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That is because there will be much less property-tax revenue to tap for the • subsidies. As part of the Legislature's push for property-tax reform, tax rates for commercial and industrial property--where much of the tax-increment money gets spent -- have been reduced for the third time in four years. For taxes payable next year, the rate will drop from 2.4 percent on a property's first $150,000 in market value to 1.5 percent. In 1998, the rate stood at 2.7 percent. Additionally, the state's takeover of K-12 education expenses means less money for tax-increment subsidies because it eliminates the general education levy from local property-tax bills. Since its inception, tax-increment financing has been a popular tool because it diverts a new development's higher property taxes from going to cities, counties and schools -- as they normally would — and instead uses them to pay for improvements made to the property. Now, generally speaking, "you're looking at one-third less [revenue]," said Andrea Stearns of the League of Minnesota Cities, a municipal lobbying group. Even Stearns, however, is uncertain what will happen next. Although tax- 9 411 increment financing will be less attractive to cities and developers, she said, commercial and industrial property owners should have less need for subsidies because the Legislature has reduced their property-tax rates. "The effect has been overdramatized, I think," said Joel Michael, a House analyst specializing in tax-increment subsidy law. "[It's] hard for me to leap to the conclusion to say, 'Gee, this is going to kill tax increment.'" A late boost In Mounds View, where the Mermaid Supper Club's $10 million expansion was put on hold while the Legislature met, city officials and owner Dan Hall are cautiously optimistic. "All I know is my proj ect is going forward," said Hall, who said that analysts studying the changes will need a month "before the learning curve hits." •