09/02/2008 Council Packet - Laserfiche WebLink

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Finance Tools Economic development actions require a framework for financial- decision making. The investment of public dollars to achieve economic development objectives should be guided by several key principles: • Financial resources are limited. The city has limited funding to apply to economic development initiatives, so the use of resources must be targeted to achieve the greatest effect on the community. • Financial decisions require long -term perspective. The current use of financial resources may reduce monies available in the future. In evaluating short-term opportunities, it is important to question the long -term impact on community development. • Public funds should lead to private investment. While this section focuses on public finance actions, economic development cannot become reality without private investment. The use of public funds should be targeted to actions that encourage private investment in Lino Lakes. A complete examination of the tools available to the city is not possible, but providing an overview of the most commonly used finance tools is important. Finance plans for actual projects should be made using appropriate technical and legal advice. Tax Increment Financing Tax increment financing (TIF) is the primary development finance tool available to Minnesota cities. TIF is simple in concept, but complex in its application. Through tax increment financing, the property taxes created by new development (or redevelopment) are captured and used to finance activities needed to encourage the development. The challenge in using TIF lies with the complex and ever - changing statutory limitations. These complexities make it impractical to provide a thorough explanation of tax increment financing as part of this plan. Instead, this section highlights the use of TIF as it relates to the implementation of the plan. Type of TIF Districts Four types of TIF districts have application to the plan. • Redevelopment • Renewal and Renovation • Housing • Economic Development Tax Abatement Tax abatement acts like a simpler and less powerful version of tax increment financing. With TIF, the city controls the entire property tax revenue from new development. Under the abatement statute (Minnesota Statutes, Sections 469.1812 through 469.1815), the city, county, and school district have independent authority to grant an abatement. Special Assessments Public improvements are often financed using the power to levy special assessments (Minnesota Statutes Chapter 429). A special assessment is a means for benefiting properties to pay for all or part of the costs associated with improvements, and to spread the impact over a period of years. This tool can be applied to both the construction of new improvements and the rehabilitation of existing improvements. 5 -22 • • •