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property owner for improvements, the City must show that the direct benefit to the property, measured in increased property value, is not more than the proposed assessment. _- Deleted:Up to Sox of the project ----------------- "---' could befimdedt1mughadirect Assessments are a critical component of the plan for two reasons. First, assessment assessments are going to provide a stable base of funding that is independent from the growth outcomes of the project. This is how the City is going to be able to bond with confidence,understanding that a large portion of the project will be paid for. The second reason is even more important to the overall strategy of growth. Many of the properties in the project area are underdeveloped and underutilized. The assessment process is going to put the property owners in a position to decide on whether or not to improve the property or sell it to someone who will. In other words, a significant direct assessment is necessary to induce the redevelopment of properties that is necessary if the other funding mechanisms are going to have validity. While this strategy may generate some controversy and resistance from those being assessed, this entire plan depends on those properties within the downtown being developed or redeveloped to their highest and best use. That is only going to happen with a direct assessment of underdeveloped properties (which will receive the benefit from these improvements). Note that it will not be possible, or wise, to direct assess the properties on Government Drive in the same way other properties in the project area are assessed. It is not clear that Government Drive properties would see a proportionate benefit in property value that others would since much of their infrastructure is already in place. Some minimal assessment should be levied to Government Drive properties,but it is important to remember that these businesses provide the stable economic base on which other growth will build. A large direct assessment to these properties, especially at a time when construction inconveniences will be putting short-term constraints on their business,does not make short or long-term economic sense. • Tax Increment Financing. TIF is a tool that is used to capture additional tax revenue that comes from growth and utilize that to pay for improvements. The first assumption of planning to utilize TIF is that there will be growth. There is some risk that the City takes on where,if the growth in the downtown does not materialize, there will be no revenue to pay for this portion of the improvements. Having a strong direct assessment funding portion reduces the risk from using TIF by providing a stable revenue stream and also inducing redevelopment of properties. The other important notion to understand with TIF is that the captured revenue will go to pay for the downtown improvements instead of supporting the general fund. With increased growth there will be demands for more Pequot Lakes Downtown Plan-Updated February 2008 21