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Pay-as-you-go (PAYG) obligations are contractual obligations in which the developer, not the development authority, pays the up-front development costs. As tax increment is received by the development authority, the developer is reimbursed for TIF-eligible costs up to the lesser of (1) the amount stated in the Development Agreement/Note or (2) the costs substantiated by the developer.

Each PAYG obligation must be supported by documentation from the developer of the TIF-eligible costs that have been incurred. The municipality or development authority should review and approve that the invoices qualify as costs reimbursable with tax increment revenues and meet the requirements of the development agreement and TIF plan. The documentation should be kept in the authority’s TIF files to substantiate that tax increment revenues have been spent in compliance with the TIF Act.

Published: March 2018

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