03-27-2002 Council Agenda - Laserfiche WebLink

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Functional Analysis March 21, 2002 Page 6 • Pooling. The boundaries of the TIF District control where the money can be spent. For a redevelopment district, not more than 25% of the tax increment revenues can be spent on activities outside of the district. This amount decreases to 20% for renovation /renewal districts. In practical terms, the amount available for expenditure is less because administrative expenses count as outside of district costs. (M.S. 469.1763, Subd. 2) • 4 -Year Knockdown Rule. Since redevelopment projects evolve over a period of years, it is important to be aware of the time constraints associated with a TIF district. Qualified actions must occur for every parcel in the district within four years of the date of certification by the County. Without a qualified action, the value of the parcel is removed from the district. The City can request restoration of the parcel when action occurs. The parcels values will be restored at the then current (presumably higher) values. Qualifying actions include demolition, rehabilitation, or renovation of property, other site preparation and the improvement of an adjacent street. The installation of utility service including sewer or water systems are not qualified actions. (M.S. 469.176, Subd. 6) • 5 -Year Rule. Another important time constraint affects the ability to spend tax increment revenues. All commitments for tax increments must occur within five years of certification. Eligible commitments include bonds and binding development agreements. This limitation should not be a constraint if all revenues are used for up -front land acquisition and infrastructure costs, The city will not be able to provide direct assistance to specific development projects occurring outside of the five year window. (M.S. 469.1763, Subd. 3) • Streetscape. Streetscape improvements located outside of the TIF district are limited in the ability to be funded by TIP. Tax increments cannot be spent on improvement, equipment or other items that are for decorative or aesthetic purposes. This limitation also applies to functional improvements and equipment if the cost is increased by more than 100% as a result of the selection of materials, design, or type as compared with more commonly used materials, designs, or types for similar improvements, equipment or items. (M.S. 469.176, Subd. 4g) • Implementing Authority. One of challenges in implementing the Rice Street Crossing Plan is that the area spans three municipalities. The municipal boundaries may not limit the boundaries of a TIP district. We believe that the County HRA could serve as the "authority" for a TIF district made up of parcels in more than one municipality. Each municipality would need to take separate action to approve the district. • Base Value. In estimating the amount of tax increment revenue from redevelopment, it is essential to account for the loss of value through demolition.