SF 261

as introduced - 93rd Legislature (2023 - 2024) Posted on 10/25/2023 10:27am

A bill for an act
relating to taxation; tax increment financing; clarifying various pooling provisions;
clarifying administrative expense limitations; expanding the application of
violations and remedies; amending Minnesota Statutes 2022, sections 469.174,
subdivision 14, by adding a subdivision; 469.175, subdivision 6; 469.176,
subdivisions 3, 4; 469.1763, subdivisions 2, 3, 4, 6; 469.1771, subdivisions 2, 2a,
3.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2022, section 469.174, subdivision 14, is amended to read:

Subd. 14.

Administrative expenses.

new text begin (a) new text end "Administrative expenses" new text begin or "administrative
costs" new text end means deleted text begin all deleted text end new text begin documented new text end expenditures of an authority deleted text begin other than deleted text end new text begin or municipality,
including but not limited to new text end :

new text begin (1) amounts paid for services provided by bond counsel, fiscal consultants, and economic
development consultants;
new text end

new text begin (2) allocated expenses and staff time of the authority or municipality for administering
a project, including but not limited to preparing the tax increment financing plan, negotiating
and preparing agreements, accounting for segregated funds of the district, preparing and
submitting required reporting for the district, and reviewing and monitoring compliance
with sections 469.174 to 469.1794;
new text end

new text begin (3) amounts paid to publish annual disclosures and provide notices under section 469.175;
new text end

new text begin (4) amounts to provide for the usual and customary maintenance and operation of
properties purchased with tax increments, including necessary reserves for repairs and the
cost of any insurance;
new text end

new text begin (5) amounts allocated or paid to prepare a development action response plan for a soils
condition district or hazardous substance subdistrict; and
new text end

new text begin (6) amounts used to pay bonds, interfund loans, or other financial obligations to the
extent those obligations were used to finance costs described in clauses (1) to (5).
new text end

new text begin (b) Administrative expenses and administrative costs do not include:
new text end

(1) amounts paid for the purchase of land new text begin and buildings new text end ;

(2) amounts paid to contractors or others providing materials and services deleted text begin , including
architectural and engineering services, deleted text end directly connected with the physical development
of the real property in the project new text begin , including architectural and engineering services and
materials and services for demolition, soil correction, and the construction or installation
of public improvements new text end ;

(3) relocation benefits paid to or services provided for persons residing or businesses
located in the project;

deleted text begin (4) amounts used to pay principal or interest on, fund a reserve for, or sell at a discount
bonds issued pursuant to section 469.178; or
deleted text end

deleted text begin (5) deleted text end new text begin (4) amounts paid for property taxes or payments in lieu of taxes; and
new text end

new text begin (5) new text end amounts used to pay new text begin principal or interest on, fund a reserve for, or sell at a discount
bonds issued pursuant to section 469.178 or new text end other financial obligations to the extent those
obligations were used to finance costs described in clauses (1) to deleted text begin (3) deleted text end new text begin (4) new text end .

deleted text begin For districts for which the requests for certifications were made before August 1, 1979,
or after June 30, 1982, "administrative expenses" includes amounts paid for services provided
by bond counsel, fiscal consultants, and planning or economic development consultants.
deleted text end

new text begin This definition does not apply to administrative expenses or administrative costs referenced
under section 469.176, subdivision 4h.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to all districts, regardless of when the request for certification was made.
new text end

Sec. 2.

Minnesota Statutes 2022, section 469.174, is amended by adding a subdivision to
read:

new text begin Subd. 30. new text end

new text begin Pay-as-you-go contract and note. new text end

new text begin "Pay-as-you-go contract and note" means
a written note or contractual obligation under which all of the following apply:
new text end

new text begin (1) the note or contractual obligation evidences an authority's commitment to reimburse
a developer, property owner, or note holder for the payment of costs of activities, including
any interest on unreimbursed costs;
new text end

new text begin (2) the reimbursement is made from tax increment revenues identified in the note or
contractual obligation as received by a municipality or authority as taxes are paid; and
new text end

new text begin (3) the risk that available tax increments may be insufficient to fully reimburse the costs
is borne by the developer, property owner, or note holder.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2022, section 469.175, subdivision 6, is amended to read:

Subd. 6.

Annual financial reporting.

(a) The state auditor shall develop a uniform
system of accounting and financial reporting for tax increment financing districts. The
system of accounting and financial reporting shall, as nearly as possible:

(1) provide for full disclosure of the sources and uses of tax increments of the district;

(2) permit comparison and reconciliation with the affected local government's accounts
and financial reports;

(3) permit auditing of the funds expended on behalf of a district, including a single
district that is part of a multidistrict project or that is funded in part or whole through the
use of a development account funded with tax increments from other districts or with other
public money;

(4) be consistent with generally accepted accounting principles.

(b) The authority must annually submit to the state auditor a financial report in compliance
with paragraph (a). Copies of the report must also be provided to the county auditor and to
the governing body of the municipality, if the authority is not the municipality. To the extent
necessary to permit compliance with the requirement of financial reporting, the county and
any other appropriate local government unit or private entity must provide the necessary
records or information to the authority or the state auditor as provided by the system of
accounting and financial reporting developed pursuant to paragraph (a). The authority must
submit the annual report for a year on or before August 1 of the next year.

(c) The annual financial report must also include the following items:

(1) the original net tax capacity of the district and any subdistrict under section 469.177,
subdivision 1;

(2) the net tax capacity for the reporting period of the district and any subdistrict;

(3) the captured net tax capacity of the district;

(4) any fiscal disparity deduction from the captured net tax capacity under section
469.177, subdivision 3;

(5) the captured net tax capacity retained for tax increment financing under section
469.177, subdivision 2, paragraph (b), clause (1);

(6) any captured net tax capacity distributed among affected taxing districts under section
469.177, subdivision 2, paragraph (b), clause (2);

(7) the type of district;

(8) the date the municipality approved the tax increment financing plan and the date of
approval of any modification of the tax increment financing plan, the approval of which
requires notice, discussion, a public hearing, and findings under subdivision 4, paragraph
(a);

(9) the date the authority first requested certification of the original net tax capacity of
the district and the date of the request for certification regarding any parcel added to the
district;

(10) the date the county auditor first certified the original net tax capacity of the district
and the date of certification of the original net tax capacity of any parcel added to the district;

(11) the deleted text begin month and deleted text end year in which the authority has received or anticipates it will receive
the first increment from the district;

(12) the date the district must be decertified;

(13) for the reporting period and prior years of the district, the actual amount received
from, at least, the following categories:

(i) tax increments paid by the captured net tax capacity retained for tax increment
financing under section 469.177, subdivision 2, paragraph (b), clause (1), but excluding any
excess taxes;

(ii) tax increments that are interest or other investment earnings on or from tax increments;

(iii) tax increments that are proceeds from the sale or lease of property, tangible or
intangible, purchased by the authority with tax increments;

(iv) tax increments that are repayments of loans or other advances made by the authority
with tax increments;

(v) bond proceeds; and

(vi) the agricultural homestead market value credit paid to the authority under section
273.1384;

(14) for the reporting period and for the prior years of the district, the actual amount
expended for, at least, the following categories:

(i) acquisition of land and buildings through condemnation or purchase;

(ii) site improvements or preparation costs;

(iii) installation of public utilities, parking facilities, streets, roads, sidewalks, or other
similar public improvements;

(iv) administrative costs, including the allocated cost of the authority; and

(v) for housing districts, construction of affordable housing;

(15) the amount of any payments for activities and improvements located outside of the
district that are paid for or financed with tax increments;

(16) the amount of payments of principal and interest that are made during the reporting
period on any nondefeased:

(i) general obligation tax increment financing bonds; and

(ii) other tax increment financing bonds, including pay-as-you-go contracts and notes;

(17) the principal amount, at the end of the reporting period, of any nondefeased:

(i) general obligation tax increment financing bonds; and

(ii) other tax increment financing bonds, including pay-as-you-go contracts and notes;

(18) the amount of principal and interest payments that are due for the current calendar
year on any nondefeased:

(i) general obligation tax increment financing bonds; and

(ii) other tax increment financing bonds, including pay-as-you-go contracts and notes;

(19) if the fiscal disparities contribution under chapter 276A or 473F for the district is
computed under section 469.177, subdivision 3, paragraph (a), the amount of total increased
property taxes to be paid from outside the tax increment financing district; and

(20) any additional information the state auditor may require.

(d) The reporting requirements imposed by this subdivision apply to districts certified
before, on, and after August 1, 1979.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2022, section 469.176, subdivision 3, is amended to read:

Subd. 3.

Limitation on administrative expenses.

(a) For districts for which certification
was requested before August 1, 2001, no tax increment shall be used to pay any
administrative expenses for a project which exceed ten percent of the total estimated tax
increment expenditures authorized by the tax increment financing plan or new text begin ten percent of new text end the
total tax increment expenditures for the project new text begin net of any amounts returned to the county
auditor as excess increment; as returned increment under section 469.1763, subdivision 4,
paragraph (g); or as remedies under section 469.1771, subdivision 2 new text end , whichever is less.

(b) For districts for which certification was requested after July 31, 2001, no tax increment
may be used to pay any administrative expenses for a project which exceed ten percent of
total estimated tax increment expenditures authorized by the tax increment financing plan
or new text begin ten percent of new text end the total tax increments, as defined in section 469.174, subdivision 25,
clause (1), deleted text begin from deleted text end new text begin received for new text end the district new text begin net of any amounts returned to the county auditor
as excess increment; as returned increment under section 469.1763, subdivision 4, paragraph
(g); or as remedies under section 469.1771, subdivision 2 new text end , whichever is less.

(c) Increments used to pay the county's administrative expenses under subdivision 4h
are not subject to the percentage limits in this subdivision.

new text begin (d) Increments defined under section 469.174, subdivision 25, clause (2), used for
administrative expenses described under section 469.174, subdivision 14, paragraph (a),
clause (4), are not subject to the percentage limits in this subdivision.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to all districts, regardless of when the request for certification was made.
new text end

Sec. 5.

Minnesota Statutes 2022, section 469.176, subdivision 4, is amended to read:

Subd. 4.

Limitation on use of tax increment; general rule.

All revenues derived from
tax increment shall be used in accordance with the tax increment financing plan. The revenues
shall be used solely for the following purposes: (1) to pay the principal of and interest on
bonds issued to finance a project; (2) by a rural development financing authority for the
purposes stated in section 469.142 deleted text begin , deleted text end new text begin ; new text end by a port authority or municipality exercising the powers
of a port authority to finance or otherwise pay the cost of redevelopment pursuant to sections
469.048 to 469.068 deleted text begin , deleted text end new text begin ; new text end by an economic development authority to finance or otherwise pay
the cost of redevelopment pursuant to sections 469.090 to 469.108 deleted text begin , deleted text end new text begin ; new text end by a housing and
redevelopment authority or economic development authority to finance or otherwise pay
public redevelopment costs pursuant to sections 469.001 to 469.047 deleted text begin , deleted text end new text begin ; new text end by a municipality or
economic development authority to finance or otherwise pay the capital and administration
costs of a development district pursuant to sections 469.124 to 469.133 deleted text begin , deleted text end new text begin ; new text end by a municipality
or authority to finance or otherwise pay the costs of developing and implementing a
development action response plan deleted text begin , deleted text end new text begin ; new text end by a municipality or redevelopment agency to finance
or otherwise pay premiums for insurance or other security guaranteeing the payment when
due of principal of and interest on the bonds pursuant to chapter 462C, sections 469.152 to
469.165, or both, or to accumulate and maintain a reserve securing the payment when due
of the principal of and interest on the bonds pursuant to chapter 462C, sections 469.152 to
469.165, or both, which revenues in the reserve shall not exceed, subsequent to the fifth
anniversary of the date of issue of the first bond issue secured by the reserve, an amount
equal to 20 percent of the aggregate principal amount of the outstanding and nondefeased
bonds secured by the reserve new text begin ; and (3) to pay administrative expenses new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to all districts, regardless of when the request for certification was made.
new text end

Sec. 6.

Minnesota Statutes 2022, section 469.1763, subdivision 2, is amended to read:

Subd. 2.

Expenditures outside district.

(a) For each tax increment financing district,
an amount equal to at least 75 percent of the total revenue derived from tax increments paid
by properties in the district must be expended on activities in the district or to pay bonds,
to the extent that the proceeds of the bonds were used to finance activities in the district or
to pay, or secure payment of, debt service on credit enhanced bonds. For districts, other
than redevelopment districts for which the request for certification was made after June 30,
1995, the in-district percentage for purposes of the preceding sentence is 80 percent. Not
more than 25 percent of the total revenue derived from tax increments paid by properties
in the district may be expended, through a development fund or otherwise, on activities
outside of the district but within the defined geographic area of the project except to pay,
or secure payment of, debt service on credit enhanced bonds. For districts, other than
redevelopment districts for which the request for certification was made after June 30, 1995,
the pooling percentage for purposes of the preceding sentence is 20 percent. The revenues
derived from tax increments paid by properties in the district that are expended on costs
under section 469.176, subdivision 4h, deleted text begin paragraph (b), deleted text end may be deducted first before calculating
the percentages that must be expended within and without the district.

(b) In the case of a housing district, a housing project, as defined in section 469.174,
subdivision 11, is an activity in the district.

(c) All administrative expenses are new text begin considered to be expenditures new text end for activities outside
of the district, except that if the only expenses for activities outside of the district under this
subdivision are for the purposes described in paragraph (d), administrative expenses will
be considered as expenditures for activities in the district.

(d) The authority may elect, in the tax increment financing plan for the district, to increase
by up to ten percentage points the permitted amount of expenditures for activities located
outside the geographic area of the district under paragraph (a). As permitted by section
469.176, subdivision 4k, the expenditures, including the permitted expenditures under
paragraph (a), need not be made within the geographic area of the project. Expenditures
that meet the requirements of this paragraph are legally permitted expenditures of the district,
notwithstanding section 469.176, subdivisions 4b, 4c, and 4j. To qualify for the increase
under this paragraph, the expenditures must:

(1) be used exclusively to assist housing that meets the requirement for a qualified
low-income building, as that term is used in section 42 of the Internal Revenue Code; and

(2) not exceed the qualified basis of the housing, as defined under section 42(c) of the
Internal Revenue Code, less the amount of any credit allowed under section 42 of the Internal
Revenue Code; and

(3) be used to:

(i) acquire and prepare the site of the housing;

(ii) acquire, construct, or rehabilitate the housing; or

(iii) make public improvements directly related to the housing; or

(4) be used to develop housing:

(i) if the market value of the housing does not exceed the lesser of:

(A) 150 percent of the average market value of single-family homes in that municipality;
or

(B) $200,000 for municipalities located in the metropolitan area, as defined in section
473.121, or $125,000 for all other municipalities; and

(ii) if the expenditures are used to pay the cost of site acquisition, relocation, demolition
of existing structures, site preparation, and pollution abatement on one or more parcels, if
the parcel contains a residence containing one to four family dwelling units that has been
vacant for six or more months and is in foreclosure as defined in section 325N.10, subdivision
7, but without regard to whether the residence is the owner's principal residence, and only
after the redemption period has expired; or

(5) to assist owner-occupied housing that meets the requirements of section 469.1761,
subdivision 2.

(e) The authority under paragraph (d), clause (4), expires on December 31, 2016.
Increments may continue to be expended under this authority after that date, if they are used
to pay bonds or binding contracts that would qualify under subdivision 3, paragraph (a), if
December 31, 2016, is considered to be the last date of the five-year period after certification
under that provision.

new text begin (f) For purposes of determining whether the minimum percentage of expenditures for
activities in the district and maximum percentages of expenditures allowed on activities
outside the district have been met under this subdivision, any amounts returned to the county
auditor as excess increment, as returned increment under subdivision 4, paragraph (g), or
as remedies under section 469.1771, subdivision 2, shall first be subtracted from the total
revenues derived from tax increments paid by properties in the district. Any other amounts
returned to the county auditor for purposes other than a remedy under section 469.1771,
subdivision 3, are considered to be expenditures for activities in the district.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to all districts with a request for certification date after April 30, 1990, except that
paragraph (f) shall apply to districts decertifying after December 31, 2023.
new text end

Sec. 7.

Minnesota Statutes 2022, section 469.1763, subdivision 3, is amended to read:

Subd. 3.

Five-year rule.

(a) Revenues derived from tax increments paid by properties
in the district new text begin that new text end are deleted text begin considered to have been deleted text end expended on an activity within the district
deleted text begin under deleted text end new text begin will instead be considered to have been expended on an activity outside the district
for purposes of new text end subdivision 2 deleted text begin only if one of the following occurs deleted text end new text begin unless new text end :

(1) before or within five years after certification of the district, the revenues are actually
paid to a third party with respect to the activity;

(2) bonds, the proceeds of which must be used to finance the activity, are issued and
sold to a third party before or within five years after certification new text begin of the district new text end , the revenues
are spent to repay the bonds, and the proceeds of the bonds either are, on the date of issuance,
reasonably expected to be spent before the end of the later of (i) the five-year period, or (ii)
a reasonable temporary period within the meaning of the use of that term under section
148(c)(1) of the Internal Revenue Code, or are deposited in a reasonably required reserve
or replacement fund;

(3) binding contracts with a third party are entered into for performance of the activity
before or within five years after certification of the district and the revenues are spent under
the contractual obligation;

(4) costs with respect to the activity are paid before or within five years after certification
of the district and the revenues are spent to reimburse a party for payment of the costs,
including interest on unreimbursed costs; or

(5) deleted text begin expenditures are made deleted text end new text begin revenues are spent new text end for housing purposes as deleted text begin permitted deleted text end new text begin described new text end
by subdivision 2, deleted text begin paragraphs deleted text end new text begin paragraph new text end (b) deleted text begin and (d), or for public infrastructure purposes
within a zone as permitted by subdivision 2, paragraph (e) deleted text end .

(b) For purposes of this subdivision, bonds include subsequent refunding bonds if the
original refunded bonds meet the requirements of paragraph (a), clause (2).

(c) For a redevelopment district or a renewal and renovation district certified after June
30, 2003, and before April 20, 2009, the five-year periods described in paragraph (a) are
extended to ten years after certification of the district. For a redevelopment district certified
after April 20, 2009, and before June 30, 2012, the five-year periods described in paragraph
(a) are extended to eight years after certification of the district. This extension is provided
primarily to accommodate delays in development activities due to unanticipated economic
circumstances.

(d) For a redevelopment district that was certified after December 31, 2017, and before
June 30, 2020, the five-year periods described in paragraph (a) are extended to eight years
after certification of the district.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to all districts with a request for certification date after April 30, 1990.
new text end

Sec. 8.

Minnesota Statutes 2022, section 469.1763, subdivision 4, is amended to read:

Subd. 4.

Use of revenues for decertification.

deleted text begin (a) In each year beginning with the sixth
year following certification of the district, or beginning with the ninth year following
certification of the district for districts whose five-year rule is extended to eight years under
subdivision 3, paragraph (d), if the applicable in-district percent of the revenues derived
from tax increments paid by properties in the district exceeds the amount of expenditures
that have been made for costs permitted under subdivision 3, an amount equal to the
difference between the in-district percent of the revenues derived from tax increments paid
by properties in the district and the amount of expenditures that have been made for costs
permitted under subdivision 3 must be used and only used to pay or defease the following
or be set aside to pay the following:
deleted text end

deleted text begin (1) outstanding bonds, as defined in subdivision 3, paragraphs (a), clause (2), and (b);
deleted text end

deleted text begin (2) contracts, as defined in subdivision 3, paragraph (a), clauses (3) and (4);
deleted text end

deleted text begin (3) credit enhanced bonds to which the revenues derived from tax increments are pledged,
but only to the extent that revenues of the district for which the credit enhanced bonds were
issued are insufficient to pay the bonds and to the extent that the increments from the
applicable pooling percent share for the district are insufficient; or
deleted text end

deleted text begin (4) the amount provided by the tax increment financing plan to be paid under subdivision
2, paragraphs (b), (d), and (e).
deleted text end

deleted text begin (b) The deleted text end new text begin (a) Beginning with the sixth year following certification of the district, or
beginning with the year following the extended period for districts whose five-year period
is extended under subdivision 3, paragraphs (c) and (d), a new text end district must be decertified deleted text begin and
the pledge of tax increment discharged when the outstanding bonds have been defeased and deleted text end
when deleted text begin sufficient money has been set aside to pay, based on deleted text end new text begin the product of the applicable
in-district percentage multiplied by new text end the deleted text begin increment to be deleted text end new text begin cumulative revenues derived from
tax increments paid by properties in the district that have been new text end collected through the end of
the calendar year, new text begin equals or exceeds an amount sufficient to pay new text end the following deleted text begin amounts deleted text end :

(1) deleted text begin contractual deleted text end new text begin any costs and new text end obligations deleted text begin as defined deleted text end new text begin described new text end in subdivision 3, deleted text begin paragraph deleted text end new text begin
paragraphs new text end (a) deleted text begin , clauses (3) and (4); deleted text end new text begin and (b), excluding those under a qualifying pay-as-you-go
contract and note;
new text end

deleted text begin (2) the amount specified in the tax increment financing plan for activities qualifying
under subdivision 2, paragraph (b), that have not been funded with the proceeds of bonds
qualifying under paragraph (a), clause (1); and
deleted text end

deleted text begin (3) the additional expenditures permitted by the tax increment financing plan for housing
activities under an election under subdivision 2, paragraph (d), that have not been funded
with the proceeds of bonds qualifying under paragraph (a), clause (1).
deleted text end

new text begin (2) any accrued interest on the costs and obligations in clause (1), payable in accordance
with the terms thereof; and
new text end

new text begin (3) any administrative expenses falling within the exception in subdivision 2, paragraph
(c).
new text end

new text begin (b) For districts with an outstanding qualifying pay-as-you-go contract and note, the
required decertification under paragraph (a) is deferred until the end of the remaining term
of the last outstanding qualifying pay-as-you-go contract and note, and the applicable
in-district percentage of cumulative revenues derived from tax increments paid by properties
in the district are sufficient to pay the obligations identified in subdivision 3, paragraphs
(a) and (b), provided that the deferral shall not exceed the district's duration limit under
section 469.176. During the deferral, beginning at the time paragraph (a) would otherwise
require decertification, the authority must annually either:
new text end

new text begin (1) remove from the district, by the end of the year, all parcels that will no longer have
their tax increment revenue pledged or subject to a qualifying pay-as-you-go contract and
note or other costs and obligations described in subdivision 3, paragraphs (a) and (b), after
the end of the year; or
new text end

new text begin (2) use the applicable in-district percentage of revenues derived from tax increments
paid by those parcels to prepay an outstanding qualifying pay-as-you-go contract and note
of the district or other costs and obligations described in subdivision 3, paragraphs (a) and
(b), or to accumulate and use revenues derived from tax increments paid by those parcels
as permitted under paragraph (i).
new text end

new text begin The authority must remove any parcels as required by this paragraph by modification
of the tax increment financing plan and notify the county auditor of the removed parcels by
the end of the same calendar year. Notwithstanding section 469.175, subdivision 4,
paragraphs (b), clause (1), and (e), the notice, discussion, public hearing, and findings
required for approval of the original plan are not required for such a modification.
new text end

new text begin (c) Notwithstanding paragraph (a) or (b), if tax increment was pledged prior to August
1, 2023, to a bond other than a pay-as-you-go contract and note or interfund loan, and the
proceeds of the bond were used solely or in part to pay authorized costs for activities outside
the district, the requirement to decertify under paragraph (a) or remove parcels under
paragraph (b) shall not apply prior to the bond being fully paid or defeased.
new text end

new text begin (d) For purposes of this subdivision, "applicable in-district percentage" means the
percentage of tax increment revenue that is restricted for expenditures within the district,
as determined under subdivision 2, paragraphs (a) and (d), for the district.
new text end

new text begin (e) For purposes of this subdivision, "qualifying pay-as-you-go contract and note" means
a pay-as-you-go contract and note that is considered to be for activities within the district
under subdivision 3, paragraph (a).
new text end

new text begin (f) For purposes of this subdivision, the reference in paragraph (a) to cumulative revenues
derived from tax increments paid by properties in the district through the end of the calendar
year shall include any final settlement distributions made in the following January. For
purposes of the calculation in paragraph (a), any amounts returned to the county auditor as
excess increment or as remedies under section 469.1771, subdivision 2, shall first be
subtracted from the cumulative revenues derived from tax increments paid by properties in
the district.
new text end

new text begin (g) The timing and implementation of a decertification pursuant to paragraphs (a) and
(b) shall be subject to the following:
new text end

new text begin (1) when a decertification is required under paragraph (a) and not deferred under
paragraph (b), the authority must, as soon as practical and no later than the final settlement
distribution date of January 25 as identified in section 276.111 for the property taxes payable
in the calendar year identified in paragraph (a), make the decertification by resolution
effective for the end of the calendar year identified in paragraph (a), and communicate the
decertification to the county auditor;
new text end

new text begin (2) when a decertification is deferred under paragraph (b), the authority must, by
December 31 of the year in which the last qualifying pay-as-you-go contract and note reaches
termination, make the decertification by resolution effective for the end of that calendar
year and communicate the decertification to the county auditor;
new text end

new text begin (3) if the county auditor is unable to prevent tax increments from being calculated for
taxes payable in the year following the year for which the decertification is made effective,
the county auditor may redistribute the tax increments in the same manner as excess
increments under section 469.176, subdivision 2, paragraph (c), clause (4), without first
distributing them to the authority; and
new text end

new text begin (4) if tax increments are distributed to an authority for a taxes payable year after the year
for which the decertification was required to be effective, the authority must return the
amount of the distributions to the county auditor for redistribution in the same manner as
excess increments under section 469.176, subdivision 2, paragraph (c), clause (4).
new text end

new text begin (h) The provisions of this subdivision do not apply to a housing district.
new text end

new text begin (i) Notwithstanding anything to the contrary in paragraph (a) or (b), if an authority has
made the election in the tax increment financing plan for the district under subdivision 2,
paragraph (d), then the requirement to decertify under paragraph (a) or remove parcels under
paragraph (b) shall not apply prior to such time that the accumulated revenues derived from
tax increments paid by properties in the district that are eligible to be expended for housing
purposes described under subdivision 2, paragraph (d), equals the lesser of the amount the
authority is permitted to expend for housing purposes described under subdivision 2,
paragraph (d), or the amount authorized for such purposes in the tax increment financing
plan. Increment revenues collected after the district would have decertified under paragraph
(a) or from parcels which otherwise would be subject to removal under paragraph (b), absent
the exception of this paragraph, shall be used solely for housing purposes as described in
subdivision 2, paragraph (d).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies to all districts with a request for certification after April 30, 1990, except that the
requirements under paragraph (b) to remove parcels or use revenues from such parcels as
prescribed in paragraph (b) apply only to districts for which the request for certification
was made after the day following final enactment.
new text end

Sec. 9.

Minnesota Statutes 2022, section 469.1763, subdivision 6, is amended to read:

Subd. 6.

Pooling permitted for deficits.

(a) This subdivision applies only to districts
for which the request for certification was made before August 1, 2001, and without regard
to whether the request for certification was made prior to August 1, 1979.

(b) The municipality for the district may transfer available increments from another tax
increment financing district located in the municipality, if the transfer is necessary to
eliminate a deficit in the district to which the increments are transferred. The municipality
may transfer increments as provided by this subdivision without regard to whether the
transfer or expenditure is authorized by the tax increment financing plan for the district
from which the transfer is made. A deficit in the district for purposes of this subdivision
means the lesser of the following two amounts:

(1) deleted text begin (i) deleted text end the amount due during the calendar year to pay preexisting obligations of the
district; minus new text begin the sum of
new text end

deleted text begin (ii) deleted text end new text begin (i) new text end the total increments collected or to be collected from properties located within
the district that are available for the calendar year including amounts collected in prior years
that are currently available; plus

deleted text begin (iii) deleted text end new text begin (ii) new text end total increments from properties located in other districts in the municipality
including amounts collected in prior years that are available to be used to meet the district's
obligations under this section, excluding this subdivision, or other provisions of law; or

(2) the reduction in increments collected from properties located in the district for the
calendar year as a result of the changes in classification rates in Laws 1997, chapter 231,
article 1; Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, and Laws 2001,
First Special Session chapter 5, or the elimination of the general education tax levy under
Laws 2001, First Special Session chapter 5.

The authority may compute the deficit amount under clause (1) only (without regard to
the limit under clause (2)) if the authority makes an irrevocable commitment, by resolution,
to use increments from the district to which increments are to be transferred and any
transferred increments are only used to pay preexisting obligations and administrative
expenses for the district that are required to be paid under section 469.176, subdivision 4h,
paragraph (a).

(c) A preexisting obligation means:

(1) bonds issued and sold before August 1, 2001, or bonds issued pursuant to a binding
contract requiring the issuance of bonds entered into before July 1, 2001, and bonds issued
to refund such bonds or to reimburse expenditures made in conjunction with a signed
contractual agreement entered into before August 1, 2001, to the extent that the bonds are
secured by a pledge of increments from the tax increment financing district; and

(2) binding contracts entered into before August 1, 2001, to the extent that the contracts
require payments secured by a pledge of increments from the tax increment financing district.

(d) The municipality may require a development authority, other than a seaway port
authority, to transfer available increments including amounts collected in prior years that
are currently available for any of its tax increment financing districts in the municipality to
make up an insufficiency in another district in the municipality, regardless of whether the
district was established by the development authority or another development authority.
This authority applies notwithstanding any law to the contrary, but applies only to a
development authority that:

(1) was established by the municipality; or

(2) the governing body of which is appointed, in whole or part, by the municipality or
an officer of the municipality or which consists, in whole or part, of members of the
governing body of the municipality. The municipality may use this authority only after it
has first used all available increments of the receiving development authority to eliminate
the insufficiency and exercised any permitted action under section 469.1792, subdivision
3, for preexisting districts of the receiving development authority to eliminate the
insufficiency.

(e) The authority under this subdivision to spend tax increments outside of the area of
the district from which the tax increments were collected:

(1) is an exception to the restrictions under section 469.176, subdivisions 4b, 4c, 4d, 4e,
4i, and 4j; the expenditure limits under section 469.176, subdivision 1c; and the other
provisions of this section; and the percentage restrictions under subdivision 2 must be
calculated after deducting increments spent under this subdivision from the total increments
for the district; and

(2) applies notwithstanding the provisions of the Tax Increment Financing Act in effect
for districts for which the request for certification was made before June 30, 1982, or any
other law to the contrary.

(f) If a preexisting obligation requires the development authority to pay an amount that
is limited to the increment from the district or a specific development within the district and
if the obligation requires paying a higher amount to the extent that increments are available,
the municipality may determine that the amount due under the preexisting obligation equals
the higher amount and may authorize the transfer of increments under this subdivision to
pay up to the higher amount. The existence of a guarantee of obligations by the individual
or entity that would receive the payment under this paragraph is disregarded in the
determination of eligibility to pool under this subdivision. The authority to transfer increments
under this paragraph may only be used to the extent that the payment of all other preexisting
obligations in the municipality due during the calendar year have been satisfied.

(g) For transfers of increments made in calendar year 2005 and later, the reduction in
increments as a result of the elimination of the general education tax levy for purposes of
paragraph (b), clause (2), for a taxes payable year equals the general education tax rate for
the school district under Minnesota Statutes 2000, section 273.1382, subdivision 1, for taxes
payable in 2001, multiplied by the captured tax capacity of the district for the current taxes
payable year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment and
applies only to districts for which the request for certification was made before August 1,
2001, and without regard to whether the request for certification was made prior to August
1, 1979.
new text end

Sec. 10.

Minnesota Statutes 2022, section 469.1771, subdivision 2, is amended to read:

Subd. 2.

Collection of increment.

If an authority includes or retains a parcel of property
in a tax increment financing district that does not qualify for inclusion or retention within
the district, the authority must pay to the county auditor an amount of money equal to the
increment collected from the property for the year or years. The property must be eliminated
from the original and captured tax capacity of the district effective for the current property
tax assessment year. deleted text begin This subdivision does not apply to a failure to decertify a district at
the end of the duration limit specified in the tax increment financing plan.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 11.

Minnesota Statutes 2022, section 469.1771, subdivision 2a, is amended to read:

Subd. 2a.

Suspension of distribution of tax increment.

(a) If an authority fails to make
a disclosure or to submit a report containing the information required by section 469.175,
subdivisions 5 and 6, regarding a tax increment financing district within the time provided
in section 469.175, subdivisions 5 and 6, the state auditor shall mail to the authority a written
notice that it or the municipality has failed to make the required disclosure or to submit a
required report with respect to a particular district. The state auditor shall mail the notice
on or before the third Tuesday of August of the year in which the disclosure or report was
required to be made or submitted. The notice must describe the consequences of failing to
disclose or submit a report as provided in paragraph (b). If the state auditor has not received
a copy of a disclosure or a report described in this paragraph on or before the first day of
October of the year in which the disclosure or report was required to be made or submitted,
the state auditor shall mail a written notice to the county auditor to hold the distribution of
tax increment from a particular district.

(b) Upon receiving written notice from the state auditor to hold the distribution of tax
increment, the county auditor shall hold deleted text begin : deleted text end new text begin all tax increment that otherwise would be distributed
after receipt of the notice, until further notified under paragraph (c).
new text end

deleted text begin (1) 100 percent of the amount of tax increment that otherwise would be distributed, if
the distribution is made after the first day of October but during the year in which the
disclosure or report was required to be made or submitted; or
deleted text end

deleted text begin (2) 100 percent of the amount of tax increment that otherwise would be distributed, if
the distribution is made after December 31 of the year in which the disclosure or report was
required to be made or submitted.
deleted text end

(c) Upon receiving the copy of the disclosure and all of the reports described in paragraph
(a) with respect to a district regarding which the state auditor has mailed to the county
auditor a written notice to hold distribution of tax increment, the state auditor shall mail to
the county auditor a written notice lifting the hold and authorizing the county auditor to
distribute to the authority or municipality any tax increment that the county auditor had held
pursuant to paragraph (b). The state auditor shall mail the written notice required by this
paragraph within five working days after receiving the last outstanding item. The county
auditor shall distribute the tax increment to the authority or municipality within 15 working
days after receiving the written notice required by this paragraph.

(d) Notwithstanding any law to the contrary, any interest that accrues on tax increment
while it is being held by the county auditor pursuant to paragraph (b) is not tax increment
and may be retained by the county.

(e) For purposes of sections 469.176, subdivisions 1a to 1g, and 469.177, subdivision
11, tax increment being held by the county auditor pursuant to paragraph (b) is considered
distributed to or received by the authority or municipality as of the time that it would have
been distributed or received but for paragraph (b).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 12.

Minnesota Statutes 2022, section 469.1771, subdivision 3, is amended to read:

Subd. 3.

Expenditure of increment.

If an authority expends revenues derived from tax
increments, including the proceeds of tax increment bonds, (1) for a purpose that is not a
permitted project under deleted text begin section 469.176 deleted text end new text begin sections 469.174 to 469.1794 new text end , (2) for a purpose
that is not permitted under deleted text begin section 469.176 deleted text end new text begin sections 469.174 to 469.1794 new text end for the district
from which the increment was received, or (3) on activities outside of the geographic area
in which the revenues may be expended under this chapter, the authority must pay to the
county auditor an amount equal to the expenditures made in violation of the law.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end