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> r -2- 1111 An economic development district may function for eight years from the date of first receipt of increments or 10 years from approval of the tax increment financing plan . To understand how tax increment financing works, an example may be useful . By definition , tax increment financing deals only with the increased property taxes that are generated from within the district. It does not prexempt the amount of property taxes derived from the district prior to development or redevelopment, nor does it directly affect the amount or rate of general ad valorem taxes levied in the municipality. The result of a tax increment financing project is an increased tax base that will ultimately benefit all local taxing jurisdictions . For example , consider a property with a dilapidated building that is now producing $500/year in property taxes. If this property were acquired by the city , cleared and resold for private development so as to produce $3 , 000/year in property taxes , there would be a tax increment of $2 , 500/year . The funds to acquire the property, remove the dilapidated building and install authorized public improvements could be obtained by the sale of general obligation bonds by the city. After redevelopment, the original $500 in annual property taxes would continue to go to the local taxing jurisdictions , but the $2, 500 annual tax increment would go toward the repayment of the bonds. After the bonds were retired , the entire $3 , 000 in annual property taxes would go to all local taxing jurisdictions , assuming the mill rate remains constant. As is the case with Industrial Development Bonds, Tax Increment Bonds may be issued only after issuance is authorized by the Minnesota Department of Energy and Economic Development pursuant to statutory guidelines. • 4-� %