10-27-1999 Council Agenda - Laserfiche WebLink

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TIF District No. 3 -2 require payment of those expenses by February 15 of the year following the year the expenses were incurred. In addition, the County will retain and forward to the State one -tenth of one percent (0.1 %) of tax increment revenue. These funds will be used to finance State tax increment monitoring activities. 2.7.5 State Tax Increment Financing Aid State Law requires that the City elect to (1) incur a reduction in LGA/HACA or (2) make a local contribution to the project. The City elects to make the annual local contribution to the project to exempt itself from the LGA -HACA penalty. The remainder of this subsection explains the requirements. An analysis of the options can be found in Appendix 2 -C. LGA/HACA Penalty: Pursuant to Minnesota Statutes, Section 273.1399, for tax increment financing districts for which certification was requested after April 30, 1990, a municipality incurs a reduction in state tax increment financing aid (RISTIFA) applied to the municipality's Local Government Aids (LGA) first and, Homestead and Agricultural Aid (HACA) second, in an amount equal to a formula based upon the equalized qualifying captured tax capacity (QCTC) of the tax increment financing district. For a redevelopment TIF district, the penalty is phased in over a 20 -year period. The initial penalty begins in year 6 at a rate of 6.25 %. An additional 6.25% is added in each subsequent year, reaching 100% in year 21. Local Contribution/Match: Pursuant to Minnesota Statutes, Section 273.1399, Subdivision 6, for tax increment financing districts certified after June 30, 1994, the City may choose an option to the LGA - HACA penalty. A tax increment financing district is exempt if the City elects at the time of approving the tax increment financing plan to make a qualifying Local contribution. To qualify for the exemption in each year, the City must make a qualifying local contribution to the project of a certain percentage. The local contribution for a redevelopment district is 7.5 percent of the annual tax increment revenue. The maximum local contribution for all districts in the City is Limited to two percent of the City's net tax capacity. The amount of the local contribution must be made out of unrestricted money of the authority or municipality, such as the general fund, a property tax levy, or a federal or a state grand -in -aid which may be spent for general government purposes. The local contribution may not be made, directly or indirectly, with tax increments or developer payments. The local contribution must be used to pay project costs and cannot be used for general government purposes. Given the activities and investment anticipated in District No. 3 -2 related to the implementation of the Development Guide, there should be a variety of sources for the local contribution. 2.7.6 Excess Tax Increments Pursuant to Minnesota Statutes, Section 469.176, Subdivision 2, in any year in which the tax increment exceeds the amount necessary to pay the costs authorized by the tax increment plan, including the amount necessary to cancel any tax levy as provided in Minnesota Statutes, Section 475.61, Subdivision 3, the City shall use the excess amount to do any of the following: 1. prepay the outstanding bonds; 2. discharge the pledge of tax increment therefor; 3. pay into an escrow account dedicated to the payment of such bond; or 4. return the excess to the County Auditor for redistribution to the respective taxing jurisdictions in proportion to their tax capacity rate as provided in Minnesota Statutes, Section 469.176, Subd. 2. 2 -9 Page 151