SDCL 11-9-30 (2) allows entities to finance a Tax Increment (Financing) District (T.I.F.) with their own resources, specifically from the General Fund.

Generally accepted accounting principles (GAAP) provide for the use of a Capital Projects Fund for major capital projects.  Smaller projects may be accounted for directly within the General Fund or a Special Revenue Fund.

SDCL 11-9-31 & 32 establishes a separate fund for the deposit of tax increments and the payment of project costs (small projects).  GAAP would classify this fund as a Special Revenue Fund.

Governmental funds such as the General Fund, Special Revenue Funds and Capital Projects Funds are required to have budgets.  SDCL 9-21-2

Since entity resources originate from the General Fund and the use of a special fund is legally required, an interfund loan should be established to reflect the balance owed the General Fund by the Special Revenue T.I.F. Fund to account for the payment of T.I.F. project costs paid for by the General Fund.

The governing board decides to fund the project costs of a T.I.F. from its General Fund resulting in the following entries:

Advance to Special Revenue T.I.F. Fund     XXXXX

            Cash                                                      XXXXX

Cash                                                  XXXXX

            Advance from General Fund                   XXXXX

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The governing board should then approve the transfer of money from the Special Revenue T.I.F. Fund to a Capital Projects Fund, for large projects, to provide resources for the construction phase of the project.

Transfer – Out                                XXXXX

            Cash                                                   XXXXX

Cash                                            XXXXX

            Transfer – In                                       XXXXX

(Capital Projects Fund monies are subsequently spent and the fund is closed)

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T.I.F. increments are received by the entity.

Cash                                       XXXXX

            Property Tax Revenue                XXXXX

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The interfund loan is repaid.

Advance From General Fund           XXXXX

            Cash                                                    XXXXX

Cash                                              XXXXX

            Advance to Special Revenue T.I.F. Fund           XXXXX

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NOTE:  If an entity has adopted an “Other Comprehensive Basis of Accounting” (OCBOA) with no related modifications, then the interfund loan entries above would instead be accounted for as “transfers”.

GASB 38 requires disclosures when interfund loans and interfund transfers occur as follows:

Interfund Balances and Transfers

GASBS38, Par. 14

14.       Governments should disclose in the notes to the financial statements the following details about interfund balances reported in the fund financial statements:

a. Amounts due from other funds by individual major fund, nonmajor governmental funds in the aggregate, nonmajor enterprise funds in the aggregate, internal service funds in the aggregate, and fiduciary fund type

b. The purpose for interfund balances

c. Interfund balances that are not expected to be repaid within one year from the date of the financial statements.

GASBS38, Par. 15

15.       Governments should disclose in the notes to the financial statements the following details about interfund transfers reported in the fund financial statements:

a. Amounts transferred from other funds by individual major fund, nonmajor governmental funds in the aggregate, nonmajor enterprise funds in the aggregate, internal service funds in the aggregate, and fiduciary fund type

b. A general description of the principal purposes of the government's interfund transfers

c. The intended purpose and the amount of significant transfers that meet either or both of the following criteria:

       (1)   Do not occur on a routine basis—for example, a transfer to a wastewater enterprise fund for the local match of a federal pollution control grant

(2)   Are inconsistent with the activities of the fund making the transfer—for example, a transfer from a capital projects fund to the general fund.

Based on the preceding accounting principles, disclosures relating to a self-funded TIF’s may appear as follows:

INTERFUND LOAN

The General Fund has loaned the Special Revenue T.I.F. Fund $XX,XXX to finance the Meadowland Acres Project.  This loan is schedule to be repaid from TIF increment dollars over the next 10 years.

INTERFUND TRANSFER

            The Special Revenue T.I.F. Fund transferred $XX,XXX to the Capital Projects       Fund for the purpose of constructing roads at the Meadowland Acres Project.