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�� i ti odu�on Tax Increment Financing (TIF) uses the increased property taxes generated by new real estate development within tax increment financing districts to pay for certain eligible costs associated with the development The value that is "captured" (i.e., the increase in value over the year the TiF district was established) generates property taxes. These "incremental"taxes go to the development authority or the city authority rather than to the county, school, city, or other taxing districts that normally share in the total property tax bill. The captured taxes are used to subsidize eligible project costs such as land acquisition, demolition, public and site improvements, and related consulting and administrative costs. The value of the property prior to development (i.e., the "non-captured" portion) continues to generate property taxes which are distributed to all taxing jurisdictions. The justification for use of TIF rests solely on the "Hut For" test. A simple way to express this test is that the development or redevelopment would not occur without a tax increment subsidy. Critics of TIF often point to the "Hut For" test as the weakness in the actual use of TiF. Such critics often claim that the development . would have occurred anyway, and local officials are not rigorously applying this test The net result in such cases is an over use of tax increment financing at the expense of the tax base of the county, school district, and other taxing districts. While there have been limited abuses, as with any other financing program, this financing tool has helped to reshape and revitalize many communities. In addition to assisting core development and redevelopment, residual growth outside of the established TiF districts provides a direct benefit to all taxing jurisdictions. in response to the potential misuse of tax increment financing, each year the State Legislature further adjusts and limits the use of this financing tool. Each amendment to the statutes has, in recent years, resulted in a more complicated and:restrictive financing vehicle. The purpose of this document is to outline the basic concepts and mechanics of using tax increment financing within the statutory guidelines and parameters. This report outlines the participants involved in TiE, mechanics, documents, process, a discussion of benefits and costs, and policy questions associated with the use of TIF. • The material included in our report is intended to be used as informational guidelines for the use of TiF. The complete Tax Increment Financing Act can be fcund in Minnesota Statutes, Section 469.174 - 469.179. S?RINGSTED