HF 2434

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to tax increment financing; making technical and minor policy changes;
amending Minnesota Statutes 2006, sections 469.174, subdivisions 10, 10a;
469.175, subdivision 3; 469.176, subdivisions 2, 4l, 7; 469.1761, subdivision
1; 469.177, subdivision 1; 469.178, subdivision 7; 469.1791, subdivision 3;
repealing Minnesota Statutes 2006, section 469.174, subdivision 29.

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

Section 1.

Minnesota Statutes 2006, section 469.174, subdivision 10, is amended to
read:

Subd. 10.

Redevelopment district.

(a) "Redevelopment district" means a type of
tax increment financing district consisting of a project, or portions of a project, within
which the authority finds by resolution that one or more of the following conditions,
reasonably distributed throughout the district, exists:

(1) parcels consisting of 70 percent of the area of the district are occupied by
buildings, streets, utilities, paved or gravel parking lots, or other similar structures
and more than 50 percent of the buildings, not including outbuildings, are structurally
substandard to a degree requiring substantial renovation or clearance;

(2) the property consists of vacant, unused, underused, inappropriately used,
or infrequently used railyards, rail storage facilities, or excessive or vacated railroad
rights-of-way;

(3) tank facilities, or property whose immediately previous use was for tank
facilities, as defined in section 115C.02, subdivision 15, if the tank facilities:

(i) have or had a capacity of more than 1,000,000 gallons;

(ii) are located adjacent to rail facilities; and

(iii) have been removed or are unused, underused, inappropriately used, or
infrequently used; or

(4) a qualifying disaster area, as defined in subdivision 10b.

(b) For purposes of this subdivision, "structurally substandard" shall mean
containing defects in structural elements or a combination of deficiencies in essential
utilities and facilities, light and ventilation, fire protection including adequate egress,
layout and condition of interior partitions, or similar factors, which defects or deficiencies
are of sufficient total significance to justify substantial renovation or clearance.

(c) A building is not structurally substandard if it is in compliance with the building
code applicable to new buildings or could be modified to satisfy the building code at
a cost of less than 15 percent of the cost of constructing a new structure of the same
square footage and type on the site. The municipality may find that a building is not
disqualified as structurally substandard under the preceding sentence on the basis of
reasonably available evidence, such as the size, type, and age of the building, the average
cost of plumbing, electrical, or structural repairs, or other similar reliable evidence. The
municipality may not make such a determination without an interior inspection of the
property, but need not have an independent, expert appraisal prepared of the cost of repair
and rehabilitation of the building. An interior inspection of the property is not required,
if the municipality finds that (1) the municipality or authority is unable to gain access to
the property after using its best efforts to obtain permission from the party that owns or
controls the property; and (2) the evidence otherwise supports a reasonable conclusion that
the building is structurally substandard. Items of evidence that support such a conclusion
include recent fire or police inspections, on-site property tax appraisals or housing
inspections, exterior evidence of deterioration, or other similar reliable evidence. Written
documentation of the findings and reasons why an interior inspection was not conducted
must be made and retained under section 469.175, subdivision 3, clause (1). Failure of a
building to be disqualified under the provisions of this paragraph is a necessary, but not a
sufficient, condition to determining that the building is substandard.

(d) A parcel is deemed to be occupied by a structurally substandard building
for purposes of the finding under paragraph (a) new text begin or by the improvements described in
paragraph (e) new text end if all of the following conditions are met:

(1) the parcel was occupied by a substandard building new text begin or met the requirements
of paragraph (e), as the case may be, new text end within three years of the filing of the request for
certification of the parcel as part of the district with the county auditor;

(2) the substandard building deleted text begin was deleted text end new text begin or the improvements described in paragraph (e)
were new text end demolished or removed by the authority or the demolition or removal was financed
by the authority or was done by a developer under a development agreement with the
authority;

(3) the authority found by resolution before the demolition or removal that the
parcel was occupied by a structurally substandard building new text begin or met the requirements of
paragraph (e) new text end and that after demolition and clearance the authority intended to include
the parcel within a district; and

(4) upon filing the request for certification of the tax capacity of the parcel as part
of a district, the authority notifies the county auditor that the original tax capacity of the
parcel must be adjusted as provided by section 469.177, subdivision 1, paragraph (f).

(e) For purposes of this subdivision, a parcel is not occupied by buildings, streets,
utilities, paved or gravel parking lots, or other similar structures unless 15 percent of the
area of the parcel contains buildings, streets, utilities, paved or gravel parking lots, or
other similar structures.

(f) For districts consisting of two or more noncontiguous areas, each area must
qualify as a redevelopment district under paragraph (a) to be included in the district, and
the entire area of the district must satisfy paragraph (a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for requests for certification made
after June 30, 2007.
new text end

Sec. 2.

Minnesota Statutes 2006, section 469.174, subdivision 10a, is amended to read:

Subd. 10a.

Renewal and renovation district.

(a) "Renewal and renovation district"
means a type of tax increment financing district consisting of a project, or portions of a
project, within which the authority finds by resolution that:

(1)(i) parcels consisting of 70 percent of the area of the district are occupied by
buildings, streets, utilities, paved or gravel parking lots, or other similar structures; (ii)
20 percent of the buildings are structurally substandard; and (iii) 30 percent of the other
buildings require substantial renovation or clearance to remove existing conditions such
as: inadequate street layout, incompatible uses or land use relationships, overcrowding of
buildings on the land, excessive dwelling unit density, obsolete buildings not suitable for
improvement or conversion, or other identified hazards to the health, safety, and general
well-being of the community; and

(2) the conditions described in clause (1) are reasonably distributed throughout the
geographic area of the district.

(b) For purposes of determining whether a building is structurally substandard,
whether parcels are occupied by buildings, streets, utilities, paved or gravel parking lots,
or other similar structures, or whether noncontiguous areas qualify, the provisions of
subdivision 10, paragraphs deleted text begin (c), (e), and deleted text end new text begin (b) through new text end (f) apply.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for requests for certification made
after June 30, 2007.
new text end

Sec. 3.

Minnesota Statutes 2006, section 469.175, subdivision 3, is amended to read:

Subd. 3.

Municipality approval.

(a) A county auditor shall not certify the original
net tax capacity of a tax increment financing district until the tax increment financing plan
proposed for that district has been approved by the municipality in which the district
is located. If an authority that proposes to establish a tax increment financing district
and the municipality are not the same, the authority shall apply to the municipality in
which the district is proposed to be located and shall obtain the approval of its tax
increment financing plan by the municipality before the authority may use tax increment
financing. The municipality shall approve the tax increment financing plan only after a
public hearing thereon after published notice in a newspaper of general circulation in the
municipality at least once not less than ten days nor more than 30 days prior to the date
of the hearing. The published notice must include a map of the area of the district from
which increments may be collected and, if the project area includes additional area, a map
of the project area in which the increments may be expended. The hearing may be held
before or after the approval or creation of the project or it may be held in conjunction with
a hearing to approve the project.

(b) Before or at the time of approval of the tax increment financing plan, the
municipality shall make the following findings, and shall set forth in writing the reasons
and supporting facts for each determination:

(1) that the proposed tax increment financing district is a redevelopment district, a
renewal or renovation district, a housing district, a soils condition district, or an economic
development district; if the proposed district is a redevelopment district or a renewal or
renovation district, the reasons and supporting facts for the determination that the district
meets the criteria of section 469.174, subdivision 10, paragraph (a), clauses (1) and (2), or
subdivision 10a, must be documented in writing and retained and made available to the
public by the authority until the district has been terminated;

(2) that, in the opinion of the municipality:

(i) the proposed development or redevelopment would not reasonably be expected to
occur solely through private investment within the reasonably foreseeable future; and

(ii) the increased market value of the site that could reasonably be expected to
occur without the use of tax increment financing would be less than the increase in the
market value estimated to result from the proposed development after subtracting the
present value of the projected tax increments for the maximum duration of the district
permitted by the plan. The requirements of this item do not apply if the district is a
deleted text begin qualified deleted text end housing district;

(3) that the tax increment financing plan conforms to the general plan for the
development or redevelopment of the municipality as a whole;

(4) that the tax increment financing plan will afford maximum opportunity,
consistent with the sound needs of the municipality as a whole, for the development or
redevelopment of the project by private enterprise;

(5) that the municipality elects the method of tax increment computation set forth in
section 469.177, subdivision 3, paragraph (b), if applicable.

(c) When the municipality and the authority are not the same, the municipality shall
approve or disapprove the tax increment financing plan within 60 days of submission by
the authority. When the municipality and the authority are not the same, the municipality
may not amend or modify a tax increment financing plan except as proposed by the
authority pursuant to subdivision 4. Once approved, the determination of the authority
to undertake the project through the use of tax increment financing and the resolution of
the governing body shall be conclusive of the findings therein and of the public need for
the financing.

(d) For a district that is subject to the requirements of paragraph (b), clause (2),
item (ii), the municipality's statement of reasons and supporting facts must include all of
the following:

(1) an estimate of the amount by which the market value of the site will increase
without the use of tax increment financing;

(2) an estimate of the increase in the market value that will result from the
development or redevelopment to be assisted with tax increment financing; and

(3) the present value of the projected tax increments for the maximum duration of
the district permitted by the tax increment financing plan.

(e) For purposes of this subdivision, "site" means the parcels on which the
development or redevelopment to be assisted with tax increment financing will be located.

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. 4.

Minnesota Statutes 2006, section 469.176, subdivision 2, is amended to read:

Subd. 2.

Excess increments.

(a) The authority shall annually determine the amount
of excess increments for a district, if any. This determination must be based on the tax
increment financing plan in effect on December 31 of the year and the increments and
other revenues received as of December 31 of the year. The authority must spend or return
the excess increments under paragraph (c) within nine months after the end of the year.

(b) For purposes of this subdivision, "excess increments" equals the excess of:

(1) total increments collected from the district since its certification, reduced by any
excess increments paid under paragraph (c), clause (4), for a prior year, over

(2) the total costs authorized by the tax increment financing plan to be paid with
increments from the district, reduced, but not below zero, by the sum of:

(i) the amounts of those authorized costs that have been paid from sources other than
tax increments from the district;

(ii) revenues, other than tax increments from the district, that are dedicated for or
otherwise required to be used to pay those authorized costs and that the authority has
received and that are not included in item (i);

(iii) the amount of principal and interest obligations due on outstanding bonds after
December 31 of the year and not prepaid under paragraph (c) in a prior year; and

(iv) increased by the sum of the transfers of increments made under section 469.1763,
subdivision 6, to reduce deficits in other districts made by December 31 of the year.

(c) The authority shall use excess increment only to do one or more of the following:

(1) prepay any outstanding bonds;

(2) discharge the pledge of tax increment for any outstanding bonds;

(3) pay into an escrow account dedicated to the payment of any outstanding bonds; or

(4) return the excess amount to the county auditor who shall distribute the excess
amount to the city or town, county, and school district in which the tax increment financing
district is located in direct proportion to their respective local tax rates.

(d) For purposes of a district for which the request for certification was made prior to
August 1, 1979, excess increments equal the amount of increments on hand on December
31, less the principal and interest obligations due on outstanding bonds or advances,
qualifying under subdivision 1c, clauses (1), (2), new text begin (4), new text end and (5), after December 31 of the
year and not prepaid under paragraph (c).

(e) The county auditor must report to the commissioner of education the amount of
any excess tax increment distributed to a school district within 30 days of the distribution.

(f) For purposes of this subdivision, "outstanding bonds" means bonds which are
secured by increments from the district.

new text begin (g) The state auditor may exempt an authority from reporting the amounts calculated
under this subdivision for a calendar year, if the authority certifies to the auditor in
its report that the total amount authorized by the tax increment plan to be paid with
increments from the district exceeds the sum of the total increments collected for the
district for all years by ... percent.
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, including
districts for which the request for certification was made on or before August 1, 1979.
new text end

Sec. 5.

Minnesota Statutes 2006, section 469.176, subdivision 4l, is amended to read:

Subd. 4l.

Prohibited facilities.

(a) No tax increment from any district may be
used for:

(1) a commons area used as a public park; or

(2) a facility used for social, recreational, or conference purposes.

(b) This subdivision does not apply to a privately owned facility for conference
purposes or a parking structure new text begin , whether it is public or privately owned or whether it is
ancillary to a use listed in paragraph (a) new text end .

new text begin EFFECTIVE DATE. new text end

new text begin This section confirms the original intent of the legislature
in enacting Minnesota Statutes, section 469.176, subdivision 4l, and is effective the day
following final enactment and applies to any expenditure subject to Minnesota Statutes,
section 469.176, subdivision 4l.
new text end

Sec. 6.

Minnesota Statutes 2006, section 469.176, subdivision 7, is amended to read:

Subd. 7.

Parcels not includable in districts.

(a) The authority may request
inclusion in a tax increment financing district and the county auditor may certify the
original tax capacity of a parcel or a part of a parcel that qualified under the provisions of
section 273.111 or 273.112 or chapter 473H for taxes payable in any of the five calendar
years before the filing of the request for certification only for:

(1) a district in which 85 percent or more of the planned buildings and facilities
(determined on the basis of square footage) are a qualified manufacturing facility or a
qualified distribution facility or a combination of both; or

(2) a deleted text begin qualified deleted text end housing district.

(b)(1) A distribution facility means buildings and other improvements to real
property that are used to conduct activities in at least each of the following categories:

(i) to store or warehouse tangible personal property;

(ii) to take orders for shipment, mailing, or delivery;

(iii) to prepare personal property for shipment, mailing, or delivery; and

(iv) to ship, mail, or deliver property.

(2) A manufacturing facility includes space used for manufacturing or producing
tangible personal property, including processing resulting in the change in condition of the
property, and space necessary for and related to the manufacturing activities.

(3) To be a qualified facility, the owner or operator of a manufacturing or distribution
facility must agree to pay and pay 90 percent or more of the employees of the facility at
a rate equal to or greater than 160 percent of the federal minimum wage for individuals
over the age of 20.

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. 7.

Minnesota Statutes 2006, section 469.1761, subdivision 1, is amended to read:

Subdivision 1.

Requirement imposed.

(a) In order for a tax increment financing
district to qualify as a housing district:

(1) the income limitations provided in this section must be satisfied; and

(2) no more than 20 percent of the square footage of buildings that receive assistance
from tax increments may consist of commercial, retail, or other nonresidential uses.

(b) The requirements imposed by this section apply to property receiving assistance
financed with tax increments, including interest reduction, land transfers at less than the
authority's cost of acquisition, utility service or connections, roads, parking facilities, or
other subsidies. The provisions of this section do not apply to districts located in a targeted
area as defined in section 462C.02, subdivision 9, clause (e).

new text begin (c) For purposes of the requirements of paragraph (a), the authority may elect to treat
an addition to an existing structure as a separate building if:
new text end

new text begin (1) construction of the addition begins more than three years after construction of
the existing structure was completed; and
new text end

new text begin (2) for an addition that does not meet the requirements of paragraph (a), clause (2), if
it is treated as a separate building, the addition was not contemplated by the tax increment
financing plan which includes the existing structure.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for expenditures of tax increment
authorized and made after the day following final enactment, regardless of when the
request for certification of the district was made.
new text end

Sec. 8.

Minnesota Statutes 2006, section 469.177, subdivision 1, is amended to read:

Subdivision 1.

Original net tax capacity.

(a) Upon or after adoption of a tax
increment financing plan, the auditor of any county in which the district is situated shall,
upon request of the authority, certify the original net tax capacity of the tax increment
financing district and that portion of the district overlying any subdistrict as described in
the tax increment financing plan and shall certify in each year thereafter the amount by
which the original net tax capacity has increased or decreased as a result of a change in tax
exempt status of property within the district and any subdistrict, reduction or enlargement
of the district or changes pursuant to subdivision 4. new text begin The auditor shall certify the amount
within 30 days after receipt of the request and sufficient information to identify the parcels
included in the district. The certification relates to the taxes payable year as provided in
subdivision 6.
new text end

(b) If the classification under section 273.13 of property located in a district changes
to a classification that has a different assessment ratio, the original net tax capacity of that
property must be redetermined at the time when its use is changed as if the property had
originally been classified in the same class in which it is classified after its use is changed.

(c) The amount to be added to the original net tax capacity of the district as a result
of previously tax exempt real property within the district becoming taxable equals the net
tax capacity of the real property as most recently assessed pursuant to section 273.18 or, if
that assessment was made more than one year prior to the date of title transfer rendering
the property taxable, the net tax capacity assessed by the assessor at the time of the
transfer. If improvements are made to tax exempt property after the municipality approves
the district and before the parcel becomes taxable, the assessor shall, at the request of
the authority, separately assess the estimated market value of the improvements. If the
property becomes taxable, the county auditor shall add to original net tax capacity, the net
tax capacity of the parcel, excluding the separately assessed improvements. If substantial
taxable improvements were made to a parcel after certification of the district and if the
property later becomes tax exempt, in whole or part, as a result of the authority acquiring
the property through foreclosure or exercise of remedies under a lease or other revenue
agreement or as a result of tax forfeiture, the amount to be added to the original net tax
capacity of the district as a result of the property again becoming taxable is the amount
of the parcel's value that was included in original net tax capacity when the parcel was
first certified. The amount to be added to the original net tax capacity of the district as a
result of enlargements equals the net tax capacity of the added real property as most
recently certified by the commissioner of revenue as of the date of modification of the tax
increment financing plan pursuant to section 469.175, subdivision 4.

(d) If the net tax capacity of a property increases because the property no longer
qualifies under the Minnesota Agricultural Property Tax Law, section 273.111; the
Minnesota Open Space Property Tax Law, section 273.112; or the Metropolitan
Agricultural Preserves Act, chapter 473H, or because platted, unimproved property is
improved or market value is increased after approval of the plat under section 273.11,
subdivision 14, 14a, or 14b, the increase in net tax capacity must be added to the original
net tax capacity.

(e) The amount to be subtracted from the original net tax capacity of the district
as a result of previously taxable real property within the district becoming tax exempt,
or a reduction in the geographic area of the district, shall be the amount of original net
tax capacity initially attributed to the property becoming tax exempt or being removed
from the district. If the net tax capacity of property located within the tax increment
financing district is reduced by reason of a court-ordered abatement, stipulation agreement,
voluntary abatement made by the assessor or auditor or by order of the commissioner of
revenue, the reduction shall be applied to the original net tax capacity of the district when
the property upon which the abatement is made has not been improved since the date of
certification of the district and to the captured net tax capacity of the district in each year
thereafter when the abatement relates to improvements made after the date of certification.
The county auditor may specify reasonable form and content of the request for certification
of the authority and any modification thereof pursuant to section 469.175, subdivision 4.

(f) If a parcel of property contained a substandard building new text begin or improvements
described in section 469.174, subdivision 10, paragraph (e), new text end that deleted text begin was deleted text end new text begin were new text end demolished
or removed and if the authority elects to treat the parcel as occupied by a substandard
building under section 469.174, subdivision 10, paragraph (b), new text begin or by improvements under
section 469.174, subdivision 10, paragraph (e), new text end the auditor shall certify the original net
tax capacity of the parcel using the greater of (1) the current net tax capacity of the
parcel, or (2) the estimated market value of the parcel for the year in which the building
deleted text begin was deleted text end new text begin or other improvements were new text end demolished or removed, but applying the class rates
for the current year.

(g) For a redevelopment district qualifying under section 469.174, subdivision 10,
paragraph (a), clause (4), as a qualified disaster area, the auditor shall certify the value of
the land as the original tax capacity for any parcel in the district that contains a building
that suffered substantial damage as a result of the disaster or emergency.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for requests for certification made
after June 30, 2007.
new text end

Sec. 9.

Minnesota Statutes 2006, section 469.178, subdivision 7, is amended to read:

Subd. 7.

Interfund loans.

The authority or municipality may advance or loan
money to finance expenditures under section 469.176, subdivision 4, from its general
fund or any other fund under which it has legal authority to do so. The loan or advance
must be authorized, by resolution of the governing body or of the authority, whichever
has jurisdiction over the fund from which the advance or loan is made, before money
is transferred, advanced, or spent, whichever is earliest. The resolution may generally
grant to the authority the power to make interfund loans under one or more tax increment
financing plans or for one or more districts. The terms and conditions for repayment of the
loan must be provided in writing and include, at a minimum, the principal amount, the
interest rate, and maximum term. The maximum rate of interest permitted to be charged
is limited to the greater of the rates specified under section 270C.40 or 549.09 as of the
date new text begin the loan new text end or advance is made, unless the written agreement states that the maximum
interest rate will fluctuate as the interest rates specified under section 270C.40 or 549.09
are from time to time adjusted.

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 subject to Minnesota Statutes, section 469.178, subdivision 7,
regardless of when the request for certification was made.
new text end

Sec. 10.

Minnesota Statutes 2006, section 469.1791, subdivision 3, is amended to read:

Subd. 3.

Preconditions to establish district.

(a) A city may establish a special
taxing district within a tax increment financing district under this section only if the
conditions under paragraphs (b) and (c) are met or if the city elects to exercise the
authority under paragraph (d).

(b) The city has determined that:

(1) total tax increments from the district, including unspent increments from
previous years and increments transferred under paragraph (c), will be insufficient to pay
the amounts due in a year on preexisting obligations; and

(2) this insufficiency of increments resulted from the reduction in property tax class
rates enacted in the 1997 and 1998 legislative sessions.

(c) The city has agreed to transfer any available increments from other tax increment
financing districts in the city to pay the preexisting obligations of the district under section
469.1763, subdivision 6. This requirement does not apply to any available increments of a
deleted text begin qualified deleted text end housing district.

(d) If a tax increment financing district does not qualify under paragraphs (b) and
(c), the governing body may elect to establish a special taxing district under this section.
If the city elects to exercise this authority, increments from the tax increment financing
district and the proceeds of the tax imposed under this section may only be used to pay
preexisting obligations and reasonable administrative expenses of the authority for the tax
increment financing district. The tax increment financing district must be decertified when
all preexisting obligations have been paid.

new text begin EFFECTIVE DATE. new text end

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

Sec. 11. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2006, section 469.174, subdivision 29, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
For purposes of any special law authorizing or limiting the use of increments to projects
meeting the requirements of a qualified housing district, expenditures for housing districts
satisfying the requirements of Minnesota Statutes, sections 469.174, subdivision 11;
469.176, subdivision 4d; and 469.1761, as amended, also satisfy the requirements of
the special law.
new text end