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AGENDA ITEM NO. 5-16 <br />MEMORANDUM <br />ver TO: Mayor & City Council <br />FROM: William Rubin, ED Coordinatoll( ~~ <br />DATE: June 19, 1995 ~ V <br />SUBJECT: Public Hearing on Tax Increment <br />Financing Plan for Tax Increment <br />Financing District No. 12 <br />(Mowry/Neos, Inc., Expansion Project) <br />Introduction <br />At its May 8 meeting, the Elk River City Council authorized a public hearing <br />for June 19, 1995, to consider a Tax Increment Financing Plan for Tax <br />Increment District No. 12. <br />Backsround <br />An EDA agenda memo for its June 12 TIF public hearing is attached to this <br />• memo. It addresses the salient points of the Mowry/Neon TIF request. <br />However, during the course of the EDA public hearing, the following two <br />points emerged as issues and are outlined below: <br />A. Local Government Aid -Homestead and Agricultural Aids <br />(LGA/HACA) <br />By virtue of legislative restrictions approved in 1990, cities are subject <br />to LGA and HACA reductions based on the retained captured value of <br />Tax Increment Districts established after Apri130, 1990. The LGA <br />and HACA reductions are based on the retained captured values <br />reported by County Auditors to the Department of Revenue. The <br />amount of the penalty is tied to the State School Aid formula. That is, <br />the State calculates how much less the school aids would have been <br />had the captured property value been available to the School District. <br />That amount is deducted from the city's LGA, and if necessary, from <br />HACA. <br />The LGA/HACA loss varies, but is usually about 30 percent of the tax <br />increment collected annually when the maximum penalty applies. The <br />amount of aid loss depends on the type of TIF District. For example, <br />• <br />13065 Orono Pazkway • P.O. Box 490 • Elk River, MN SS330 • (612) 441-7420 • Fax: (612) 441-7425 <br />