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Tax Increment Financing (TIF) Decertification

TIF is an economic development tool. When TIF districts are decertified, it can affect a city's tax base and LGA distribution.

About TIF

TIF in Minnesota

TIF decertification and tax base increases

TIF decertification and local government aid (LGA)
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About TIF

  • TIF is an economic development and redevelopment tool.
  • Cities and authorities (e.g., housing and redevelopment authorities) are authorized to create TIF districts.
  • The authority to create a TIF district is granted by the state Legislature.
  • TIF helps cities preserve and grow their local economies, which contributes to the economic health and vitality of the state.

View the Handbook for Minnesota Cities (pdf) for more on TIF

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TIF in Minnesota

  • In 2009 there were 408 municipalities and development authorities with TIF districts; there were 2,006 TIF districts. 67 of these districts were decertified by the end of 2009.
  • 87 TIF districts were certified during 2008 while 155 districts were decertified.
  • 626 districts, or 47 percent of all current TIF districts with known end dates, have been created since 2000.

Learn more about the 2008 TIF Report on the OSA website

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TIF decertification and tax base increases

  • City TIF districts together contain more than $302 million in captured net tax capacity (NTC), according to the most recent data.*
  • Although the majority of all city-authorized TIF districts are located in greater Minnesota, 85 percent of the total captured NTC is in the 7-county metro area.
  • The share of total city fully taxable NTC contained within city-authorized TIF districts in the 7-county metro area is larger than in greater Minnesota (9 percent vs. 5 percent).

Table 1 shows the amount of captured net tax capacity in city-authorized TIF districts (by economic development region).

TIF Table 1

*Cities in Blue Earth County (Region 9) are excluded from this analysis as Fully Taxable NTC data was not available.

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TIF decertification and local government aid (LGA)

The increase in tax capacity resulting from decertification can affect a city’s LGA distribution.

  • The current LGA distribution formula uses a city’s net tax capacity to measure ability to pay.
  • A city’s ability to pay is compared to its calculated expenditure need to determine the amount of LGA received.
  • A city that has enough revenue-raising capacity to meet its spending needs does not receive LGA.

Cities with large shares of net tax capacity in TIF districts will likely see a decrease in their LGA distribution when the districts are decertified, as the difference between calculated need and capacity narrows.

Example: Minneapolis would have received 9 percent less certified LGA in 2008 if all tax capacity in TIF districts at the time was included in the ability to pay measure.

Table 2 shows the total amount of 2009 NTC that will be included in tax rolls (by estimated year of decertification).

TIF Table 2

**Does not include districts that have decertified and no longer receive tax increments. The remaining 5 districts must continue to report until their fund balance is zero.

Source: Tax capacity and decertification data from the Minnesota Department of Revenue.

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