The purpose of Act 425 is to provide for a means for two local units of government to share tax revenues resulting from new or expanding development in the areas of their jurisdiction. Most typically a city and a nearby township are the parties to such an agreement. Because of the limited ability for a city in Michigan to annex adjacent territory, development that takes place outside of the city limits would normally deprive that city of any added revenue benefit. In those cases where the affected township receives its supply of water from the city, the city is given a degree of leverage to negotiate with the township by Act 425.