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TIF District account for use only on TIF-eligible activities. As a practical matter, • this severely limits the ability to fill the aid-loss hole in the municipality's general fund. D. LGA/HACA Exemptions. 1. Qualified housing districts are exempt from the LGA/HACA penalty. These are housing districts for residential rental .projects in which the only properties receiving the TIF assistance meet all the requirements for a low-income housing credit under federal law, regardless of whether the project actually receives a housing credit. The tax credit requirements: at least 20 percent of the units are occupied by persons with no more than 50 percent of areawide median income, or at least 40 percent of the units have occupants with no more than 60 percent of median income; and rent in the income-restricted units does not exceed 30 percent of an imputed maximum income (which depends on the size of the unit). 2. Local match option: A TIF District is exempt from the LGA/HACA penalty if the municipality elects at the time of approval of the tax increment plan to make a "qualifying local contribution" each year, equal to the following percentages of increment from the district: • 10 percent, for an economic development, housing, or renewal and • renovation district; • 5 percent, for a redevelopment, mined underground space, hazardous substance subdistrict, or soils condition district. If the municipality elects the local match option but fails to make a contribution in any year, there will be a state aid reduction equal to the greater of (1) the required local contribution, or (2) the LGA/HACA reduction that otherwise applies under the statute. If, in any year, the combined local contributions for that year from districts in the municipality reaches two percent of the city net tax capacity (excluding the captured tax capacity in any TIF district), then only a minimum additional contribution is required in that year. In addition to the overall two percent of tax capacity (which may be allocated among the municipality's TIF districts at its discretion), the municipality must contribute .25 percent of the city net capacity or three percent of the tax increment revenues from the district in question, whichever is less. If those contributions are made, no LGA/HACA penalty will apply that year for any TIF districts subject to the local match option. The local contribution must be made from unrestricted money of the authority or municipality (including any unrestricted grant), and cannot include tax increments • or developer payments. The contribution must be used to pay project costs and not improvements that the authority or city planned to incur absent the project. Cities, counties, towns and schools are authorized to contribute towards this local SJB100909 FIRM-2 10