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EDA Public Hearing on TIF No. 12 <br />Page 3 <br />Twe of TIF District/Conseauences <br />• In order to honor the request for tax increment financing assistance, the EDA <br />would create an "Economic Development TIF District." These districts are <br />designed to last a short period of time - a maximum of eleven years during <br />which time property taxes (otherwise known as tax increments) can be <br />collected for a period of nine years. In accordance with 19901egislation, a <br />consequence of creating a new TIF District is that of a local government aid <br />(LGA) loss. The rule-of--thumb calculation used to estimate the LGA loss is <br />thirty-five percent of the gross taxes generated within a respective TIF <br />District. The calculation for the Mowry/Neos TIF District is estimated as <br />follows: <br />Tax Capacity of $15,650 times 1995 tax capacity rate of 1.04247 equals <br />$16,315 times 35% equals a local government aid loss of approximately <br />$5,710 per year. <br />It is estimated that the Mowry/Neos TIF District would generate tax <br />increment payments for a period of six years (from 1997 through 2002, <br />inclusive) in order to repay the $80,000 TIF grant. Therefore, total local <br />government aid losses are estimated as follows: <br />$5,710 per year times six years equals $34,260 <br />Workshou Revisited <br />At an EDA workshop in January, EDA Commissioners and City <br />Councilmembers participating in the workshop considered the consequences <br />of the local government aid losses. as well as the long term benefits of <br />creating new TIF Districts for manufacturing uses. It was agreed that future <br />requests for tax increment financing assistance would be evaluated on a case <br />by case basis. Criteria for establishing new districts included the type of <br />user, jobs created or retained, the finished product, and the need to retain <br />existing businesses. <br />Alternative to State Aid Losses <br />Another recent legislative change related to tax increment financing <br />assistance enables cities/eda's to opt out of the local government aid penalty <br />by making a "qualifying local contribution" of 10 percent of the tax increment <br />financing assistance .requested. The contribution must come from <br />unrestricted monies of the tax increment authority or municipality (or other <br />local jurisdictions). The cap on the total of these contributions is 2 percent of <br />a city's net tax capacity. Considering this option, the following calculation is <br />offered: <br />• <br />