportunities, challenges, and any compliance issues with the City’s TIF Districts. It also serves as a management reference and tool for staff. Ehlers worked with City staff to create this plan for the management of its TIF districts and their related debt obligations.