VALPARAISO | The new property tax laws took away the city's right to levy a tax increment financing replacement tax, but they didn't take away the city's need for the funds the levy generated.

The replacement levy was put in effect in 2004 when a change in the tax laws governing school finances were expected to reduce the amount of money the city's Redevelopment Commission received from its TIF districts. The commission signed an agreement with the city to allow the $300,000 raised by the tax to be used for the purchase of equipment.

The agreement expired Dec. 31, but the city has payments due on equipment bought with the money. Although the law no longer allows the city to levy the replacement tax, the commission agreed to continue to contribute the $300,000 through the year 2012, and the agreement will automatically renew for another four years unless either party gives 30-day notice not to renew it.

The commission, which approved the agreement in December, will use money from tax abatement fees in addition to its regular revenue to make the annual payment. The agreement was presented to the council for final approval Monday, and Mayor Jon Costas said the equipment fund set up by the money has been very important for the city.

"There's very little money in the budget for equipment purchases, and, after last year (when the tax cap legislation was approved by the state legislature), there's even less," Costas said. "This has been a way to make up for that amount."

Councilman Joey Larr said the agreement allows the city to spend the money for police and fire equipment. If any is left over, it can be used for pathways, sidewalk ramps and other things, which he didn't think was proper.

Summers said not having the replacement levy money will reduce the number and scope of the commission's planned projects. For 2009, it will mean the Calumet Avenue sidewalk and streetscape project between Vale Park Road and Glendale Boulevard will be limited to the west side of Calumet. The city will seek more federal grants and ask for more contributions from adjacent property owners.