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Temporary Transfer Authority
<br />In 2021, the Legislature enacted expanded, temporary authority to transfer unobligated tax increments for
<br />purposes of assisting private development consisting of the construction or substantial rehabilitation of buildings
<br />and ancillary facilities, if doing so will create or retain jobs in the state. Proposed amidst the COVID-19
<br />pandemic, the enacted law is narrower than initially proposed and is similar to 2010 legislation that temporarily
<br />expanded the use of TIF with the aim of stimulating economic recovery after the Great Recession.
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<br />Authority and Purpose
<br />The new law temporarily permits the City to elect, by resolution, to transfer unobligated increment for certain
<br />specified purposes. The new law does not, however, override requirements to pay bonds to which increments
<br />are pledged.
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<br />Any transfer under this provision must be for the purpose of assisting private development that meets all the
<br />following criteria:
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<br />1. it consists of the construction or substantial rehabilitation of buildings and ancillary facilities;
<br />2. it creates or retains jobs in the state, including construction jobs; and
<br />3. construction commences before December 31, 2025 and the project would not have commenced
<br />before that date without the assistance.
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<br />Developments that would already commence construction prior to December 31, 2025, or those that do not add
<br />or retain jobs in the state, would not be permitted beneficiaries of the transfer. Transfers must provide the
<br />assistance in one or both of the following ways:
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<br />1. by providing improvements, loans, interest rate subsidies, or assistance in any form to the private
<br />development; or
<br />2. by making an equity or similar investment in a corporation, partnership, or limited liability company that
<br />the authority determines is necessary to make construction of a development financially feasible.
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<br />In order to demonstrate compliance with the new provision, an authority may wish to include affirmation of the
<br />qualifications in the written resolution electing to make the transfer. The authority also should keep
<br />documentation that demonstrates that the development created or retained jobs in the state and that
<br />commencement of construction by December 31, 2025, depended on the transfer.
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<br />Parameters and Limitations
<br />The authority to transfer increments under this provision expires on December 31, 2022. Amounts being
<br />transferred under this provision must be transferred from the fund or account in which tax increments are
<br />segregated and into a separate fund or account by December 31, 2022. All transfers must be spent by December
<br />31, 2025.
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<br />Transfers from a TIF district in calendar years 2021 and 2022 are limited to a maximum transfer equal to the
<br />excess of the district’s unobligated increment. Under the provision, unobligated increment includes any
<br />increment not required for payment of obligations due during the six months following the transfer on
<br />outstanding bonds, binding contracts, and other outstanding financial obligations of the district to which the
<br />district’s increment is pledged. Therefore, the transfer of increment for 2021 is limited to the eligible balance of
<br />tax increment at the end of 2020, less amounts needed to pay bonds, pay-as-you-go notes, and interfund loans
<br />due from January 1, 2021, to June 30, 2021. Similarly, the transfer of increment for 2022 is limited to the eligible
<br />balance of tax increment at the end of 2021, less amounts needed to pay bonds, pay-as-you-go notes, and
<br />interfund loans due from January 1, 2022, to June 30, 2022.
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<br />Increment that is improperly retained, received, spent, or transferred is not eligible for transfer under this
<br />authority. Therefore, the 2020 and 2021 balances of tax increment should be carefully evaluated prior to making
<br />transfers in 2021 and 2022, respectively. For example, excess increment calculated for 2019 that might remain
<br />in the TIF fund after it should have been returned by September 30, 2020, would not be eligible for transfer,
<br />nor would any subsequent excess increment be eligible for a transfer after it should have been returned.
<br />Likewise, if a district receives tax increment after it should have decertified under the Six-Year Rule, such
<br />amounts of increment would also not be eligible for transfer.
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