TAX INCREMENT FINANCING
TAX ABATEMENTS
WHENTHEYWORK AND WHENTHEY
DON’T OPERATE EFFECTIVELY
USEYOUR RESOURCESWISELY

Tax Increment Financing andTax
Abatements
JANUARY 25, 2018
CITY COUNCIL OF BREEZY POINT

TAX INCREMENT FINANCING
Tax increment financing is a procedure utilized by local governmental
entities for the purposes of property redevelopment. It can also be used
for the expressed function of projects that can improve the condition of
existing structures. Financing of these improvements is assessed to
future tax revenues that will generate by the taxing government entity
that levies taxes against the property.The local governmental unit is
responsible for determining how much property valuation will increase
and then needs to decide how much revenue would exist in association
with the improvement to offset the related construction or development
costs.

IMPORTANT POINTTO NOTE
It is also imperative that the property in
question be located within the
governmental entity and that the proposed
redevelopment be in accordance with
relevant zoning guidelines.

COOPERATION WITH COUNTY GOVERNMENT IS
VITAL FOR SUCCESS !!!!!
Since many municipalities utilize tax increment financing to
develop properties that may exist in the periphery of the city or
town, it is important to involve the County governmental entity
in successful planning. Sometimes, this may mean the
establishment of positive communication channels and the
development of additional resources. Since many
Municipalities utilize tax increment financing to develop
properties that may exist in the periphery of the city or town, it
is important to involve the County governmental entity in
successful planning.

TAX ABATEMENTS
 Tax abatements are a form of tax reduction that is utilized by a governmental
entity to encourage or promote economic development. A common example
of a tax abatement is one that is given to a business as an incentive for the
organization to move into a municipal location or to expand commercial
operations within the geographic area. Tax abatements operate within a
defined time period and allow for the business owners to invest additional
revenues into the enterprise.

GASB INFORMATION
 It is important to note that when a governmental entity decides to
utilize tax abatements that they provide public information to citizens
and stakeholders about the rationale for their decision making. General
Accounting Standards under GASB Statement No. 77,Tax Abatement
Disclosures, require state and local governments to disclose key
information about their tax abatement agreements that has not been
consistently or comprehensively available before. In addition, key
information about related tax abatement agreements need to be clearly
and consistently discussed with all interested parties.

It is important for legislators to realize that under a tax abatement
agreement, a government reduces or removes the taxes a company or
business entity would otherwise owe. In return, the business entity
stipulates that action be conducted that expressly contributes to
economic development. It is vital that the expansion of services or job
creation is beneficial to the taxing entity and its citizens. An excellent
example of this would be a corporation that decides to build a new
business center that could potentially 500 new employees.

Manylocal andmunicipal governments havetax abatement programs inplace.
Whenoperatingsuccessfully,theseprograms canimprovecommunityeconomic
developmentand contributeto overall growthandtax baseincrease. Inaddition
to improvingrevenueflow,theseprograms canalso increasemunicipal business
expansionandcan createhousingand transportationimprovements. Further,
complementarybusinesses mayexperienceadditionalimprovements based upon
increasedtrafficand consumptionassociatedwiththeseimprovements

 While utilizing tax abatements and tax increment financing, it is Important that
government officials fully disclose to the community, citizens, the media and
stakeholders all related information concerning these agreements. It is important that
the following information is provided; the purpose of the tax abatement program, the
tax being abated, the dollar amount of taxes abated, provisions for recapturing abated
taxes, the types of commitments made by tax abatement recipients and other
commitments made by a government in tax abatement agreements. In addition,
information should also be made available that includes infrastructural assets.

 It is also important that any legal guidance that addresses tax abatements that result
from agreements entered into by the reporting government, as well as those that are
initiated by other governments and reduce the reporting government’s tax revenues
need to be disclosed. Finally, regarding the latter, the reporting government will
disclose the governments entering into the agreements, the specific tax being abated,
and the amount abated. Governmental officials can and have gotten into difficulties
where clear reporting procedures are not utilized.

Recommendations for Breezy Point
 Tax increment financing is a good policy to implement if you are looking to redevelop a
neighborhood. However, in a municipality of 3,000 population or less there are other
techniques that may work better. Neighborhood associations sometimes can receive
funds from organizations such as the Main Street Main Street America Institute. The
MSAI can equip downtown and commercial district leaders with the tools they need to
lead results-oriented and preservation-based community revitalization organizations.
This organization can secure financing and can also assist in historic and cultural
heritage preservation activities.

In addition, local business groups such as the Chamber of
Commerce can assist in securing financing for business and
commercial operations within the metropolitan region. My
recommendations is that prior to tax increment financing, the
City examine all possible sources of assistance and look into
cooperative endeavors with the area townships and County
government. Projects need to be clearly defined and business
developers need to be consulted about both future revenue
flows and potential expenditures and/or liabilities that may
exist as a result of a project.

The utilization of a tax abatement for a municipality may
operate effectively in the event that the proposed project
allows for the creation of a successful business operation or
provides a clear and well delineated municipal project. It is
vital that citizens be actively involved in the project and that
the goals and objectives be clearly defined and established.
Residents must also be willing to support the project in both
the short and long term setting. In addition, business leaders
must find the project to be equitable and not disadvantageous
to their own interests.

It is important that community leaders have the opportunity to
positively discuss the project(s) being viewed for
consideration. I was very impressed with the community
comprehensive plan that was developed by Breezy Point. This
was well developed and allows for positive resource
coordination

RECOMMENDATIONS
 http://www.cityofbreezypointmn.us/vertical/sites/%7B015800BA-D4A6-4AD6-8483-
B21AF7FD9977%7D/uploads/%7BCD15A5DA-634B-4478-B696-4ECE7A2084CE%7D.PDF
Using this strategic comp plan and utilizing positive community resource allocation, I would
encourage the City Council of Breezy Point to use citizen and stakeholder involvement prior
to the commencement of any tax abatements. The State of California has experienced much
litigation over tax increment policies and these once productive activities have been
eliminated as a result. Some municipalities have seen job creation programs go into arrears
soon after a business has established itself and transportation costs are often not entered into
contingent liability derivation. Sand companies in the State ofWisconsin have not generated
some of the stipulated economic gains and the cost of transportation infrastructure was not
properly calibrated by some local governments.

I would strongly recommend business development that
contributes real job creation with employment opportunities
that provide substantive career development. No municipality
wants to deal with creating the future toxic company that once
promised real jobs, environmental protection and now has left
the country.