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2 <br />added tax base. Ms. Huot explained that a portion of the Legacy project is inside a TIF district. <br />The tax abatement boundaries are related to the portion of the Legacy project that are outside the <br />TIF district, since a city cannot use taxes generated within a TIF district for tax abatement. Tax <br />abatement works through identifying properties that should experience the growth and generate <br />the taxes needed to offset the levy. The city adds to the levy each year the amount needed for <br />debt service and it is spread among the taxpayers. To use the tool you have to identify the <br />properties that are to be developed to offset the additional levy. The bonds are structured so as <br />development is phased in over five years the amount available for the debt service is also <br />increasing, until the amount of taxes from the project exceed what the city will need to levy for <br />the debt service. <br /> <br />Ms. Schwartz clarified that even though it is a levy among the taxpayers, property taxes should <br />not go up, because it is absorbed by the increased tax base. Ms. Huot said the developer <br />estimates $60 million in taxable value on the identified parcels with partial value created for tax <br />available in 2008, with four additional years of phasing, with annual tax revenue from the project <br />to be $305,000/year. For the debt service we’ll need approximately $150,000 -$175,000/year. So <br />the difference not being abated should be able to absorb any increased services of the project <br />itself. <br /> <br />Mr. Rolek stated the estimate on the impact on a median value home in Lino Lakes is $17- <br />$22/year. The added tax base should absorb that. <br /> <br />The abatement law was changed this year to extend the duration to 15 years and a city does not <br />have to request participation from the county and school district. The city did not request <br />participation because those entities do not generally participate. <br /> <br />Ms. Kuschke asked about costs of abatement bonds. Mr. Milbauer asked if the city considered <br />private placement to save costs. Mr. Rolek stated the city generally goes out to bids on <br />abatement bonds but private placement would not be ruled out. <br /> <br />Ms. Kuschke asked whether this could restrict the city’s ability to use tax abatement in the <br />future. Mr. Rolek said the amount the city needs to recapture every year is structured so the <br />payment on the bonds remains much the same annually, while the city’s annual levy increases <br />each year. Mr. Rolek said TIF will still remain the major development tool. TIF generates more <br />money for development. Tax abatement is used when development doesn’t qualify for TIF. TIF <br />cannot be used for this project because the YMCA is tax exempt and because a portion of the <br />Legacy project did not qualify for TIF because it had no previous substandard development on it. <br /> <br />Mr. Rolek said the abatement bonds are less complicated and have lower rates. It is more cost <br />effective than lease revenue bonds because of GO backing. <br /> <br />Committee asked for clarification regarding conduit bonds to finance the YMCA’s debt. The <br />IRS allows cities to lend their bond rating to tax exempt organizations. There is no risk to the <br />city and this is not a debt of the city. The city is lending its name to allow the Y to get lower <br />interest rates. A default does not impact the city’s bond rating. The bank lends directly to the Y.