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DORSEY & WHITNEY LLP Mr. Michael Morrison September 21, 1999 Page 3 This amendment is both good and bad news to the City of St. Anthony. The good news is that it removes any uncertainty concerning the legality of the prior expenditures of tax increment from the Kenzie TIF District on activities outside the geographic area of the Kenzie TIF District, and clearly authorizes the continued application of such tax increment to pay debt service on the bonds issued for the Community C enter and for Apache Plaza. The bad news is that the City may not issue any additional bonds payable from tax increment from the Kenzie TIF District to finance activities located outside the Kenzie TIF District, and that on or after December 31, 1999, no expenditures of tax increment from the Kenzie TIF District may be made on activities located outside the geographic area of the Kenzie TIF District. The amendment does not restrict the expenditure of tax increment from the Kenzie TIF District on additional activities located within the geographic area of the Kenzie TIF District. Certain steps can be taken by the City to mitigate the effect of this amendment on the City's. The City has pledged to the payment of the bonds for the Community Center tax • increments from both the Kenzie TIF District and the Chandler Tax Increment Financing District. The Chandler Tax Increment Financing District was established in 1985 and is not subject to the restrictions imposed by the Legislature on expenditure of tax increment outside the geographic area of the district. The City could use only the tax increment for the Kenzie TIF District to pay debt service on the bonds for the Community Center and this will result in additional tax increment being available from the Chandler Tax Increment Financing District for other authorized activities in the City. Also, until December 31, 1999 the City can continue to make expenditures of the tax increment from the Kenzie TIF District on activities outside the geographic area of the Kenzie TIF District. The law requires that the expenditure must be made before December 31, 1999, and merely committing to make the expenditure prior to such date is not sufficient. A second amendment to the Tax Increment Financing Act enacted by the Legislature at its 1999 Session may also impact the City. Presently tax increment may be used to finance a public park or a facility used for social, recreational or conference purposes. This authorization allowed the City to use tax increment to finance the Community Center. The Legislature amended the Tax Increment Financing Act to prohibit use of tax increment to pay for a public park or a facility for social, recreational or conference purposes. This amendment is effective for all tax increment financing districts, but does not apply to (1) expenditures made before January 1, 2000, (2) expenditures made under a binding contract entered into before January 1, 2000, or(3) expenditures made under a binding contract entered into pursuant to a • letter of intent with the developer or contractor if the letter of intent was entered into before January 1, 2000. Should the City wish to use tax increment revenue to finance a public park or a