Resource Library Tax Increment Financing
Communities Available: Belle Plaine, Elko New Market, Jordan, New Prague, Prior Lake, Savage, Shakopee
Tax increment financing (TIF) is a public financing method that is used as a subsidy for redevelopment, infrastructure, and other community-improvement projects in many countries, including the United States. Similar or related value capture strategies are used around the world.
A limited amount of activities can occur prior to the approval of the Tax Increment Funding (TIF) Plan; however, TIF projects are subject to the but-for test. In approving a TIF district the City must make several findings, including the “but-for” test: that the proposed development would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The provided but-for argument states the development requires improvements the developers could not economically provide to construct this housing project without the use of Tax Increment Financing.
Revenue derived from tax increment from an economic development district may not be used to provide improvements, loans, subsidies, grants, interest rate subsidies, or assistance in any form to developments consisting of buildings and ancillary facilities, if more than 15 percent of the buildings and facilities (determined on the basis of square footage) are used for a purpose other than:
- the manufacturing or production of tangible personal property, including processing resulting in the change in the condition of the property;
- warehousing, storage, and distribution of tangible personal property, excluding retail sales;
- research and development related to the activities listed in 1 or 2;
- telemarketing if that activity is the exclusive use of the property;
- tourism facilities;
- qualified border retail facilities; or
- space necessary for and related to the activities listed in 1 to 6.
The maximum term of an economic development district is eight years after receipt of the first year of increment for a total of nine years of collection. The revenues captured from a tax increment financing district include the incremental local share of taxes from the city, county, applicable school district and other small taxing jurisdictions.
A process needs to be completed for a subsidy request, which begins with completion of a subsidy application. TIF requests are evaluated on a case by case basis and are contingent on City Council approval.
For more information, please contact Jo Foust at firstname.lastname@example.org
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