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Economic development TIF districts generally cannot be used to assist commercial facilities, but the small city exception permits such use of tax increment under certain conditions. Assistance is limited to up to 15,000 square feet of any separately-owned commercial facility, and tax increment revenue must:

  • Be necessary to assist the facility;
  • Be spent only to assist the facility and pay administrative costs; and
  • Be spent (with the exception of administrative costs) only on activities within the district.

To qualify as a small city, a city’s population must be 5,000 or less and it must be ten miles or more from any other city in the state with a population of 10,000 or more (as measured by a straight line from the nearest boundaries). Qualification, based on the year certification is requested, applies for the duration of the district even if the population changes. The designation of small city should be indicated in the TIF plan of the district.

For more information regarding the small city exception, please refer to our Statement of Position Small Cities’ Expanded TIF Power.

Published: December 2018

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