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Public Improvement Corporations
Formation 
A public improvement corporation ("PIC") is a non-profit corporation formed by filing articles of incorporation with the appropriate Secretary of State's office. The articles of incorporation must state that the PIC is formed in furtherance of the objectives of a public entity, such as a Title 32 special district. Pursuant to IRS Revenue Ruling 63-20, an entity so formed may issue tax-exempt municipal bonds to assist the public entity and its purposes. There are other requirements which must be met in order to receive the tax-exempt status and are not discussed herein. 

Revenue-Raising Authority
At the time of formation, or shortly thereafter, PIC covenants are recorded on the property encompassing the PIC's boundaries, and the landowner must consent to the covenants. By virtue of the covenants, the PIC is empowered to impose a public improvement fee ("PIF") for collection on retail transactions. The PIF is a private fee, not a tax, but is imposed on all taxable transactions within the PIC's boundaries. To the consumer, the PIF is similar to a tax as it is included within the tax portion of their bill. Likewise, to the retailer, the PIF is similar to a tax because it is a pass-through cost. 

The PIF collected by the PIC may be used by the PIC or the public entity to finance public improvements which benefit the property encompassed its boundaries. The PIF may also be used to finance certain improvements that are not otherwise able to be funded by a public entity, such as dry utilities and parking. The use of the PIF to pay for or supplement the costs of public improvements reduces the need for a mill levy or bonded indebtedness on the property. The amount of the PIF is established by the PIC and, while it can be perpetual, the amount of the PIF typically reduces significantly after bonds are paid and continue to be imposed for the purpose of funding capital repairs and operations and maintenance costs. 

At the time a retailer enters into a lease with the property owner, the retailer is required to enter into an agreement with the PIC to impose the PIF and to remit the PIF proceeds to the PIC, or the public entity, and to allow the PIC to inspect its records for payment. Failure to pay and remit the PIF to the PIC, or the public entity, generally constitutes a cross-default under the lease as well as a breach of the covenant on the property.