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Tax Increment Financing in ;:if;resota <br /> • <br /> City Security Guarantee <br /> A. Usually when TIF bonds are sold they are general obligation <br /> bonds. General obligation TIF bonds require that if increment <br /> income is not sufficient to pay debt service at any th a over <br /> the life of the bonds, then the City is ultimately required to <br /> levy City-wide property taxes to repay the bonds. <br /> B. How can this occur? <br /> • New development is constructed over , <br /> frame and/or to a lesser market value than rot,reso ed <br /> to the City at the time of approval; <br /> • Property owners don't pay their taxes on time; <br /> • Property owners pay taxes on time, but with dear cases <br /> in tax capacity rates caused by changes in ;i^© ti.�4.1inq <br /> of local governments or tax structures chance-, actual <br /> property tax payments are less than scheduled debt <br /> service. • <br /> C. How does the City protect itself? <br /> • Assessment agreement stipulating market value of new <br /> • <br /> development and schedule of completion. <br /> • Withholding bond•proceeds or delaying construction of <br /> public improvement until ail or a portion of new <br /> development is ccmpieted. <br /> • Liquidity guarantees (letters of credit) provided by <br /> property owners ensuring timely payment of property . <br /> taxes (number of years?). <br /> • Liquidity guarantees (letters of credit) provided by <br /> property owners covering debt service shortfalls <br /> regardless if taxes are paid on time. • <br /> • <br /> • Pay-as-you-go: No debt is issued. The landowner <br /> finances his own improvements and is reimbursed over <br /> time by the City from the actual collection of increment • <br /> revenue. <br /> D. The type of guarantees depends on the level of risk the City <br /> perceives itself to be exposed to. <br /> • <br /> Page <br />