2006.07.17 EDA Packet - Laserfiche WebLink

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Tax Abatement aka. "TIF-Lite" Tax Abatement operates under a similar concept as TIF, is less complex, but is limited in its financial contribution. Abatement operates under the same concept of TIF in the fact that it captures revenue that is generated by development, and other properties located in the "abatement district." Simply put the City defines a geographic region whose tax revenue is going to be captured to provide financial assistance to a project. The reason Tax Abatement generates a lesser amount of money is two-fold. First, only the City's portion of the revenue can be captured, as opposed to city, county, and school portion that TIF provides. Secondly, Cities are limited by MN State Statutes in the fact that they can only capture $200,000 or 10% of the Cities tax levy whichever is greater. Therefore any funding which tax abatement is used for is inherently going to be of a lesser amount than TIF would provide. The benefits of abatement arise from its relative simplicity in comparison to TIF. It is not as highly regulated as TIF, and does not have to meet the criteria that usually accompany a TIF project. Tax Abatement provides cities with an option that still allows for a substantial amount of funding to be provided to a project, without the complexity of TIF. Financial Assistance Conclusions All of the above mentioned tools are presented in terms of the theory of their use. The implementation of any of these tools has to be on the basis strong public policy that regulates their use. It is essential that anytime a City or EDA uses public funds to provide assistance to private industry, it has to be done for the right reasons, which is why the policy is so important.