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Tax Increment Financing
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Can a DDA or TIFA plan spend revenue outside of its development area?
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Answer:
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According to state law, the plan may spend revenue only for projects described in the development plan and/or tax increment financing plan, and the projects must be allowable under the law. The revenue must be spent for the benefit of the development area. Revenue of one plan may not be used to pay an obligation or expense of another plan.
The State Tax Commission's policy is that revenue must also be spent on improvements or properties located in the plan's development area. The State Tax Commission will enforce this policy on a prospective basis as of April 14, 1998, but not retroactively. After April 14, 1998, a plan may not start any new projects outside of that plan's development area. The State Tax Commission may waive this requirement for certain infrastructure improvements made in the development plan that must extend outside the development area's boundaries.
Note: LDFA's are not included here because section 12(2) of the Local Development Financing Act (P.A. 281) has specific provisions regarding restrictions on the use of tax increment revenue.
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