HF 3710

1st Engrossment - 90th Legislature (2017 - 2018) Posted on 03/26/2018 04:32pm

A bill for an act
relating to taxation; sales tax; tax increment financing; abatements; local
government aid; authorizing the city of Duluth to create a regional exchange district
for development purposes; authorizing the extension of certain taxes in the city of
Duluth; amending Minnesota Statutes 2016, section 297A.71, by adding a
subdivision; Laws 1980, chapter 511, sections 1, subdivision 2, as amended; 2, as
amended; proposing coding for new law in Minnesota Statutes, chapter 469.

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

Section 1.

Minnesota Statutes 2016, section 297A.71, is amended by adding a subdivision
to read:

new text begin Subd. 51. new text end

new text begin Construction materials, public infrastructure, and improvements in
regional exchange district. new text end

new text begin Materials and supplies used in, and equipment incorporated
into, the construction and improvement of buildings and infrastructure, whether publicly
or privately owned, which are located within a regional exchange district established under
section 469.51, are exempt.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for sales and purchases made after June
30, 2018, and before July 1, 2035.
new text end

Sec. 2.

new text begin [469.50] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Application. new text end

new text begin For the purposes of sections 469.50 to 469.54, the terms
defined in this section have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin City. new text end

new text begin "City" means the city of Duluth.
new text end

new text begin Subd. 3. new text end

new text begin County. new text end

new text begin "County" means St. Louis County.
new text end

new text begin Subd. 4. new text end

new text begin District. new text end

new text begin "District" means the regional exchange district established under
section 469.51.
new text end

new text begin Subd. 5. new text end

new text begin Medical business entity. new text end

new text begin "Medical business entity" means a medical business
entity with its principal place of business in the regional exchange district that, effective
January 1, 2015, is the largest private employer with the city.
new text end

new text begin Subd. 6. new text end

new text begin Public infrastructure project. new text end

new text begin (a) "Public infrastructure project" means a
project financed in part or in whole with public money in order to support development in
the district. A public infrastructure project may:
new text end

new text begin (1) acquire real property and other assets associated with the real property;
new text end

new text begin (2) demolish, repair, or rehabilitate buildings;
new text end

new text begin (3) remediate land and buildings as required to prepare the property for acquisition or
development;
new text end

new text begin (4) install, construct, or reconstruct elements of public infrastructure required to support
the overall development of the district, including but not limited to: streets, roadways,
highways, utilities systems and related facilities, including relocations and realignments;
structural caps or streetscape improvements; bridges or other buildable pads above streets,
roadways, highways, and other rights-of-way; network and communication systems; drainage
systems; sewer and water systems; subgrade structures and associated improvements;
landscaping; façade construction and restoration; wayfinding and signage, and other
components of community infrastructure;
new text end

new text begin (5) acquire, construct or reconstruct, and equip parking facilities, transit stations, and
other facilities to encourage intermodal transportation and transit;
new text end

new text begin (6) install, construct or reconstruct, furnish, and equip parks and trails; cultural,
community, educational, and recreational facilities; facilities to promote tourism and
hospitality, conferencing, and conventions; and broadcast and related multimedia
infrastructure;
new text end

new text begin (7) make related site improvements, including, without limitation, excavation, earth
retention, soil stabilization and correction, foundation and substructure, vertical circulation
systems, and other site improvements to support a district;
new text end

new text begin (8) prepare land for private development and to sell or lease land;
new text end

new text begin (9) pay the costs of providing relocation benefits to occupants of acquired properties;
and
new text end

new text begin (10) construct and equip all or a portion of one or more suitable structures on land owned
by the city or the state for sale or lease to private development; provided, however, that the
portion of any structure directly financed by the city or the state as a public infrastructure
project may not finance inpatient hospital facilities within a medical district.
new text end

new text begin (b) A public infrastructure project is not a business subsidy under section 116J.993.
new text end

new text begin Subd. 7. new text end

new text begin Regional Exchange District Advisory Board; advisory board; REDAB.
new text end

new text begin "Regional Exchange District Advisory Board," "advisory board," or "REDAB" means the
advisory board established under section 469.51, subdivision 3.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of the
city of Duluth and its chief clerical officer timely comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end

Sec. 3.

new text begin [469.51] REGIONAL EXCHANGE DISTRICT; REGIONAL EXCHANGE
DISTRICT ADVISORY BOARD.
new text end

new text begin Subdivision 1. new text end

new text begin Creation; boundaries. new text end

new text begin There is established in the city a regional exchange
district, largely within the area of the city commonly referred to as the medical district. The
regional exchange district is bounded by: East 6th Street from North 3rd Avenue East to
North 7th Avenue East; North 7th Avenue East from East 6th Street to East 3rd Street; East
3rd Street from North 7th Avenue East to North 12th Avenue East; North 12th Avenue East
from East 3rd Street straight through the Duluth Rose Garden to the Lake Superior waterfront;
the Lake Superior waterfront from the Duluth Rose Garden at North 12th Avenue East to
Lake Place Park at North 3rd Avenue East; North 3rd Avenue East from Lake Place Park
at the Lake Superior waterfront to East 6th Street, excluding any property operated as a
hotel on the corner of Superior Street and North 3rd Avenue East.
new text end

new text begin Subd. 2. new text end

new text begin Purpose; findings. new text end

new text begin The public purposes of the district are to facilitate:
new text end

new text begin (1) repurposing vacant or underutilized public land, or unutilized property interests such
as air rights, for development or redevelopment and to incent significant private investment;
new text end

new text begin (2) redeveloping vacant or underutilized private land to increase its tax-generating and
job-creating potential or to provide housing or meet other community needs; and
new text end

new text begin (3) encouraging development by the anchoring institutions in the community, such as
health care organizations and institutions of higher education, to create opportunities to
improve the economy of the city and greater Minnesota regions and attract and retain a
workforce.
new text end

new text begin Subd. 3. new text end

new text begin Advisory board. new text end

new text begin (a) The Regional Exchange District Advisory Board is created
to provide the city with advice and guidance in developing an overall development plan for
the regional exchange district. The advisory council terminates when funds from all
appropriation support payments made to the city under section 469.54 are committed to
approved public infrastructure projects.
new text end

new text begin (b) REDAB will consist of eight members appointed as follows:
new text end

new text begin (1) the mayor of the city or the mayor's designee, subject to approval of the city council;
new text end

new text begin (2) a city council member selected by the mayor;
new text end

new text begin (3) one member of the county board, appointed by the county board;
new text end

new text begin (4) a member of the Duluth Seaway Port Authority, appointed by the Port Authority
Board;
new text end

new text begin (5) three representatives of the medical business entity, appointed by and serving at the
pleasure of the medical business entity; and
new text end

new text begin (6) one member selected by a two-thirds vote by the members appointed under clauses
(1) to (5).
new text end

new text begin (c) The appointing authorities must make their respective appointments as soon as
practicable after May 31, 2018, but no later than June 30, 2018. A member first appointed
after June 22, 2013, under paragraph (b), clauses (1) to (4), serves for a term coterminous
with the term of the elected office, but may be reappointed. A vacancy occurs as provided
in section 351.02 and must be filled by the appointing authority for the balance of a term
in the same manner as a regular appointment. The member selected under paragraph (b),
clause (6), serves a term coterminous with the member appointed under paragraph (b),
clause (2), but may be reselected.
new text end

new text begin (d) The duties of the advisory board are to prepare a proposed development for the
district for approval by the city council; propose modifications to the development plan for
city council approval; and recommend to the city council proposed public infrastructure
projects not specifically listed in the plan that the board designates as consistent with the
development plan adopted by the city.
new text end

new text begin (e) The advisory board and committee or subcommittee of the advisory board is subject
to the Open Meeting Law in chapter 13D and is a government entity for purposes of chapter
13.
new text end

new text begin Subd. 4. new text end

new text begin Development plan. new text end

new text begin (a) REDAB, in consultation with the city and the medical
business entity, must prepare a proposed development plan for the district. The plan must
provide the following:
new text end

new text begin (1) an outline for the development of the district to meet the purpose and findings in
subdivision 2;
new text end

new text begin (2) discussion of how the development plans will increase economic activity in the city
and fit into the city's long-term comprehensive development plans;
new text end

new text begin (3) a specific list of public infrastructure projects that meet the purposes and findings
listed in subdivision 2; and
new text end

new text begin (4) the criteria to be used by the advisory board in evaluating whether a public
infrastructure project, not specifically listed in the plan under clause (3), is consistent with
the proposed development plan.
new text end

new text begin (b) A development plan for the district is not adopted until approved by the city council.
If the city council rejects the initial development plan proposed by the advisory board, the
board may revise the development plan and resubmit the plan. Section 15.99 does not apply
to review and approval of the development plan. The city must not spend any appropriation
support payments from the state until it has approved a development plan proposed by the
advisory board.
new text end

new text begin (c) REDAB may propose modifications to the development plan at any time, however
all changes are subject to approval by the city council.
new text end

new text begin Subd. 5. new text end

new text begin Project approval; notice; hearing. new text end

new text begin Public infrastructure projects may be
undertaken within the district by the city if the project is listed in the development plan or
is recommended to the city by REDAB. The city must hold a public hearing before approving
a public infrastructure project for local or state funding provided pursuant to section 469.53
or 469.54. At least ten days before the hearing, the city must publish notice of the hearing
in the official newspaper of the city.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of the
city of Duluth and its chief clerical officer timely comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end

Sec. 4.

new text begin [469.52] CITY POWERS; DUTIES; AUTHORITY TO ISSUE BONDS.
new text end

new text begin Subdivision 1. new text end

new text begin Port authority powers. new text end

new text begin The city may exercise the powers of a port
authority under sections 469.048 to 469.068 for purposes of implementing sections 469.50
to 469.54.
new text end

new text begin Subd. 2. new text end

new text begin City may issue debt. new text end

new text begin The city may issue general obligation bonds, revenue
bonds, or other obligations, as it determines appropriate, to finance public infrastructure
projects, as provided by chapter 475. Notwithstanding section 475.53, obligations issued
under this section are not subject to the limits on net debt, regardless of their source of
security or payment. Notwithstanding section 475.58 or any other law or charter provision
to the contrary, issuance of obligations under the provisions of this section are not subject
to approval of the electors. The city may pledge local revenues under section 469.53, the
appropriation support payments under section 469.54, and any of the city's unrestricted
revenues as security for and to pay the obligations.
new text end

new text begin Subd. 3. new text end

new text begin American-made steel. new text end

new text begin The city must require that a public infrastructure project
use American steel products to the extent practicable. In determining whether it is practicable,
the city may consider the exceptions to the requirement by Public Law 111-5, section 1605.
new text end

new text begin Subd. 4. new text end

new text begin City contracts; construction requirements. new text end

new text begin For all public infrastructure
projects, the city must make reasonable efforts to hire and cause the construction manager
and any subcontractors to employ women and members of minority communities. Goals
for construction contracts must be established in the manner required under the city's
disadvantaged business enterprises plan.
new text end

new text begin Subd. 5. new text end

new text begin Public bidding exemption. new text end

new text begin Notwithstanding section 469.068 or any other law
to the contrary, the city need not require competitive bidding with respect to a parking
facility or other public improvements constructed in conjunction with, and directly above
or below, or adjacent and integrally related to, a private development within a district.
new text end

new text begin Subd. 6. new text end

new text begin Support to advisory board. new text end

new text begin The city may provide financial, administrative,
and research support, and office and other space, to the board. The city may appropriate
city funds to the board for its work.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of the
city of Duluth and its chief clerical officer timely comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end

Sec. 5.

new text begin [469.53] LOCAL VALUE CAPTURE AUTHORITY.
new text end

new text begin Subdivision 1. new text end

new text begin Special abatement rules. new text end

new text begin (a) If the city or county elects to use tax
abatement under sections 469.1812 to 469.1815 to finance costs of public infrastructure
projects, or to finance the costs of a joint project between the city and county, including all
financing costs, the special rules under this subdivision apply.
new text end

new text begin (b) The limitations under section 469.1813, subdivision 6, do not apply.
new text end

new text begin (c) The limitations under section 469.1813, subdivision 8, do not apply, and property
taxes abated by the city or county to finance costs of public infrastructure projects are not
included for purposes of applying section 469.1813, subdivision 8, to the use of tax abatement
for other purposes.
new text end

new text begin Subd. 2. new text end

new text begin Special tax increment financing rules. new text end

new text begin If the city elects to establish one or
more redevelopment tax increment financing districts within a regional exchange district
to fund public infrastructure projects, the requirements, definitions, limitations, or restrictions
in the following statutes do not apply: sections 469.174, subdivisions 10 and 25, clause (2);
469.176, subdivisions 4j, 4l, and 5; and 469.1763, subdivisions 2, 3, and 4. The provisions
of this subdivision expire effective for tax increments expended after December 31, 2054.
After that date, the provisions of section 469.1763, subdivision 4, apply to any remaining
unspent or unobligated increments.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of the
city of Duluth and its chief clerical officer timely comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end

Sec. 6.

new text begin [469.54] STATE VALUE CAPTURE.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given them.
new text end

new text begin (b) "Appropriation support payments" means payment from the state to the city pursuant
to subdivision 3.
new text end

new text begin (c) "Commissioner" means the commissioner of employment and economic development.
new text end

new text begin (d) "Construction projects" means expenditures for the constructing, furnishing,
commissioning, and equipping of buildings, ancillary facilities, utilities, parking, and other
improvements, whether private or public, that are located within a district.
new text end

new text begin (e) "Expenditures" means expenditures made, or to be made, by any entity on construction
projects for the capital cost of the construction project, including but not limited to:
new text end

new text begin (1) planning, predesign, design, including architectural, engineering, project management,
and similar services;
new text end

new text begin (2) legal, regulatory, and other compliance costs of the project;
new text end

new text begin (3) land acquisition, demolition of existing improvements, and other site preparation
costs;
new text end

new text begin (4) construction costs, including all materials and supplies of the project; and
new text end

new text begin (5) equipment, furnishings, and fixtures.
new text end

new text begin Expenditures excludes supplies and other items with a useful life of less than a year that
are not used or consumed in constructing improvements to real property or are otherwise
chargeable to capital costs.
new text end

new text begin (f) "Finance" means to pay all costs, including the costs of debt financing, which includes
principal, interest, and premium.
new text end

new text begin (g) "Qualified expenditures" means the total minimum contract value of all executed
contracts for construction projects.
new text end

new text begin Subd. 2. new text end

new text begin Certification of expenditures. new text end

new text begin By March 1 of each year, the city must certify
to the commissioner the amount of qualified expenditures made through the end of the
preceding year. The certification must be made in the form that the commissioner prescribes
and include any documentation of and supporting information regarding the qualified
expenditures that the commissioner requires. By July 1 of each year, the commissioner must
confirm or revise the amount of the qualified expenditures.
new text end

new text begin Subd. 3. new text end

new text begin Appropriation support payments. new text end

new text begin (a) No appropriation support payments
from the state to the city may be made under this section until total qualified expenditures
equal at least $360,000,000.
new text end

new text begin (b) The amount of the appropriation support payments for a year equals:
new text end

new text begin (1) for qualified expenditures, as certified by the commissioner, of $360,000,000, the
amount of $360,000,000 multiplied by 0.02; plus
new text end

new text begin (2) for qualified expenditures, as certified by the commissioner, if any, between
$360,000,000 and $540,000,000, the amount of such certified qualified expenditures
multiplied by 0.015; plus
new text end

new text begin (3) for qualified expenditures, as certified by the commissioner, if any, between
$540,000,000 and $720,000,000, the amount of such certified qualified expenditures
multiplied by 0.0125; plus
new text end

new text begin (4) for qualified expenditures, as certified by the commissioner, if any, between
$720,000,000 and $1,000,000,000, the amount of such certified qualified expenditures
multiplied by 0.01.
new text end

new text begin (c) The maximum amount of appropriation support payments in any year is limited to
no more than $15,000,000, minus the amount of city contributions under sections 7 and 8
in the previous calendar year. The total amount of appropriation support payments made
under this subdivision is limited to an amount sufficient to finance $184,000,000 of public
infrastructure projects.
new text end

new text begin (d) The city must use the appropriation support payments it receives under this subdivision
for public infrastructure projects, including the cost to finance such projects. The city must
maintain appropriate records to document the use of the funds under this requirement.
new text end

new text begin (e) The commissioner must pay to the city the amount of appropriation support payments
determined under this section for the year by September 1.
new text end

new text begin Subd. 4. new text end

new text begin Prevailing wage requirement. new text end

new text begin During the construction, installation, remodeling,
and repairs of any public infrastructure project funded by appropriation support payments,
laborers and mechanics at the site must be paid the prevailing wage rate as defined in section
177.42, subdivision 6, and the public infrastructure project is subject to the requirements
of sections 177.30 and 177.41 to 177.44.
new text end

new text begin Subd. 5. new text end

new text begin Termination. new text end

new text begin No aid may be paid under this section after fiscal year 2054.
new text end

new text begin Subd. 6. new text end

new text begin Appropriation. new text end

new text begin An amount sufficient to pay the appropriation support payments
authorized under this section to the city is appropriated to the commissioner from the general
fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of the
city of Duluth and its chief clerical officer timely comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end

Sec. 7.

Laws 1980, chapter 511, section 1, subdivision 2, as amended by Laws 1991,
chapter 291, article 8, section 22, Laws 1998, chapter 389, article 8, section 25, Laws 2003,
First Special Session chapter 21, article 8, section 11, Laws 2008, chapter 154, article 5,
section 2, Laws 2014, chapter 308, article 3, section 21, and Laws 2017, First Special Session
chapter 1, article 5, section 1, is amended to read:

Subd. 2.

(a) Notwithstanding Minnesota Statutes, section 477A.016, or any other law,
ordinance, or city charter provision to the contrary, the city of Duluth may, by ordinance,
impose an additional sales tax of up to one and three-quarter percent on sales transactions
which are described in Minnesota Statutes 2000, section 297A.01, subdivision 3, clause (c).
The imposition of this tax shall not be subject to voter referendum under either state law or
city charter provisions. When the city council determines that the taxes imposed under this
paragraph at a rate of three-quarters of one percent and other sources of revenue produce
revenue sufficient to pay debt service on bonds in the principal amount of $40,285,000 plus
issuance and discount costs, issued for capital improvements at the Duluth Entertainment
and Convention Center, which include a new arena, the rate of tax under this subdivision
must be reduced by three-quarters of one percent.

(b) In addition to the tax in paragraph (a) and notwithstanding Minnesota Statutes, section
477A.016, or any other law, ordinance, or city charter provision to the contrary, the city of
Duluth may, by ordinance, impose an additional sales tax of up to one-half of one percent
on sales transactions which are described in Minnesota Statutes 2000, section 297A.01,
subdivision 3, clause (c). This tax expires when the city council determines that the tax
imposed under this paragraph, along with the tax imposed under section 22, paragraph (b),
has produced revenues sufficient to pay the debt service on bonds in a principal amount of
no more than $18,000,000, plus issuance and discount costs, to finance capital improvements
to public facilities to support tourism and recreational activities in that portion of the city
west of 14th Avenue West and the area south of and including Skyline Parkway.

(c) The city of Duluth may sell and issue up to $18,000,000 in general obligation bonds
under Minnesota Statutes, chapter 475, plus an additional amount to pay for the costs of
issuance and any premiums. The proceeds may be used to finance capital improvements to
public facilities that support tourism and recreational activities in the portion of the city
west of 14th Avenue West and the area south of and including Skyline Parkway, as described
in paragraph (b). The issuance of the bonds is subject to the provisions of Minnesota Statutes,
chapter 475, except no election shall be required unless required by the city charter. The
bonds shall not be included in computing net debt. The revenues from the taxes that the city
of Duluth may impose under paragraph (b) and under section 22, paragraph (b), may be
pledged to pay principal of and interest on such bonds.

new text begin (d) If the city of Duluth adopts a development plan for a regional exchange district under
Minnesota Statutes, section 469.51, the tax under paragraph (b) shall be extended for ten
years after it would otherwise expire under that paragraph and all revenues from the extension
of the tax under this paragraph must be used to fund public infrastructure projects, including
related bonds costs, in the regional exchange district. Use of this revenue is limited to the
same allowed uses for state appropriation support payments under Minnesota Statutes,
section 469.54.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of the
city of Duluth and its chief clerical officer timely comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end

Sec. 8.

Laws 1980, chapter 511, section 2, as amended by Laws 1998, chapter 389, article
8, section 26, Laws 2003, First Special Session chapter 21, article 8, section 12, Laws 2014,
chapter 308, article 3, section 22, and Laws 2017, First Special Session chapter 1, article
5, section 2, is amended to read:

Sec. 22. CITY OF DULUTH; TAX ON RECEIPTS BY HOTELS AND MOTELS.

(a) Notwithstanding Minnesota Statutes, section 477A.016, or any other law, or ordinance,
or city charter provision to the contrary, the city of Duluth may, by ordinance, impose an
additional tax of one percent upon the gross receipts from the sale of lodging for periods of
less than 30 days in hotels and motels located in the city. The tax shall be collected in the
same manner as the tax set forth in the Duluth city charter, section 54(d), paragraph one.
The imposition of this tax shall not be subject to voter referendum under either state law or
city charter provisions.

(b) In addition to the tax in paragraph (a) and notwithstanding Minnesota Statutes, section
477A.016, or any other law, ordinance, or city charter provision to the contrary, the city of
Duluth may, by ordinance, impose an additional sales tax of up to one-half of one percent
on the gross receipts from the sale of lodging for periods of less than 30 days in hotels and
motels located in the city. This tax expires when the city council first determines that the
tax imposed under this paragraph, along with the tax imposed under section 21, paragraph
(b), has produced revenues sufficient to pay the debt service on bonds in a principal amount
of no more than $18,000,000, plus issuance and discount costs, to finance capital
improvements to public facilities to support tourism and recreational activities in that portion
of the city west of 14th Avenue West and the area south of and including Skyline Parkway.

new text begin (c) If the city of Duluth adopts a development plan for a regional exchange district under
Minnesota Statutes, section 469.51, the tax under paragraph (b) shall be extended for ten
years after it would otherwise expire under that paragraph and all revenues from the extension
of the tax under this paragraph must be used to fund public infrastructure projects, including
related bonds costs, in the regional exchange district. Use of this revenue is limited to the
same allowed uses for state appropriation support payments under Minnesota Statutes,
section 469.54.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day after the governing body of the
city of Duluth and its chief clerical officer timely comply with Minnesota Statutes, section
645.021, subdivisions 2 and 3.
new text end