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HF 556

as introduced - 90th Legislature (2017 - 2018) Posted on 01/26/2017 02:15pm

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to tax increment financing; making various technical and minor policy
changes; amending Minnesota Statutes 2016, sections 469.1763, subdivisions 1,
2, 3; 469.178, subdivision 7.

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

Section 1.

Minnesota Statutes 2016, section 469.1763, subdivision 1, is amended to read:


Subdivision 1.

Definitions.

(a) For purposes of this section, the following terms have
the meanings given.

(b) "Activities" means acquisition of property, clearing of land, site preparation, soils
correction, removal of hazardous waste or pollution, installation of utilities, construction
of public or private improvements, and other similar activities, but only to the extent that
tax increment revenues may be spent for such purposes under other law.

(c) "Third party" means an entity other than (1) the person receiving the benefit of
assistance financed with tax increments, or (2) the municipality or the development authority
or other person substantially under the control of the municipality.

(d) "Revenues derived from tax increments paid by properties in the district" means only
tax increment as defined in section 469.174, subdivision 25, clause (1), and does not include
tax increment as defined in section 469.174, subdivision 25, clauses (2)deleted text begin , (3), and (4)deleted text end new text begin to (5)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. 2.

Minnesota Statutes 2016, 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 deleted text begin revenuedeleted text end new text begin
revenues
new text end derived from tax increments deleted text begin fordeleted text end new text begin paid by properties innew text end 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; 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.

(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 EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2016, section 469.1763, subdivision 3, is amended to read:


Subd. 3.

Five-year rule.

(a) Revenues derived from tax increments new text begin paid by properties
in the district
new text end 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, paragraphs
(b) and (d), or for public infrastructure purposes within a zone as permitted by subdivision
2, paragraph (e).

(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.

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 2016, section 469.178, subdivision 7, is amended to read:


Subd. 7.

Interfund loans.

new text begin (a) new text end 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.

new text begin (b) Not later than 60 days after money is transferred, advanced, or spent, whichever is
earliest,
new text end the loan or advance must be authorizeddeleted text begin ,deleted text end by resolution of the governing body or of
the authority, whichever has jurisdiction over the fund from which the advance or loan is
authorizeddeleted text begin , before money is transferred, advanced, or spent, whichever is earliestdeleted text end .

new text begin (c)new text end The resolution may generally grant to new text begin the municipality or new text end the authority the power to
make interfund loans under one or more tax increment financing plans or for one or more
districts.new text begin The resolution may be adopted before or after the adoption of the tax increment
financing plan or the creation of the tax increment financing district from which the advance
or loan is to be repaid.
new text end

new text begin (d)new text end The terms and conditions for repayment of the loan must be provided in writing deleted text begin anddeleted text end new text begin .
The written terms and conditions may be in any form, but must
new text end include, at a minimum, the
principal amount, the interest rate, and maximum term.new text begin Written terms may be modified or
amended in writing by the municipality or the authority before the latest decertification of
any tax increment financing district from which the interfund loan is to be repaid.
new text end 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 the loan or advance is authorized,
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
Loans or advances may be structured as draw-down or line-of-credit obligations of the
lending fund.
new text end

new text begin (e) The authority shall report in the annual report submitted under section 469.175,
subdivision 6:
new text end

new text begin (1) the amount of any interfund loan or advance made in a calendar year; and
new text end

new text begin (2) any amendment of an interfund loan or advance made in a calendar year.
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