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';.• STATE OF MINNESOTA <br /> �e OFFICE OF THE LEGISLATIVE AUDITOR <br /> • - CENTENNIAL BUILDING,658 CEDAR STREET•ST.PAUL,MN 55155.61212964708•TDD RELAY 6121297-5353 <br /> JAMES R.NOBLES,LEGISLATIVE AUDITOR <br /> March 8, 1996 <br /> Members <br /> Legislative Audit Commission <br /> Since the late 1980s, the Legislature has enacted several important reforms to tax <br /> increment financing (TIF), the development tool that enables cities and certain other <br /> jurisdictions to capture the additional taxes which are generated by a development project <br /> to finance up-front site preparation or acquisition costs. The purpose of most of the <br /> reforms was to limit the use of TIF to certain kinds of development projects and to <br /> eliminate perceived abuse of the financing tool. <br /> Our evaluation found that legislative restrictions have addressed most of the perceived <br /> abuses of TIF, which we documented in our earlier evaluation of TIF, published in 1986. <br /> Most TIF districts created since 1990 appear to meet the guidelines established by the <br /> Legislature. In addition, legislative reforms have apparently reduced the use of TIP by <br /> cities. While the amount of captured tax capacity grew by an average of 24 percent per <br /> • year between 1984 and 1989, it slowed to just 2 percent per year between 1990 and 1995. <br /> But some issues continue to demand legislative attention. For example, instead of <br /> retiring old TIF districts that have completed their ongm eve opment go s, some <br /> cities have amended their TIF plane to Ise ax increment revenues to pay or gene <br /> government activites. We also offer several su gestions to the State Auditor's Office for <br /> focusing its new responsibilities for monitoring the implementation o <br /> This report was researched and written by Susan Von Mosch (project manager) and <br /> David Chein, and cost approximately$60,000. Our research team also produced an <br /> additional document, entitled "Description of Selected Tax Increment Financing <br /> Districts," (96-06a). We appreciate the assistance of local government officials in 46 <br /> cities and counties, the Department of Revenue, and the State Auditor's Office. <br /> Sincerely, <br /> W4' <br /> &4VIe- or ea <br /> J s Nobles Roger Brooks <br /> Legislative Auditor Deputy Legislative Auditor <br /> • <br />