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When a city designates an area as a tax-increment district, the property taxes <br /> generated by new development there are used to payoff the public debt incurred <br /> p <br /> to improve those areas -- expenses a developer otherwise would pay. That <br /> means the additional tax revenue -- the increment -- doesn't go into the general <br /> funds of cities, counties and school districts. <br /> Cities sometimes keep the districts in place for as long as legally possible -- up to <br /> 25 years -- funneling tax revenue beyond what is needed for debt repayment into <br /> other projects favored by city officials. General taxpayers are left with a higher bill <br /> than they would pay if the special districts had not been established. <br /> "City authorities have looked on districts as cash cows [for favored projects] and <br /> have delayed paying off the obligations and putting them back on the tax rolls," <br /> said state Sen. Ann Rest, DFL-New Hope. <br /> Each year, Rest and her legislative colleagues also confront the fact that these <br /> subsidies shift some costs from particular cities to the rest of the state. <br /> That's because the state uses income and sales taxes to compensate school <br /> districts when part of their claim on local property taxes is diverted to pay for <br /> development. According to House figures, the state has paid more than $1.4 <br /> billion in inflation-adjusted dollars for such compensation since 1974. <br /> Hollowed tax bases <br /> Rep. Ron Abrams, R-Minnetonka, has challenged what he considers the abuse <br /> of the subsidy. <br /> Abrams, who heads the House Committee on Taxes, said the technique is "a <br /> perfectly acceptable vehicle in certain circumstances" such as preparing land for <br /> affordable housing or attracting a development that is "too big to fail." <br /> But too often, Abrams said, the subsidy has become "a garden-variety <br /> development tool that developers ask for on the way in." <br /> By going along, cities are "hollowing out the tax base," Abrams said. <br /> Minneapolis has used the subsidy more than any other city in terms of total <br /> dollars, according to the Citizens League. In 1999, Minneapolis had 14 percent of <br />