10.0. EDSR 06-12-1995 - Laserfiche WebLink

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EDA Public Hearing on TIF No.`12 Page 3 Type of TIF District/Consequences SIn order to honor the request for tax increment financing assistance, the EDA would create an"Economic Development TIF District." These districts are designed to last a short period of time - a maximum of eleven years during which time property taxes(otherwise known as tax increments) can be collected for a period of nine years. In accordance with 1990 legislation, a consequence of creating a new TIF District is that of a local government aid (LGA) loss. The rule-of-thumb calculation used to estimate the LGA loss is thirty-five percent of the gross taxes generated within a respective TIF District. The calculation for the Mowry/Neos TIF District is estimated as follows: Tax Capacity of$15,650 times 1995 tax capacity rate of 1.04247 equals $16,315 times 35% equals a local government aid loss of approximately $5,710 per year. It is estimated that the Mowry/Neos TIF District would generate tax increment payments for a period of six years (from 1997 through 2002, inclusive) in order to repay the $80,000 TIF grant. Therefore, total local government aid losses are estimated as follows: $5,710 per year times six years equals $34,260 IDWorkshop Revisited At an EDA workshop in January, EDA Commissioners and City Councilmembers participating in the workshop considered the consequences of the local government aid losses as well as the long term benefits of creating new TIF Districts for manufacturing uses. It was agreed that future requests for tax increment financing assistance would be evaluated on a case by case basis. Criteria for establishing new districts included the type of user, jobs created or retained, the finished product, and the need to retain existing businesses. Alternative to State Aid Losses Another recent legislative,change related to tax increment financing assistance enables cities/eda's to opt out of the local government aid penalty by making a "qualifying local contribution"of 10 percent of the tax increment financing assistance requested. The contribution must come from unrestricted monies of the tax increment authority or municipality (or other local jurisdictions). The cap on the total of these contributions is 2 percent of a city's net tax capacity. Considering this option, the following calculation is offered: