HF 3001

1st Engrossment - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to economic development; amending definitions; clarifying
commissioner's discretion; directing funds to the contamination cleanup grant
program; clarifying use of tax increment from a tax increment district located
within a biotechnology and health sciences industry zone; clarifying that the
five-year rule and use of revenues for decertification also apply to those districts;
amending Minnesota Statutes 2004, sections 116J.552, subdivision 7; 469.1763,
subdivisions 3, 4; 473.252, subdivision 3; Minnesota Statutes 2005 Supplement,
sections 116J.572, subdivision 3; 116J.575, subdivision 1; 469.1763, subdivision
2.

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

Section 1.

Minnesota Statutes 2004, section 116J.552, subdivision 7, is amended to
read:

Subd. 7.

Project costs.

"Project costs" includes cleanup costs for the site deleted text begin and the
cost of related site acquisition deleted text end , demolition of existing improvements, and installation of
public improvements necessary for the development authority to implement the response
action plan.

Sec. 2.

Minnesota Statutes 2005 Supplement, section 116J.572, subdivision 3, is
amended to read:

Subd. 3.

Redevelopment costs or costs.

"Redevelopment costs" or "costs" means
the costs of deleted text begin land acquisition, deleted text end stabilizing unstable soils when infill is required, demolition,
infrastructure improvements, and ponding or other environmental infrastructure and costs
necessary for adaptive reuse of buildings, including remedial activities.

Sec. 3.

Minnesota Statutes 2005 Supplement, section 116J.575, subdivision 1, is
amended to read:

Subdivision 1.

Commissioner discretion.

The commissioner may make a grant
for up to 50 percent of the eligible costs of a project. new text begin The commissioner shall, in each
grant cycle, make grants so that 50 percent of the dollar value of grants for that cycle
are for projects located outside of the metropolitan area and 50 percent are for projects
located within the metropolitan area. This allocation of funds does not apply for any grant
cycle in which the applications received by the application deadline are insufficient to
permit the equal division of grants between metropolitan and nonmetropolitan projects.
new text end The determination of whether to make a grant for a site is within the discretion of the
commissioner, subject to this section and sections 116J.571 to 116J.574 and available
unencumbered money in the redevelopment account. deleted text begin Notwithstanding section 116J.573,
if the commissioner determines that the applications for grants for projects in greater
Minnesota are less than the amount of grant funds available, the commissioner may
make grants for projects anywhere in Minnesota. deleted text end The commissioner's decisions and
application of the priorities under this section are not subject to judicial review, except
for abuse of discretion.

Sec. 4.

Minnesota Statutes 2005 Supplement, 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 revenue derived from tax increments for the district that are expended on
costs under section 469.176, subdivision 4h, paragraph (b), 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 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;

(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.

(e) For a district created within a biotechnology and health sciences industry zone
as defined in section 469.330, subdivision 6, new text begin or for an existing district located within
such a zone, new text end tax increment derived from such a district may be expended outside of
the district but within the zone only for expenditures required for the construction of
public infrastructure necessary to support the activities of the zone. new text begin Public infrastructure
expenditures are considered as expenditures for activities within the district.
new text end

Sec. 5.

Minnesota Statutes 2004, section 469.1763, subdivision 3, is amended to read:

Subd. 3.

Five-year rule.

(a) Revenues derived from tax increments are considered
to have been expended on an activity within the district under subdivision 2 only if one
of the following occurs:

(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, 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) expenditures are made for housing purposes as permitted by subdivision 2,
paragraph (b) new text begin , or for public infrastructure purposes within a zone as permitted by
subdivision 2, paragraph (e) new 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).

Sec. 6.

Minnesota Statutes 2004, section 469.1763, subdivision 4, is amended to read:

Subd. 4.

Use of revenues for decertification.

(a) In each year beginning with the
sixth year following certification of the district, 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:

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

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

(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 deleted text begin . deleted text end new text begin ; or
new text end

new text begin (4) the amount provided by the tax increment financing plan to be paid under
subdivision 2, paragraph (e).
new text end

(b) When the outstanding bonds have been defeased and when sufficient money
has been set aside to pay contractual obligations as defined in subdivision 3, paragraph
(a), clauses (3) and (4), the district must be decertified and the pledge of tax increment
discharged.

Sec. 7.

Minnesota Statutes 2004, section 473.252, subdivision 3, is amended to read:

Subd. 3.

Distribution of funds.

(a) The council must use the funds in the account
to make grants to municipalities or development authorities for the cleanup of polluted
land in the metropolitan area. A grant to a metropolitan county or a development authority
must be used for a project in a participating municipality. The council shall prescribe
and provide the grant application form to municipalities. The council must consider the
probability of funding from other sources when making grants under this section.

(b)(1) The legislature expects that applications for grants will exceed the available
funds and the council will be able to provide grants to only some of the applicant
municipalities. If applications for grants for qualified sites exceed the available funds,
the council shall make grants that provide the highest return in public benefits for the
public costs incurred, that encourage development that will lead to the preservation or
growth of living-wage jobs or the production of affordable housing, and that enhance the
tax base of the recipient municipality. new text begin For purposes of ranking applications, equal weight
shall be given to preservation or growth of living-wage jobs and to the production of
affordable housing.
new text end

new text begin For purposes of this section, affordable housing includes both:
new text end

new text begin (i) affordable rental housing for persons or families whose income, at the time
of initial occupancy, does not exceed 60 percent of median income as determined by
the United States Department of Housing and Urban Development for the metropolitan
area; and
new text end

new text begin (ii) affordable ownership housing units for persons or families whose income, at the
time of initial occupancy, does not exceed 80 percent of median income as determined by
the United States Department of Housing and Urban Development for the metropolitan
area.
new text end

(2) In making grants, the council shall establish regular application deadlines in
which grants will be awarded from the available money in the account. If the council
provides for application cycles of less than six-month intervals, the council must reserve
at least 40 percent of the receipts of the account for a year for application deadlines that
occur in the second half of the year. If the applications for grants exceed the available
funds for an application cycle, no more than one-half of the funds may be granted to
projects in a statutory or home rule charter city and no more than three-quarters of the
funds may be granted to projects located in cities of the first class.

(c) A municipality may use the grant to provide a portion of the local match
requirement for project costs that qualify for a grant under sections 116J.551 to 116J.557.