HF 1504

as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to taxation; tax increment financing; tax 
  1.3             abatement; making technical and minor changes; 
  1.4             amending Minnesota Statutes 2002, sections 469.174, 
  1.5             subdivisions 3, 6, 10, 25, by adding a subdivision; 
  1.6             469.175, subdivisions 1, 3, 4, 6; 469.176, 
  1.7             subdivisions 1c, 2, 3, 4d, 7; 469.1763, subdivisions 
  1.8             1, 2, 3, 4, 6; 469.177, subdivisions 1, 12; 469.1771, 
  1.9             subdivision 4; 469.178, subdivision 7; 469.1791, 
  1.10            subdivision 3; 469.1792, subdivisions 1, 2; 469.1815, 
  1.11            subdivision 1; Laws 1997, chapter 231, article 10, 
  1.12            section 25. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 2002, section 469.174, 
  1.15  subdivision 3, is amended to read: 
  1.16     Subd. 3.  [BONDS.] (a) "Bonds" means any bonds, including 
  1.17  refunding bonds, notes, interim certificates, debentures, 
  1.18  interfund loans or advances, or other obligations issued: 
  1.19     (1) by an authority under section 469.178; or which were 
  1.20  issued 
  1.21     (2) in aid of a project under any other law, except revenue 
  1.22  bonds issued pursuant to sections 469.152 to 469.165, prior to 
  1.23  August 1, 1979. 
  1.24     (b) Bonds or other obligations include: 
  1.25     (1) refunding bonds; 
  1.26     (2) notes; 
  1.27     (3) interim certificates; 
  1.28     (4) debentures; and 
  1.29     (5) interfund loans or advances qualifying under section 
  2.1   469.178, subdivision 7. 
  2.2      [EFFECTIVE DATE.] This section is effective at the same 
  2.3   time as provided by Laws 2001, First Special Session chapter 5, 
  2.4   article 15, section 3. 
  2.5      Sec. 2.  Minnesota Statutes 2002, section 469.174, 
  2.6   subdivision 6, is amended to read: 
  2.7      Subd. 6.  [MUNICIPALITY.] "Municipality" means any the 
  2.8   city, however organized, and with respect to in which the 
  2.9   district is located, with the following exceptions: 
  2.10     (1) for a project undertaken pursuant to sections 469.152 
  2.11  to 469.165, "municipality" has the meaning given in sections 
  2.12  469.152 to 469.165, and with respect to; and 
  2.13     (2) for a project undertaken pursuant to sections 469.142 
  2.14  to 469.151, or a county or multicounty project undertaken 
  2.15  pursuant to sections 469.004 to 469.008, "municipality" also 
  2.16  includes any means the county in which the district is located. 
  2.17     [EFFECTIVE DATE.] This section is effective for districts 
  2.18  for which the request for certification was made after July 31, 
  2.19  1979. 
  2.20     Sec. 3.  Minnesota Statutes 2002, section 469.174, 
  2.21  subdivision 10, is amended to read: 
  2.22     Subd. 10.  [REDEVELOPMENT DISTRICT.] (a) "Redevelopment 
  2.23  district" means a type of tax increment financing district 
  2.24  consisting of a project, or portions of a project, within which 
  2.25  the authority finds by resolution that one or more of the 
  2.26  following conditions, reasonably distributed throughout the 
  2.27  district, exists: 
  2.28     (1) parcels consisting of 70 percent of the area of the 
  2.29  district are occupied by buildings, streets, utilities, paved or 
  2.30  gravel parking lots, or other similar structures and more than 
  2.31  50 percent of the buildings, not including outbuildings, are 
  2.32  structurally substandard to a degree requiring substantial 
  2.33  renovation or clearance; or 
  2.34     (2) the property consists of vacant, unused, underused, 
  2.35  inappropriately used, or infrequently used railyards, rail 
  2.36  storage facilities, or excessive or vacated railroad 
  3.1   rights-of-way; or 
  3.2      (3) tank facilities, or property whose immediately previous 
  3.3   use was for tank facilities, as defined in section 115C.02, 
  3.4   subdivision 15, if the tank facilities: 
  3.5      (i) have or had a capacity of more than 1,000,000 gallons; 
  3.6      (ii) are located adjacent to rail facilities; and 
  3.7      (iii) have been removed or are unused, underused, 
  3.8   inappropriately used, or infrequently used. 
  3.9      (b) For purposes of this subdivision, "structurally 
  3.10  substandard" shall mean containing defects in structural 
  3.11  elements or a combination of deficiencies in essential utilities 
  3.12  and facilities, light and ventilation, fire protection including 
  3.13  adequate egress, layout and condition of interior partitions, or 
  3.14  similar factors, which defects or deficiencies are of sufficient 
  3.15  total significance to justify substantial renovation or 
  3.16  clearance. 
  3.17     (c) A building is not structurally substandard if it is in 
  3.18  compliance with the building code applicable to new buildings or 
  3.19  could be modified to satisfy the building code at a cost of less 
  3.20  than 15 percent of the cost of constructing a new structure of 
  3.21  the same square footage and type on the site.  The municipality 
  3.22  may find that a building is not disqualified as structurally 
  3.23  substandard under the preceding sentence on the basis of 
  3.24  reasonably available evidence, such as the size, type, and age 
  3.25  of the building, the average cost of plumbing, electrical, or 
  3.26  structural repairs, or other similar reliable evidence.  The 
  3.27  municipality may not make such a determination without an 
  3.28  interior inspection of the property, but need not have an 
  3.29  independent, expert appraisal prepared of the cost of repair and 
  3.30  rehabilitation of the building.  An interior inspection of the 
  3.31  property is not required, if the municipality finds that (1) the 
  3.32  municipality or authority is unable to gain access to the 
  3.33  property after using its best efforts to obtain permission from 
  3.34  the party that owns or controls the property; and (2) the 
  3.35  evidence otherwise supports a reasonable conclusion that the 
  3.36  building is structurally substandard.  Items of evidence that 
  4.1   support such a conclusion include recent fire or police 
  4.2   inspections, on-site property tax appraisals or housing 
  4.3   inspections, exterior evidence of deterioration, or other 
  4.4   similar reliable evidence.  Written documentation of the 
  4.5   findings and reasons why an interior inspection was not 
  4.6   conducted must be made and retained under section 469.175, 
  4.7   subdivision 3, clause (1). 
  4.8      (d) A parcel is deemed to be occupied by a structurally 
  4.9   substandard building for purposes of the finding under paragraph 
  4.10  (a) if all of the following conditions are met: 
  4.11     (1) the parcel was occupied by a substandard building 
  4.12  within three years of the filing of the request for 
  4.13  certification of the parcel as part of the district with the 
  4.14  county auditor; 
  4.15     (2) the substandard building was demolished or removed by 
  4.16  the authority or the demolition or removal was financed by the 
  4.17  authority or was done by a developer under a development 
  4.18  agreement with the authority; 
  4.19     (3) the authority found by resolution before the demolition 
  4.20  or removal that the parcel was occupied by a structurally 
  4.21  substandard building and that after demolition and clearance the 
  4.22  authority intended to include the parcel within a district; and 
  4.23     (4) upon filing the request for certification of the tax 
  4.24  capacity of the parcel as part of a district, the authority 
  4.25  notifies the county auditor that the original tax capacity of 
  4.26  the parcel must be adjusted as provided by section 469.177, 
  4.27  subdivision 1, paragraph (h) (f). 
  4.28     (e) For purposes of this subdivision, a parcel is not 
  4.29  occupied by buildings, streets, utilities, paved or gravel 
  4.30  parking lots, or other similar structures unless 15 percent of 
  4.31  the area of the parcel contains buildings, streets, utilities, 
  4.32  paved or gravel parking lots, or other similar structures. 
  4.33     (f) For districts consisting of two or more noncontiguous 
  4.34  areas, each area must qualify as a redevelopment district under 
  4.35  paragraph (a) to be included in the district, and the entire 
  4.36  area of the district must satisfy paragraph (a). 
  5.1      [EFFECTIVE DATE.] This section is effective for districts 
  5.2   for which the request for certification was received by the 
  5.3   county after June 30, 2002. 
  5.4      Sec. 4.  Minnesota Statutes 2002, section 469.174, 
  5.5   subdivision 25, is amended to read: 
  5.6      Subd. 25.  [INCREMENT.] "Increment," "tax increment," "tax 
  5.7   increment revenues," "revenues derived from tax increment," and 
  5.8   other similar terms for a district include: 
  5.9      (1) taxes paid by the captured net tax capacity, but 
  5.10  excluding any excess taxes, as computed under section 469.177; 
  5.11     (2) the proceeds from the sale or lease of property, 
  5.12  tangible or intangible, purchased by the authority with tax 
  5.13  increments; 
  5.14     (3) repayments of principal and interest received on loans 
  5.15  or other advances made by the authority with tax increments; and 
  5.16     (4) interest or other investment earnings on or from tax 
  5.17  increments. 
  5.18     [EFFECTIVE DATE.] This section is effective for districts 
  5.19  for which the request for certification was made after June 30, 
  5.20  1982, and payments of principal and interest received on loans 
  5.21  or other advances that were made after June 30, 1997. 
  5.22     Sec. 5.  Minnesota Statutes 2002, section 469.174, is 
  5.23  amended by adding a subdivision to read: 
  5.24     Subd. 29.  [QUALIFIED HOUSING DISTRICT.] "Qualified housing 
  5.25  district" means: 
  5.26     (1) a housing district for a residential rental project or 
  5.27  projects in which the only properties receiving assistance from 
  5.28  revenues derived from tax increments from the district meet the 
  5.29  rent restriction requirements and the low-income occupancy test 
  5.30  for a qualified low-income housing project under section 42(g) 
  5.31  of the Internal Revenue Code of 1986, as amended through 
  5.32  December 31, 2002, regardless of whether the project actually 
  5.33  receives a low-income housing credit; or 
  5.34     (2) a housing district for a single-family homeownership 
  5.35  project or projects, if 95 percent or more of the homes 
  5.36  receiving assistance from tax increments from the district are 
  6.1   purchased by qualified purchasers.  A qualified purchaser means 
  6.2   the first purchaser of a home after the tax increment assistance 
  6.3   is provided whose income is at or below 70 percent of the median 
  6.4   gross income for a family of the same size as the purchaser.  
  6.5   Median gross income is the greater of (i) area median gross 
  6.6   income, or (ii) the statewide median gross income, as determined 
  6.7   by the secretary of Housing and Urban Development. 
  6.8      [EFFECTIVE DATE.] This section applies to all districts for 
  6.9   which the request for certification was made on or after January 
  6.10  1, 2002, and to all districts to which the definition of 
  6.11  qualified housing districts under Minnesota Statutes 2000, 
  6.12  section 273.1399, applied. 
  6.13     Sec. 6.  Minnesota Statutes 2002, section 469.175, 
  6.14  subdivision 1, is amended to read: 
  6.15     Subdivision 1.  [TAX INCREMENT FINANCING PLAN.] A tax 
  6.16  increment financing plan shall contain:  
  6.17     (1) a statement of objectives of an authority for the 
  6.18  improvement of a project; 
  6.19     (2) a statement as to the development program for the 
  6.20  project, including the property within the project, if any, that 
  6.21  the authority intends to acquire; 
  6.22     (3) a list of any development activities that the plan 
  6.23  proposes to take place within the project, for which contracts 
  6.24  have been entered into at the time of the preparation of the 
  6.25  plan, including the names of the parties to the contract, the 
  6.26  activity governed by the contract, the cost stated in the 
  6.27  contract, and the expected date of completion of that activity; 
  6.28     (4) identification or description of the type of any other 
  6.29  specific development reasonably expected to take place within 
  6.30  the project, and the date when the development is likely to 
  6.31  occur; 
  6.32     (5) estimates of the following:  
  6.33     (i) cost of the project, including administration 
  6.34  administrative expenses, except that if part of the cost of the 
  6.35  project is paid or financed with increment from the tax 
  6.36  increment financing district, the tax increment financing plan 
  7.1   for the district must contain an estimate of the amount of the 
  7.2   cost of the project, including administrative expenses, that 
  7.3   will be paid or financed with tax increments from the district; 
  7.4      (ii) amount of bonded indebtedness to be incurred; 
  7.5      (iii) sources of revenue to finance or otherwise pay public 
  7.6   costs; 
  7.7      (iv) the most recent net tax capacity of taxable real 
  7.8   property within the tax increment financing district and within 
  7.9   any subdistrict; 
  7.10     (v) the estimated captured net tax capacity of the tax 
  7.11  increment financing district at completion; and 
  7.12     (vi) the duration of the tax increment financing district's 
  7.13  and any subdistrict's existence; 
  7.14     (6) statements of the authority's alternate estimates of 
  7.15  the impact of tax increment financing on the net tax capacities 
  7.16  of all taxing jurisdictions in which the tax increment financing 
  7.17  district is located in whole or in part.  For purposes of one 
  7.18  statement, the authority shall assume that the estimated 
  7.19  captured net tax capacity would be available to the taxing 
  7.20  jurisdictions without creation of the district, and for purposes 
  7.21  of the second statement, the authority shall assume that none of 
  7.22  the estimated captured net tax capacity would be available to 
  7.23  the taxing jurisdictions without creation of the district or 
  7.24  subdistrict; 
  7.25     (7) identification and description of studies and analyses 
  7.26  used to make the determination set forth in subdivision 3, 
  7.27  clause (2); and 
  7.28     (8) identification of all parcels to be included in the 
  7.29  district or any subdistrict. 
  7.30     [EFFECTIVE DATE.] This section applies to districts for 
  7.31  which the request for certification was made after July 31, 
  7.32  1979, and is effective for tax increment financing plans and 
  7.33  modifications approved after June 30, 2003. 
  7.34     Sec. 7.  Minnesota Statutes 2002, section 469.175, 
  7.35  subdivision 3, is amended to read: 
  7.36     Subd. 3.  [MUNICIPALITY APPROVAL.] (a) A county auditor 
  8.1   shall not certify the original net tax capacity of a tax 
  8.2   increment financing district until the tax increment financing 
  8.3   plan proposed for that district has been approved by the 
  8.4   municipality in which the district is located.  If an authority 
  8.5   that proposes to establish a tax increment financing district 
  8.6   and the municipality are not the same, the authority shall apply 
  8.7   to the municipality in which the district is proposed to be 
  8.8   located and shall obtain the approval of its tax increment 
  8.9   financing plan by the municipality before the authority may use 
  8.10  tax increment financing.  The municipality shall approve the tax 
  8.11  increment financing plan only after a public hearing thereon 
  8.12  after published notice in a newspaper of general circulation in 
  8.13  the municipality at least once not less than ten days nor more 
  8.14  than 30 days prior to the date of the hearing.  The published 
  8.15  notice must include a map of the area of the district from which 
  8.16  increments may be collected and, if the project area includes 
  8.17  additional area, a map of the project area in which the 
  8.18  increments may be expended.  The hearing may be held before or 
  8.19  after the approval or creation of the project or it may be held 
  8.20  in conjunction with a hearing to approve the project.  
  8.21     (b) Before or at the time of approval of the tax increment 
  8.22  financing plan, the municipality shall make the following 
  8.23  findings, and shall set forth in writing the reasons and 
  8.24  supporting facts for each determination: 
  8.25     (1) that the proposed tax increment financing district is a 
  8.26  redevelopment district, a renewal or renovation district, a 
  8.27  housing district, a soils condition district, or an economic 
  8.28  development district; if the proposed district is a 
  8.29  redevelopment district or a renewal or renovation district, the 
  8.30  reasons and supporting facts for the determination that the 
  8.31  district meets the criteria of section 469.174, subdivision 10, 
  8.32  paragraph (a), clauses (1) and (2), or subdivision 10a, must be 
  8.33  documented in writing and retained and made available to the 
  8.34  public by the authority until the district has been terminated; 
  8.35     (2) that the proposed development or redevelopment, in the 
  8.36  opinion of the municipality,: 
  9.1      (i) the proposed development or redevelopment would not 
  9.2   reasonably be expected to occur solely through private 
  9.3   investment within the reasonably foreseeable future; and that 
  9.4      (ii) the increased market value of the site that could 
  9.5   reasonably be expected to occur without the use of tax increment 
  9.6   financing would be less than the increase in the market value 
  9.7   estimated to result from the proposed development after 
  9.8   subtracting the present value of the projected tax increments 
  9.9   for the maximum duration of the district permitted by the plan.  
  9.10  In computing present values for purposes of this subdivision, 
  9.11  the municipality must use a discount rate that does not exceed 
  9.12  the greater of the rate specified under section 270.75 or 549.09 
  9.13  for the last business day of the calendar month ending before 
  9.14  publication of the notice under this subdivision.  The 
  9.15  requirements of this clause item do not apply if the district is 
  9.16  a qualified housing district, as defined in section 273.1399, 
  9.17  subdivision 1; 
  9.18     (3) that the tax increment financing plan conforms to the 
  9.19  general plan for the development or redevelopment of the 
  9.20  municipality as a whole; 
  9.21     (4) that the tax increment financing plan will afford 
  9.22  maximum opportunity, consistent with the sound needs of the 
  9.23  municipality as a whole, for the development or redevelopment of 
  9.24  the project by private enterprise; 
  9.25     (5) that the municipality elects the method of tax 
  9.26  increment computation set forth in section 469.177, subdivision 
  9.27  3, clause (b), if applicable. 
  9.28     (c) When the municipality and the authority are not the 
  9.29  same, the municipality shall approve or disapprove the tax 
  9.30  increment financing plan within 60 days of submission by the 
  9.31  authority.  When the municipality and the authority are not the 
  9.32  same, the municipality may not amend or modify a tax increment 
  9.33  financing plan except as proposed by the authority pursuant to 
  9.34  subdivision 4.  Once approved, the determination of the 
  9.35  authority to undertake the project through the use of tax 
  9.36  increment financing and the resolution of the governing body 
 10.1   shall be conclusive of the findings therein and of the public 
 10.2   need for the financing. 
 10.3      (d) For a district that is subject to the requirements of 
 10.4   paragraph (b), clause (2), item (ii), the municipality's 
 10.5   statement of reasons and supporting facts must include all of 
 10.6   the following: 
 10.7      (1) an estimate of the amount by which the market value of 
 10.8   the site will increase without the use of tax increment 
 10.9   financing; 
 10.10     (2) an estimate of the increase in the market value that 
 10.11  will result from the development or redevelopment to be assisted 
 10.12  with tax increment financing; and 
 10.13     (3) the present value of the projected tax increments for 
 10.14  the maximum duration of the district permitted by the tax 
 10.15  increment financing plan. 
 10.16     (e) For purposes of this subdivision, "site" means the 
 10.17  parcels on which the development or redevelopment to be assisted 
 10.18  with tax increment financing will be located. 
 10.19     [EFFECTIVE DATE.] This section is effective for tax 
 10.20  increment financing plans approved after June 30, 2003, except 
 10.21  the provisions of paragraph (e) apply to requests for 
 10.22  certification of tax increment districts made after June 30, 
 10.23  1995. 
 10.24     Sec. 8.  Minnesota Statutes 2002, section 469.175, 
 10.25  subdivision 4, is amended to read: 
 10.26     Subd. 4.  [MODIFICATION OF PLAN.] (a) A tax increment 
 10.27  financing plan may be modified by an authority, provided that. 
 10.28     (b) The authority may make the following modifications only 
 10.29  upon the notice and after the discussion, public hearing, and 
 10.30  findings required for approval of the original plan: 
 10.31     (1) any reduction or enlargement of geographic area of the 
 10.32  project or tax increment financing district, that does not meet 
 10.33  the requirements of paragraph (e); 
 10.34     (2) increase in amount of bonded indebtedness to be 
 10.35  incurred, including; 
 10.36     (3) a determination to capitalize interest on the debt if 
 11.1   that determination was not a part of the original plan, or to 
 11.2   increase or decrease the amount of interest on the debt to be 
 11.3   capitalized,; 
 11.4      (4) increase in the portion of the captured net tax 
 11.5   capacity to be retained by the authority,; 
 11.6      (5) increase in total estimated tax increment 
 11.7   expenditures the estimate of the cost of the project, including 
 11.8   administrative expenses, that will be paid or financed with tax 
 11.9   increment from the district; or 
 11.10     (6) designation of additional property to be acquired by 
 11.11  the authority shall be approved upon the notice and after the 
 11.12  discussion, public hearing, and findings required for approval 
 11.13  of the original plan; provided that. 
 11.14     (c) If an authority changes the type of district from 
 11.15  housing, redevelopment, or economic development to another type 
 11.16  of district, this change shall is not be considered a 
 11.17  modification but shall require requires the authority to follow 
 11.18  the procedure set forth in sections 469.174 to 469.179 for 
 11.19  adoption of a new plan, including certification of the net tax 
 11.20  capacity of the district by the county auditor.  
 11.21     (d) If a redevelopment district or a renewal and renovation 
 11.22  district is enlarged, the reasons and supporting facts for the 
 11.23  determination that the addition to the district meets the 
 11.24  criteria of section 469.174, subdivision 10, paragraph (a), 
 11.25  clauses (1) and (2), or subdivision 10a, must be documented.  
 11.26     (e) The requirements of this paragraph (b) do not apply if 
 11.27  (1) the only modification is elimination of parcels from the 
 11.28  project or district and (2)(A) the current net tax capacity of 
 11.29  the parcels eliminated from the district equals or exceeds the 
 11.30  net tax capacity of those parcels in the district's original net 
 11.31  tax capacity or (B) the authority agrees that, notwithstanding 
 11.32  section 469.177, subdivision 1, the original net tax capacity 
 11.33  will be reduced by no more than the current net tax capacity of 
 11.34  the parcels eliminated from the district.  The authority must 
 11.35  notify the county auditor of any modification that reduces or 
 11.36  enlarges the geographic area of a district or a project area.  
 12.1      (b) (f) The geographic area of a tax increment financing 
 12.2   district may be reduced, but shall not be enlarged after five 
 12.3   years following the date of certification of the original net 
 12.4   tax capacity by the county auditor or after August 1, 1984, for 
 12.5   tax increment financing districts authorized prior to August 1, 
 12.6   1979. 
 12.7      [EFFECTIVE DATE.] This section applies to districts for 
 12.8   which the request for certification was made after June 30, 
 12.9   2003.  This section also is effective for tax increment 
 12.10  financing plans or modifications approved before July 1, 2003, 
 12.11  if the authority adopts before January 1, 2004, a modification 
 12.12  of the plan that states the amount of the cost of the project, 
 12.13  including administrative expenses, that will be paid or financed 
 12.14  with tax increments from the district.  Section 469.175, 
 12.15  subdivision 4, paragraph (b), does not apply to a modification 
 12.16  adopted under this section if the modification is exclusively 
 12.17  for the purpose of stating the amount of the cost of the 
 12.18  project, including administrative expenses, that will be paid or 
 12.19  financed with tax increment from the district.  For districts 
 12.20  for which the request for certification was made after July 31, 
 12.21  1979, and for which this section is not effective, the total 
 12.22  estimated tax increment expenditures are determined by 
 12.23  considering all of the information in the tax increment 
 12.24  financing plan and exhibits to the plan about estimated sources 
 12.25  and uses of funds. 
 12.26     For districts for which certification was requested after 
 12.27  June 30, 1982, and before July 1, 2003, and for which the plan 
 12.28  has not been amended after July 1, 2003, the limit on 
 12.29  administrative expenses equals the greater of (1) nine percent 
 12.30  of the increments for the district or (2) the amount determined 
 12.31  under section 469.176, subdivision 3, and the tax increment 
 12.32  financing plan. 
 12.33     Sec. 9.  Minnesota Statutes 2002, section 469.175, 
 12.34  subdivision 6, is amended to read: 
 12.35     Subd. 6.  [ANNUAL FINANCIAL REPORTING.] (a) The state 
 12.36  auditor shall develop a uniform system of accounting and 
 13.1   financial reporting for tax increment financing districts.  The 
 13.2   system of accounting and financial reporting shall, as nearly as 
 13.3   possible: 
 13.4      (1) provide for full disclosure of the sources and uses of 
 13.5   public funds in the district; 
 13.6      (2) permit comparison and reconciliation with the affected 
 13.7   local government's accounts and financial reports; 
 13.8      (3) permit auditing of the funds expended on behalf of a 
 13.9   district, including a single district that is part of a 
 13.10  multidistrict project or that is funded in part or whole through 
 13.11  the use of a development account funded with tax increments from 
 13.12  other districts or with other public money; 
 13.13     (4) be consistent with generally accepted accounting 
 13.14  principles. 
 13.15     (b) The authority must annually submit to the state auditor 
 13.16  a financial report in compliance with paragraph (a).  Copies of 
 13.17  the report must also be provided to the county auditor and to 
 13.18  the governing body of the municipality, if the authority is not 
 13.19  the municipality.  To the extent necessary to permit compliance 
 13.20  with the requirement of financial reporting, the county and any 
 13.21  other appropriate local government unit or private entity must 
 13.22  provide the necessary records or information to the authority or 
 13.23  the state auditor as provided by the system of accounting and 
 13.24  financial reporting developed pursuant to paragraph (a).  The 
 13.25  authority must submit the annual report for a year on or before 
 13.26  August 1 of the next year. 
 13.27     (c) The annual financial report must also include the 
 13.28  following items: 
 13.29     (1) the original net tax capacity of the district and any 
 13.30  subdistrict under section 469.177, subdivision 1; 
 13.31     (2) the net tax capacity for the reporting period of the 
 13.32  district and any subdistrict; 
 13.33     (3) the captured net tax capacity of the district; 
 13.34     (4) any fiscal disparity deduction from the captured net 
 13.35  tax capacity under section 469.177, subdivision 3; 
 13.36     (5) the captured net tax capacity retained for tax 
 14.1   increment financing under section 469.177, subdivision 2, 
 14.2   paragraph (a), clause (1); 
 14.3      (6) any captured net tax capacity distributed among 
 14.4   affected taxing districts under section 469.177, subdivision 2, 
 14.5   paragraph (a), clause (2); 
 14.6      (7) the type of district; 
 14.7      (8) the date the municipality approved the tax increment 
 14.8   financing plan and the date of approval of any modification of 
 14.9   the tax increment financing plan, the approval of which requires 
 14.10  notice, discussion, a public hearing, and findings under 
 14.11  subdivision 4, paragraph (a); 
 14.12     (9) the date the authority first requested certification of 
 14.13  the original net tax capacity of the district and the date of 
 14.14  the request for certification regarding any parcel added to the 
 14.15  district; 
 14.16     (10) the date the county auditor first certified the 
 14.17  original net tax capacity of the district and the date of 
 14.18  certification of the original net tax capacity of any parcel 
 14.19  added to the district; 
 14.20     (11) the month and year in which the authority has received 
 14.21  or anticipates it will receive the first increment from the 
 14.22  district; 
 14.23     (12) the date the district must be decertified; 
 14.24     (13) for the reporting period and prior years of the 
 14.25  district, the actual amount received from, at least, the 
 14.26  following categories: 
 14.27     (i) tax increments paid by the captured net tax capacity 
 14.28  retained for tax increment financing under section 469.177, 
 14.29  subdivision 2, paragraph (a), clause (1), but excluding any 
 14.30  excess taxes; 
 14.31     (ii) tax increments that are interest or other investment 
 14.32  earnings on or from tax increments; 
 14.33     (iii) tax increments that are proceeds from the sale or 
 14.34  lease of property, tangible or intangible, purchased by the 
 14.35  authority with tax increments; 
 14.36     (iv) tax increments that are repayments of loans or other 
 15.1   advances made by the authority with tax increments; 
 15.2      (v) bond or loan proceeds; 
 15.3      (vi) special assessments; 
 15.4      (vii) grants; and 
 15.5      (viii) transfers from funds not exclusively associated with 
 15.6   the district; 
 15.7      (14) for the reporting period and for the prior years of 
 15.8   the district, the amount budgeted under the tax increment 
 15.9   financing plan, and the actual amount expended for, at least, 
 15.10  the following categories: 
 15.11     (i) acquisition of land and buildings through condemnation 
 15.12  or purchase; 
 15.13     (ii)  site improvements or preparation costs; 
 15.14     (iii) installation of public utilities, parking facilities, 
 15.15  streets, roads, sidewalks, or other similar public improvements; 
 15.16     (iv) administrative costs, including the allocated cost of 
 15.17  the authority; 
 15.18     (v) public park facilities, facilities for social, 
 15.19  recreational, or conference purposes, or other similar public 
 15.20  improvements; and 
 15.21     (vi) transfers to funds not exclusively associated with the 
 15.22  district; 
 15.23     (15) for properties sold to developers, the total cost of 
 15.24  the property to the authority and the price paid by the 
 15.25  developer; 
 15.26     (16) the amount of any payments and the value of any 
 15.27  in-kind benefits, such as physical improvements and the use of 
 15.28  building space, that are paid or financed with tax increments 
 15.29  and are provided to another governmental unit other than the 
 15.30  municipality during the reporting period; 
 15.31     (17) the amount of any payments for activities and 
 15.32  improvements located outside of the district that are paid for 
 15.33  or financed with tax increments; 
 15.34     (18) the amount of payments of principal and interest that 
 15.35  are made during the reporting period on any nondefeased: 
 15.36     (i) general obligation tax increment financing bonds; 
 16.1      (ii) other tax increment financing bonds; and 
 16.2      (iii) notes and pay-as-you-go contracts; 
 16.3      (19) the principal amount, at the end of the reporting 
 16.4   period, of any nondefeased: 
 16.5      (i) general obligation tax increment financing bonds; 
 16.6      (ii) other tax increment financing bonds; and 
 16.7      (iii) notes and pay-as-you-go contracts; 
 16.8      (20) the amount of principal and interest payments that are 
 16.9   due for the current calendar year on any nondefeased: 
 16.10     (i) general obligation tax increment financing bonds; 
 16.11     (ii) other tax increment financing bonds; and 
 16.12     (iii) notes and pay-as-you-go contracts; 
 16.13     (21) if the fiscal disparities contribution under chapter 
 16.14  276A or 473F for the district is computed under section 469.177, 
 16.15  subdivision 3, paragraph (a), the amount of increased property 
 16.16  taxes imposed on other properties in the municipality that 
 16.17  approved the tax increment financing plan as a result of the 
 16.18  fiscal disparities contribution; 
 16.19     (22) whether the tax increment financing plan or other 
 16.20  governing document permits increment revenues to be expended: 
 16.21     (i) to pay bonds, the proceeds of which were or may be 
 16.22  expended on activities outside of the district; 
 16.23     (ii) for deposit into a common bond fund from which money 
 16.24  may be expended on activities located outside of the district; 
 16.25  or 
 16.26     (iii) to otherwise finance activities located outside of 
 16.27  the tax increment financing district; and 
 16.28     (23) the estimate, if any, contained in the tax increment 
 16.29  financing plan of the amount of the cost of the project, 
 16.30  including administrative expenses, that will be paid or financed 
 16.31  with tax increment; and 
 16.32     (24) any additional information the state auditor may 
 16.33  require. 
 16.34     (d) The commissioner of revenue shall prescribe the method 
 16.35  of calculating the increased property taxes under paragraph (c), 
 16.36  clause (21), and the form of the statement disclosing this 
 17.1   information on the annual statement under subdivision 5. 
 17.2      (e) The reporting requirements imposed by this subdivision 
 17.3   apply to districts certified before, on, and after August 1, 
 17.4   1979. 
 17.5      [EFFECTIVE DATE.] This section is effective beginning with 
 17.6   the reports due in calendar year 2004. 
 17.7      Sec. 10.  Minnesota Statutes 2002, section 469.176, 
 17.8   subdivision 1c, is amended to read: 
 17.9      Subd. 1c.  [DURATION LIMITS; PRE-1979 DISTRICTS.] (a) For 
 17.10  tax increment financing districts created prior to August 1, 
 17.11  1979, no tax increment shall be paid to the authority after 
 17.12  April 1, 2001, or the term of a nondefeased bond or obligation 
 17.13  outstanding on April 1, 1990, secured by increments from the 
 17.14  district or project area, whichever time is greater, provided 
 17.15  that in no case will a tax increment be paid to an authority 
 17.16  after August 1, 2009, from such a district.  If a district's 
 17.17  termination date is extended beyond April 1, 2001, because bonds 
 17.18  were outstanding on April 1, 1990, with maturities extending 
 17.19  beyond April 1, 2001, the following restrictions apply.  No 
 17.20  increment collected from the district may be expended after 
 17.21  April 1, 2001, except to pay or defease (i): 
 17.22     (1) bonds issued before April 1, 1990, or (ii); 
 17.23     (2) bonds issued to refund the principal of the outstanding 
 17.24  bonds and pay associated issuance costs, provided the average 
 17.25  maturity of the refunding bonds does not exceed the bonds 
 17.26  refunded refunding reduces the present value of the debt service 
 17.27  costs; 
 17.28     (3) administrative expenses of the district required to be 
 17.29  paid under section 469.176, subdivision 4h, paragraph (a); and 
 17.30     (4) transfers of increment permitted under section 
 17.31  469.1763, subdivision 6. 
 17.32     (b) Each year, any increments from a district subject to 
 17.33  this subdivision must be first applied to pay or defease 
 17.34  obligations listed under paragraph (a), clauses (1) and (2), and 
 17.35  administrative expenses under paragraph (a), clause (3).  Any 
 17.36  remaining increments may be used for transfers of increments 
 18.1   permitted under section 469.763, subdivision 6. 
 18.2      (c) When sufficient money has been received to pay in full 
 18.3   or defease bonds under paragraph (a), clauses (1) and (2), the 
 18.4   tax increment project or district must be decertified. 
 18.5      [EFFECTIVE DATE.] This section is effective the day 
 18.6   following final enactment and applies to tax increment financing 
 18.7   districts for which the request for certification was made 
 18.8   before August 1, 1979. 
 18.9      Sec. 11.  Minnesota Statutes 2002, section 469.176, 
 18.10  subdivision 2, is amended to read: 
 18.11     Subd. 2.  [EXCESS TAX INCREMENTS.] In any year in which the 
 18.12  tax increment exceeds the amount necessary to pay the costs 
 18.13  authorized by the tax increment financing plan, including the 
 18.14  amount necessary to cancel any tax levy as provided in section 
 18.15  475.61, subdivision 3, (a) The authority shall annually 
 18.16  determine the amount of excess increments for a district, if 
 18.17  any.  This determination must be based on the tax increment 
 18.18  financing plan in effect on December 31 of the year and the 
 18.19  increments and other revenues received as of December 31 of the 
 18.20  year. 
 18.21     (b) For purposes of this subdivision, "excess increments" 
 18.22  equals the excess of: 
 18.23     (1) total increments collected from the district since its 
 18.24  certification, reduced by any excess increments paid under 
 18.25  paragraph (c), clause (4), for a prior year, over 
 18.26     (2) the total costs authorized by the tax increment 
 18.27  financing plan to be paid with increments from the district, 
 18.28  reduced, but not below zero, by the sum of: 
 18.29     (i) the amounts of those authorized costs that have been 
 18.30  paid from sources other than tax increments from the district; 
 18.31     (ii) revenues, other than tax increments from the district, 
 18.32  that are dedicated for or otherwise required to be used to pay 
 18.33  those authorized costs and that the authority has received and 
 18.34  that are not included in item (i); and 
 18.35     (iii) the amount of principal and interest obligations due 
 18.36  on outstanding bonds after December 31 of the year and not 
 19.1   prepaid under paragraph (c) in a prior year. 
 19.2      (c) The authority shall use the excess amount to do any 
 19.3   of excess increment only to do one or more of the following:  
 19.4      (1) prepay any outstanding bonds,; 
 19.5      (2) discharge the pledge of tax increment therefor, for any 
 19.6   outstanding bonds; 
 19.7      (3) pay into an escrow account dedicated to the payment of 
 19.8   such bond,; or 
 19.9      (4) return the excess amount to the county auditor who 
 19.10  shall distribute the excess amount to the municipality city or 
 19.11  town, county, and school district in which the tax increment 
 19.12  financing district is located in direct proportion to their 
 19.13  respective local tax rates.  
 19.14     (d) The county auditor must report to the commissioner of 
 19.15  children, families, and learning the amount of any excess tax 
 19.16  increment distributed to a school district within 30 days of the 
 19.17  distribution. 
 19.18     [EFFECTIVE DATE.] This section is effective for all tax 
 19.19  increment financing districts, regardless of whether the request 
 19.20  for certification was made before, on, or after August 1, 1979, 
 19.21  and applies after August 1, 2003, except the amendment to 
 19.22  paragraph (c), clause (4), applies retroactively to August 1, 
 19.23  1979. 
 19.24     Sec. 12.  Minnesota Statutes 2002, section 469.176, 
 19.25  subdivision 3, is amended to read: 
 19.26     Subd. 3.  [LIMITATION ON ADMINISTRATIVE EXPENSES.] (a) For 
 19.27  districts for which certification was requested before August 1, 
 19.28  1979, or after June 30, 1982 and before August 1, 2001, no tax 
 19.29  increment shall be used to pay any administrative expenses for a 
 19.30  project which exceed ten percent of the total estimated tax 
 19.31  increment expenditures authorized by the tax increment financing 
 19.32  plan or the total tax increment expenditures for the project, 
 19.33  whichever is less.  
 19.34     (b) For districts for which certification was requested 
 19.35  after July 31, 1979, and before July 1, 1982, no tax increment 
 19.36  shall be used to pay administrative expenses, as defined in 
 20.1   Minnesota Statutes 1980, section 273.73, for a district which 
 20.2   exceeds five percent of the total tax increment expenditures 
 20.3   authorized by the tax increment financing plan or the 
 20.4   total estimated tax increment expenditures for the district, 
 20.5   whichever is less. 
 20.6      (c) For districts for which certification was requested 
 20.7   after July 31, 2001, no tax increment may be used to pay any 
 20.8   administrative expenses for a project which exceed ten percent 
 20.9   of total estimated tax increment expenditures authorized by the 
 20.10  tax increment financing plan or the total tax increments, as 
 20.11  defined in section 469.174, subdivision 25, clause (1), from the 
 20.12  district, whichever is less. 
 20.13     [EFFECTIVE DATE.] This section is effective for districts 
 20.14  for which the request for certification was made before, on, or 
 20.15  after August 1, 1979. 
 20.16     Sec. 13.  Minnesota Statutes 2002, section 469.176, 
 20.17  subdivision 4d, is amended to read: 
 20.18     Subd. 4d.  [HOUSING DISTRICTS.] Revenue derived from tax 
 20.19  increment from a housing district must be used solely to finance 
 20.20  the cost of housing projects as defined in section 469.174, 
 20.21  subdivision 11.  The cost of public improvements directly 
 20.22  related to the housing projects and the allocated administrative 
 20.23  expenses of the authority may be included in the cost of a 
 20.24  housing project includes expenditures on: 
 20.25     (1) public improvements directly related to a housing 
 20.26  project; 
 20.27     (2) public or private housing units, but not to exceed an 
 20.28  amount equal to the average cost of all the units in the project 
 20.29  multiplied by the number of units that are pledged to be income 
 20.30  restricted; and 
 20.31     (3) allocated administrative expenses of the authority. 
 20.32     [EFFECTIVE DATE.] The provisions of this section apply to 
 20.33  all districts, regardless of when the request for certification 
 20.34  was made, and to expenditures of increments, regardless of 
 20.35  whether they were made before or after the date of enactment. 
 20.36     Sec. 14.  Minnesota Statutes 2002, section 469.176, 
 21.1   subdivision 7, is amended to read: 
 21.2      Subd. 7.  [PARCELS NOT INCLUDABLE IN DISTRICTS.] (a) The 
 21.3   authority may request inclusion in a tax increment financing 
 21.4   district and the county auditor may certify the original tax 
 21.5   capacity of a parcel or a part of a parcel that qualified under 
 21.6   the provisions of section 273.111 or 273.112 or chapter 473H for 
 21.7   taxes payable in any of the five calendar years before the 
 21.8   filing of the request for certification only for: 
 21.9      (1) a district in which 85 percent or more of the planned 
 21.10  buildings and facilities (determined on the basis of square 
 21.11  footage) are a qualified manufacturing facility or a qualified 
 21.12  distribution facility or a combination of both; or 
 21.13     (2) a qualified housing district as defined in section 
 21.14  273.1399, subdivision 1. 
 21.15     (b)(1) A distribution facility means buildings and other 
 21.16  improvements to real property that are used to conduct 
 21.17  activities in at least each of the following categories: 
 21.18     (i) to store or warehouse tangible personal property; 
 21.19     (ii) to take orders for shipment, mailing, or delivery; 
 21.20     (iii) to prepare personal property for shipment, mailing, 
 21.21  or delivery; and 
 21.22     (iv) to ship, mail, or deliver property. 
 21.23     (2) A manufacturing facility includes space used for 
 21.24  manufacturing or producing tangible personal property, including 
 21.25  processing resulting in the change in condition of the property, 
 21.26  and space necessary for and related to the manufacturing 
 21.27  activities. 
 21.28     (3) To be a qualified facility, the owner or operator of a 
 21.29  manufacturing or distribution facility must agree to pay and pay 
 21.30  90 percent or more of the employees of the facility at a rate 
 21.31  equal to or greater than 160 percent of the federal minimum wage 
 21.32  for individuals over the age of 20. 
 21.33     [EFFECTIVE DATE.] This section applies to all districts for 
 21.34  which the request for certification was made on or after January 
 21.35  1, 2002, and to all districts to which the definition of 
 21.36  qualified housing districts under Minnesota Statutes 2000, 
 22.1   section 273.1399, applied. 
 22.2      Sec. 15.  Minnesota Statutes 2002, section 469.1763, 
 22.3   subdivision 1, is amended to read: 
 22.4      Subdivision 1.  [DEFINITIONS.] (a) For purposes of this 
 22.5   section, the following terms have the meanings given. 
 22.6      (b) "Activities" means acquisition of property, clearing of 
 22.7   land, site preparation, soils correction, removal of hazardous 
 22.8   waste or pollution, installation of utilities, construction of 
 22.9   public or private improvements, and other similar activities, 
 22.10  but only to the extent that tax increment revenues may be spent 
 22.11  for such purposes under other law.  
 22.12     (c) "Third party" means an entity other than (1) the person 
 22.13  receiving the benefit of assistance financed with tax 
 22.14  increments, or (2) the municipality or the development authority 
 22.15  or other person substantially under the control of the 
 22.16  municipality. 
 22.17     (d) "Revenues derived from tax increments paid by 
 22.18  properties in the district" means only tax increment as defined 
 22.19  in section 469.174, subdivision 25, clause (1), and does not 
 22.20  include tax increment as defined in section 469.174, subdivision 
 22.21  25, clauses (2), (3), and (4). 
 22.22     [EFFECTIVE DATE.] This section is effective for districts 
 22.23  for which the request for certification was made after April 30, 
 22.24  1990. 
 22.25     Sec. 16.  Minnesota Statutes 2002, section 469.1763, 
 22.26  subdivision 2, is amended to read: 
 22.27     Subd. 2.  [EXPENDITURES OUTSIDE DISTRICT.] (a) For each tax 
 22.28  increment financing district, an amount equal to at least 75 
 22.29  percent of the total revenue derived from tax increments paid by 
 22.30  properties in the district must be expended on activities in the 
 22.31  district or to pay bonds, to the extent that the proceeds of the 
 22.32  bonds were used to finance activities in the district or to pay, 
 22.33  or secure payment of, debt service on credit enhanced bonds.  
 22.34  For districts, other than redevelopment districts for which the 
 22.35  request for certification was made after June 30, 1995, the 
 22.36  in-district percentage for purposes of the preceding sentence is 
 23.1   80 percent.  Not more than 25 percent of the total revenue 
 23.2   derived from tax increments paid by properties in the district 
 23.3   may be expended, through a development fund or otherwise, on 
 23.4   activities outside of the district but within the defined 
 23.5   geographic area of the project except to pay, or secure payment 
 23.6   of, debt service on credit enhanced bonds.  For districts, other 
 23.7   than redevelopment districts for which the request for 
 23.8   certification was made after June 30, 1995, the pooling 
 23.9   percentage for purposes of the preceding sentence is 20 
 23.10  percent.  The revenue derived from tax increments for the 
 23.11  district that are expended on costs under section 469.176, 
 23.12  subdivision 4h, paragraph (b), may be deducted first before 
 23.13  calculating the percentages that must be expended within and 
 23.14  without the district.  
 23.15     (b) In the case of a housing district, a housing project, 
 23.16  as defined in section 469.174, subdivision 11, is an activity in 
 23.17  the district.  
 23.18     (c) All administrative expenses are for activities outside 
 23.19  of the district. 
 23.20     (d) The authority may elect, in the tax increment financing 
 23.21  plan for the district, to increase by up to ten percentage 
 23.22  points the permitted amount of expenditures for activities 
 23.23  located outside the geographic area of the district under 
 23.24  paragraph (a).  As permitted by section 469.176, subdivision 4k, 
 23.25  the expenditures, including the permitted expenditures under 
 23.26  paragraph (a), need not be made within the geographic area of 
 23.27  the project.  Expenditures that meet the requirements of this 
 23.28  paragraph are legally permitted expenditures of the district, 
 23.29  notwithstanding section 469.176, subdivisions 4b, 4c, and 4j.  
 23.30  To qualify for the increase under this paragraph, the 
 23.31  expenditures must: 
 23.32     (1) be used exclusively to assist housing that meets the 
 23.33  requirement for a qualified low-income building, as that term is 
 23.34  used in section 42 of the Internal Revenue Code; 
 23.35     (2) not exceed the qualified basis of the housing, as 
 23.36  defined under section 42(c) of the Internal Revenue Code, less 
 24.1   the amount of any credit allowed under section 42 of the 
 24.2   Internal Revenue Code; and 
 24.3      (3) be used to: 
 24.4      (i) acquire and prepare the site of the housing; 
 24.5      (ii) acquire, construct, or rehabilitate the housing; or 
 24.6      (iii) make public improvements directly related to the 
 24.7   housing. 
 24.8      [EFFECTIVE DATE.] This section is effective for districts 
 24.9   for which the request for certification was made after April 30, 
 24.10  1990. 
 24.11     Sec. 17.  Minnesota Statutes 2002, section 469.1763, 
 24.12  subdivision 3, is amended to read: 
 24.13     Subd. 3.  [FIVE-YEAR RULE.] (a) Revenues derived from tax 
 24.14  increments are considered to have been expended on an activity 
 24.15  within the district under subdivision 2 only if one of the 
 24.16  following occurs: 
 24.17     (1) before or within five years after certification of the 
 24.18  district, the revenues are actually paid to a third party with 
 24.19  respect to the activity; 
 24.20     (2) bonds, the proceeds of which must be used to finance 
 24.21  the activity, are issued and sold to a third party before or 
 24.22  within five years after certification, the revenues are spent to 
 24.23  repay the bonds, and the proceeds of the bonds either are, on 
 24.24  the date of issuance, reasonably expected to be spent before the 
 24.25  end of the later of (i) the five-year period, or (ii) a 
 24.26  reasonable temporary period within the meaning of the use of 
 24.27  that term under section 148(c)(1) of the Internal Revenue Code, 
 24.28  or are deposited in a reasonably required reserve or replacement 
 24.29  fund; 
 24.30     (3) binding contracts with a third party are entered into 
 24.31  for performance of the activity before or within five years 
 24.32  after certification of the district and the revenues are spent 
 24.33  under the contractual obligation; or 
 24.34     (4) costs with respect to the activity are paid before or 
 24.35  within five years after certification of the district and the 
 24.36  revenues are spent to reimburse a party for payment of the 
 25.1   costs, including interest on unreimbursed costs; or 
 25.2      (5) expenditures are made for housing purposes as permitted 
 25.3   by subdivision 2, paragraph (b). 
 25.4      (b) For purposes of this subdivision, bonds include 
 25.5   subsequent refunding bonds if the original refunded bonds meet 
 25.6   the requirements of paragraph (a), clause (2). 
 25.7      [EFFECTIVE DATE.] This section is effective for 
 25.8   expenditures made after June 30, 2003. 
 25.9      Sec. 18.  Minnesota Statutes 2002, section 469.1763, 
 25.10  subdivision 4, is amended to read: 
 25.11     Subd. 4.  [USE OF REVENUES FOR DECERTIFICATION.] (a) In 
 25.12  each year beginning with the sixth year following certification 
 25.13  of the district, if the applicable in-district percent of the 
 25.14  revenues derived from tax increments paid by properties in the 
 25.15  district that remain after exceeds the amount of expenditures 
 25.16  that have been made for costs permitted under subdivision 3, an 
 25.17  amount equal to the difference between the in-district percent 
 25.18  of the revenues derived from tax increments paid by properties 
 25.19  in the district and the amount of expenditures that have been 
 25.20  made for costs permitted under subdivision 3 must be used and 
 25.21  only used to pay or defease the following or be set aside to pay 
 25.22  the following: 
 25.23     (1) outstanding bonds, as defined in subdivision 3, 
 25.24  paragraphs (a), clause (2), and (b); 
 25.25     (2) contracts, as defined in subdivision 3, paragraph (a), 
 25.26  clauses (3) and (4); or 
 25.27     (3) credit enhanced bonds to which the revenues derived 
 25.28  from tax increments are pledged, but only to the extent that 
 25.29  revenues of the district for which the credit enhanced bonds 
 25.30  were issued are insufficient to pay the bonds and to the extent 
 25.31  that the increments from the applicable pooling percent share 
 25.32  for the district are insufficient. 
 25.33     (b) When the outstanding bonds have been defeased and when 
 25.34  sufficient money has been set aside to pay contractual 
 25.35  obligations as defined in subdivision 3, paragraph (a), clauses 
 25.36  (3) and (4), the district must be decertified and the pledge of 
 26.1   tax increment discharged. 
 26.2      [EFFECTIVE DATE.] This section is effective for districts 
 26.3   for which the request for certification was made after April 30, 
 26.4   1990. 
 26.5      Sec. 19.  Minnesota Statutes 2002, section 469.1763, 
 26.6   subdivision 6, is amended to read: 
 26.7      Subd. 6.  [POOLING PERMITTED FOR DEFICITS.] (a) This 
 26.8   subdivision applies only to districts for which the request for 
 26.9   certification was made before August 1, 2001, and without regard 
 26.10  to whether the request for certification was made prior to 
 26.11  August 1, 1979. 
 26.12     (b) The municipality for the district may transfer 
 26.13  available increments from another tax increment financing 
 26.14  district located in the municipality, if the transfer is 
 26.15  necessary to eliminate a deficit in the district to which the 
 26.16  increments are transferred.  A deficit in the district for 
 26.17  purposes of this subdivision means the lesser of the following 
 26.18  two amounts: 
 26.19     (1)(i) the amount due during the calendar year to pay 
 26.20  preexisting obligations of the district; minus 
 26.21     (ii) the total increments collected or to be collected from 
 26.22  properties located within the district that are available for 
 26.23  the calendar year including amounts collected in prior years 
 26.24  that are currently available; plus 
 26.25     (iii) total increments from properties located in other 
 26.26  districts in the municipality including amounts collected in 
 26.27  prior years that are available to be used to meet the district's 
 26.28  obligations under this section, excluding this subdivision, or 
 26.29  other provisions of law (but excluding a special tax under 
 26.30  section 469.1791 and the grant program under Laws 1997, chapter 
 26.31  231, article 1, section 19, or Laws 2001, First Special Session 
 26.32  chapter 5); or 
 26.33     (2) the reduction in increments collected from properties 
 26.34  located in the district for the calendar year as a result of the 
 26.35  changes in class rates in Laws 1997, chapter 231, article 1; 
 26.36  Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, 
 27.1   and Laws 2001, First Special Session chapter 5, or the 
 27.2   elimination of the general education tax levy under Laws 2001, 
 27.3   First Special Session chapter 5. 
 27.4      (c) A preexisting obligation means: 
 27.5      (1) bonds issued and sold before August 1, 2001, or bonds 
 27.6   issued pursuant to a binding contract requiring the issuance of 
 27.7   bonds entered into before July 1, 2001, and bonds issued to 
 27.8   refund such bonds or to reimburse expenditures made in 
 27.9   conjunction with a signed contractual agreement entered into 
 27.10  before August 1, 2001, to the extent that the bonds are secured 
 27.11  by a pledge of increments from the tax increment financing 
 27.12  district; and 
 27.13     (2) binding contracts entered into before August 1, 2001, 
 27.14  to the extent that the contracts require payments secured by a 
 27.15  pledge of increments from the tax increment financing district. 
 27.16     (d) The municipality may require a development authority, 
 27.17  other than a seaway port authority, to transfer available 
 27.18  increments including amounts collected in prior years that are 
 27.19  currently available for any of its tax increment financing 
 27.20  districts in the municipality to make up an insufficiency in 
 27.21  another district in the municipality, regardless of whether the 
 27.22  district was established by the development authority or another 
 27.23  development authority.  This authority applies notwithstanding 
 27.24  any law to the contrary, but applies only to a development 
 27.25  authority that: 
 27.26     (1) was established by the municipality; or 
 27.27     (2) the governing body of which is appointed, in whole or 
 27.28  part, by the municipality or an officer of the municipality or 
 27.29  which consists, in whole or part, of members of the governing 
 27.30  body of the municipality.  The municipality may use this 
 27.31  authority only after it has first used all available increments 
 27.32  of the receiving development authority to eliminate the 
 27.33  insufficiency and exercised any permitted action under section 
 27.34  469.1792, subdivision 3, for preexisting districts of the 
 27.35  receiving development authority to eliminate the insufficiency. 
 27.36     (e) The authority under this subdivision to spend tax 
 28.1   increments outside of the area of the district from which the 
 28.2   tax increments were collected: 
 28.3      (1) may only be exercised after obtaining approval of the 
 28.4   use of the increments, in writing, by the commissioner of 
 28.5   revenue; 
 28.6      (2) is an exception to the restrictions under section 
 28.7   469.176, subdivision 4i, and the other provisions of this 
 28.8   section, and the percentage restrictions under subdivision 2 
 28.9   must be calculated after deducting increments spent under this 
 28.10  subdivision from the total increments for the district; and 
 28.11     (3) (2) applies notwithstanding the provisions of the Tax 
 28.12  Increment Financing Act in effect for districts for which the 
 28.13  request for certification was made before June 30, 1982, or any 
 28.14  other law to the contrary. 
 28.15     (f) If a preexisting obligation requires the development 
 28.16  authority to pay an amount that is limited to the increment from 
 28.17  the district or a specific development within the district and 
 28.18  if the obligation requires paying a higher amount to the extent 
 28.19  that increments are available, the municipality may determine 
 28.20  that the amount due under the preexisting obligation equals the 
 28.21  higher amount and may authorize the transfer of increments under 
 28.22  this subdivision to pay up to the higher amount.  The existence 
 28.23  of a guarantee of obligations by the individual or entity that 
 28.24  would receive the payment under this paragraph is disregarded in 
 28.25  the determination of eligibility to pool under this 
 28.26  subdivision.  The authority to transfer increments under this 
 28.27  paragraph may only be used to the extent that the payment of all 
 28.28  other preexisting obligations in the municipality due during the 
 28.29  calendar year have been satisfied. 
 28.30     [EFFECTIVE DATE.] This section is effective retroactively 
 28.31  to January 2, 2002, and thereafter. 
 28.32     Sec. 20.  Minnesota Statutes 2002, section 469.177, 
 28.33  subdivision 1, is amended to read: 
 28.34     Subdivision 1.  [ORIGINAL NET TAX CAPACITY.] (a) Upon or 
 28.35  after adoption of a tax increment financing plan, the auditor of 
 28.36  any county in which the district is situated shall, upon request 
 29.1   of the authority, certify the original net tax capacity of the 
 29.2   tax increment financing district and that portion of the 
 29.3   district overlying any subdistrict as described in the tax 
 29.4   increment financing plan and shall certify in each year 
 29.5   thereafter the amount by which the original net tax capacity has 
 29.6   increased or decreased as a result of a change in tax exempt 
 29.7   status of property within the district and any subdistrict, 
 29.8   reduction or enlargement of the district or changes pursuant to 
 29.9   subdivision 4.  
 29.10     (b) For districts approved under section 469.175, 
 29.11  subdivision 3, or parcels added to existing districts after May 
 29.12  1, 1988, If the classification under section 273.13 of property 
 29.13  located in a district changes to a classification that has a 
 29.14  different assessment ratio, the original net tax capacity of 
 29.15  that property must be redetermined at the time when its use is 
 29.16  changed as if the property had originally been classified in the 
 29.17  same class in which it is classified after its use is changed. 
 29.18     (c) The amount to be added to the original net tax capacity 
 29.19  of the district as a result of previously tax exempt real 
 29.20  property within the district becoming taxable equals the net tax 
 29.21  capacity of the real property as most recently assessed pursuant 
 29.22  to section 273.18 or, if that assessment was made more than one 
 29.23  year prior to the date of title transfer rendering the property 
 29.24  taxable, the net tax capacity assessed by the assessor at the 
 29.25  time of the transfer.  If improvements are made to tax exempt 
 29.26  property after certification of the district and before the 
 29.27  parcel becomes taxable, the assessor shall, at the request of 
 29.28  the authority, separately assess the estimated market value of 
 29.29  the improvements.  If the property becomes taxable, the county 
 29.30  auditor shall add to original net tax capacity, the net tax 
 29.31  capacity of the parcel, excluding the separately assessed 
 29.32  improvements.  If substantial taxable improvements were made to 
 29.33  a parcel after certification of the district and if the property 
 29.34  later becomes tax exempt, in whole or part, as a result of the 
 29.35  authority acquiring the property through foreclosure or exercise 
 29.36  of remedies under a lease or other revenue agreement or as a 
 30.1   result of tax forfeiture, the amount to be added to the original 
 30.2   net tax capacity of the district as a result of the property 
 30.3   again becoming taxable is the amount of the parcel's value that 
 30.4   was included in original net tax capacity when the parcel was 
 30.5   first certified.  The amount to be added to the original net tax 
 30.6   capacity of the district as a result of enlargements equals the 
 30.7   net tax capacity of the added real property as most recently 
 30.8   certified by the commissioner of revenue as of the date of 
 30.9   modification of the tax increment financing plan pursuant to 
 30.10  section 469.175, subdivision 4. 
 30.11     (d) For districts approved under section 469.175, 
 30.12  subdivision 3, or parcels added to existing districts after May 
 30.13  1, 1988, If the net tax capacity of a property increases because 
 30.14  the property no longer qualifies under the Minnesota 
 30.15  Agricultural Property Tax Law, section 273.111; the Minnesota 
 30.16  Open Space Property Tax Law, section 273.112; or the 
 30.17  Metropolitan Agricultural Preserves Act, chapter 473H, or 
 30.18  because platted, unimproved property is improved or three years 
 30.19  pass after approval of the plat under section 273.11, 
 30.20  subdivision 1, the increase in net tax capacity must be added to 
 30.21  the original net tax capacity.  
 30.22     (e) The amount to be subtracted from the original net tax 
 30.23  capacity of the district as a result of previously taxable real 
 30.24  property within the district becoming tax exempt, or a reduction 
 30.25  in the geographic area of the district, shall be the amount of 
 30.26  original net tax capacity initially attributed to the property 
 30.27  becoming tax exempt or being removed from the district.  If the 
 30.28  net tax capacity of property located within the tax increment 
 30.29  financing district is reduced by reason of a court-ordered 
 30.30  abatement, stipulation agreement, voluntary abatement made by 
 30.31  the assessor or auditor or by order of the commissioner of 
 30.32  revenue, the reduction shall be applied to the original net tax 
 30.33  capacity of the district when the property upon which the 
 30.34  abatement is made has not been improved since the date of 
 30.35  certification of the district and to the captured net tax 
 30.36  capacity of the district in each year thereafter when the 
 31.1   abatement relates to improvements made after the date of 
 31.2   certification.  The county auditor may specify reasonable form 
 31.3   and content of the request for certification of the authority 
 31.4   and any modification thereof pursuant to section 469.175, 
 31.5   subdivision 4.  
 31.6      (f) If a parcel of property contained a substandard 
 31.7   building that was demolished or removed and if the authority 
 31.8   elects to treat the parcel as occupied by a substandard building 
 31.9   under section 469.174, subdivision 10, paragraph (b), the 
 31.10  auditor shall certify the original net tax capacity of the 
 31.11  parcel using the greater of (1) the current net tax capacity of 
 31.12  the parcel, or (2) the estimated market value of the parcel for 
 31.13  the year in which the building was demolished or removed, but 
 31.14  applying the class rates for the current year. 
 31.15     [EFFECTIVE DATE.] The provisions of this section apply to 
 31.16  all districts, regardless of when the request for certification 
 31.17  was made, beginning for taxes payable in 2004.  The provisions 
 31.18  only apply to classification changes enacted after January 1, 
 31.19  2001, and for changes in use occurring after December 31, 2002. 
 31.20     Sec. 21.  Minnesota Statutes 2002, section 469.177, 
 31.21  subdivision 12, is amended to read: 
 31.22     Subd. 12.  [DECERTIFICATION OF TAX INCREMENT FINANCING 
 31.23  DISTRICT.] The county auditor shall decertify a tax increment 
 31.24  financing district when the earliest of the following times is 
 31.25  reached: 
 31.26     (1) the applicable maximum duration limit under section 
 31.27  469.176, subdivisions 1a to 1g; 
 31.28     (2) the maximum duration limit, if any, provided by the 
 31.29  municipality pursuant to section 469.176, subdivision 1; 
 31.30     (3) the time of decertification specified in section 
 31.31  469.1761, subdivision 4, if the commissioner of revenue issues 
 31.32  an order of noncompliance and the maximum duration limit for 
 31.33  economic development districts has been exceeded; 
 31.34     (4) upon completion of the required actions to allow 
 31.35  decertification under section 469.1763, subdivision 4; or 
 31.36     (5) upon the later of receipt by the county auditor of a 
 32.1   written request for decertification from the authority that 
 32.2   requested certification of the original net tax capacity of the 
 32.3   district or its successor or the decertification date specified 
 32.4   in the request. 
 32.5      [EFFECTIVE DATE.] This section is effective for all 
 32.6   districts regardless of whether the request for certification 
 32.7   was made before, on, or after August 1, 1979. 
 32.8      Sec. 22.  Minnesota Statutes 2002, section 469.1771, 
 32.9   subdivision 4, is amended to read: 
 32.10     Subd. 4.  [LIMITATIONS.] (a) If the increments are pledged 
 32.11  to repay bonds that were issued before the lawsuit was filed 
 32.12  under this section, the damages under this section may not 
 32.13  exceed the greater of (1) ten percent of the expenditures or 
 32.14  revenues derived from increment, or (2) the amount of available 
 32.15  revenues after paying debt services due on the bonds.  
 32.16     (b) The court may abate all or part of the amount if it 
 32.17  determines the unauthorized action or failure to perform the 
 32.18  required action was taken in good faith and the payment would 
 32.19  work an undue hardship on the authority or municipality. 
 32.20     [EFFECTIVE DATE.] This section is effective for violations 
 32.21  occurring after December 31, 1990. 
 32.22     Sec. 23.  Minnesota Statutes 2002, section 469.178, 
 32.23  subdivision 7, is amended to read: 
 32.24     Subd. 7.  [INTERFUND LOANS.] The authority or municipality 
 32.25  may advance or loan money to finance expenditures under section 
 32.26  469.176, subdivision 4, from its general fund or any other fund 
 32.27  under which it has legal authority to do so.  The loan or 
 32.28  advance must be approved authorized, by resolution of the 
 32.29  governing body, before money is transferred, advanced, or spent, 
 32.30  whichever is earliest.  The resolution may generally grant to 
 32.31  the authority the power to make interfund loans under one or 
 32.32  more tax increment financing plans or for one or more 
 32.33  districts.  The terms and conditions for repayment of the loan 
 32.34  must be provided in writing and include, at a minimum, the 
 32.35  principal amount, the interest rate, and maximum term.  The 
 32.36  maximum rate of interest permitted to be charged is limited to 
 33.1   the greater of the rates specified under section 270.75 or 
 33.2   549.09 as of the date or advance is made, unless the written 
 33.3   agreement states that the maximum interest rate will fluctuate 
 33.4   as the interest rates specified under section 270.75 or 549.09 
 33.5   are from time to time adjusted. 
 33.6      [EFFECTIVE DATE.] This section is effective for loans and 
 33.7   advances made after July 31, 2001, and for districts for which 
 33.8   the request for certification was made after July 31, 1979. 
 33.9      Sec. 24.  Minnesota Statutes 2002, section 469.1791, 
 33.10  subdivision 3, is amended to read: 
 33.11     Subd. 3.  [PRECONDITIONS TO ESTABLISH DISTRICT.] (a) A city 
 33.12  may establish a special taxing district within a tax increment 
 33.13  financing district under this section only if the conditions 
 33.14  under paragraphs (b) and (c) are met or if the city elects to 
 33.15  exercise the authority under paragraph (d). 
 33.16     (b) The city has determined that: 
 33.17     (1) total tax increments from the district, including 
 33.18  unspent increments from previous years and increments 
 33.19  transferred under paragraph (c), will be insufficient to pay the 
 33.20  amounts due in a year on preexisting obligations; and 
 33.21     (2) this insufficiency of increments resulted from the 
 33.22  reduction in property tax class rates enacted in the 1997 and 
 33.23  1998 legislative sessions. 
 33.24     (c) The city has agreed to transfer any available 
 33.25  increments from other tax increment financing districts in the 
 33.26  city to pay the preexisting obligations of the district under 
 33.27  section 469.1763, subdivision 6.  This requirement does not 
 33.28  apply to any available increments of a qualified housing 
 33.29  district, as defined in section 273.1399, subdivision 1.  
 33.30     (d) If a tax increment financing district does not qualify 
 33.31  under paragraphs (b) and (c), the governing body may elect to 
 33.32  establish a special taxing district under this section.  If the 
 33.33  city elects to exercise this authority, increments from the tax 
 33.34  increment financing district and the proceeds of the tax imposed 
 33.35  under this section may only be used to pay preexisting 
 33.36  obligations and reasonable administrative expenses of the 
 34.1   authority for the tax increment financing district.  The tax 
 34.2   increment financing district must be decertified when all 
 34.3   preexisting obligations have been paid.  
 34.4      [EFFECTIVE DATE.] This section applies to all districts for 
 34.5   which the request for certification was made on or after January 
 34.6   1, 2002, and to all districts to which the definition of 
 34.7   qualified housing districts under Minnesota Statutes 2002, 
 34.8   section 273.1399, applied. 
 34.9      Sec. 25.  Minnesota Statutes 2002, section 469.1792, 
 34.10  subdivision 1, is amended to read: 
 34.11     Subdivision 1.  [SCOPE.] This section applies only to an 
 34.12  authority with a preexisting district for which: 
 34.13     (1) the increments from the district were insufficient to 
 34.14  pay preexisting obligations as a result of the class rate 
 34.15  changes or the elimination of the state-determined general 
 34.16  education property tax levy under this act, or both; or 
 34.17     (2)(i) the development authority has a binding contract, 
 34.18  entered into before August 1, 2001, with a person requiring the 
 34.19  authority to pay to the person an amount that may not exceed the 
 34.20  increment from the district or a specific development within the 
 34.21  district; and 
 34.22     (ii) the authority is unable to pay the full amount under 
 34.23  the contract from the pledged increments or other increments 
 34.24  from the district that would have been due if the class rate 
 34.25  changes or elimination of the state-determined general education 
 34.26  property tax levy or both had not been made under Laws 2001, 
 34.27  First Special Session chapter 5. 
 34.28     [EFFECTIVE DATE.] This section is effective retroactively 
 34.29  to the effective date of the original enactment of section 
 34.30  469.1792, subdivision 1, and applies to all districts for which 
 34.31  the request for certification was made after July 1, 1979. 
 34.32     Sec. 26.  Minnesota Statutes 2002, section 469.1792, 
 34.33  subdivision 2, is amended to read: 
 34.34     Subd. 2.  [DEFINITIONS.] (a) For purposes of this section, 
 34.35  the following terms have the meanings given. 
 34.36     (b) "Preexisting district" means a tax increment financing 
 35.1   district for which the request for certification was made before 
 35.2   August 1, 2001. 
 35.3      (c) "Preexisting obligation" means a bond or binding 
 35.4   contract that: 
 35.5      (1) was issued or approved before August July 1, 2001, or 
 35.6   was issued pursuant to a binding contract entered into before 
 35.7   August 1, 2001; 
 35.8      (2) is secured by increments from a preexisting district. 
 35.9      [EFFECTIVE DATE.] This section is effective retroactively 
 35.10  to the effective date of the original enactment of section 
 35.11  469.1792, subdivision 2, and applies to all districts for which 
 35.12  the request for certification was made after July 31, 1979. 
 35.13     Sec. 27.  Minnesota Statutes 2002, section 469.1815, 
 35.14  subdivision 1, is amended to read: 
 35.15     Subdivision 1.  [INCLUSION IN PROPOSED AND FINAL LEVIES.] 
 35.16  The political subdivision must add to its levy amount for the 
 35.17  current year under sections 275.065 and 275.07 the total 
 35.18  estimated amount of all current year abatements granted.  If all 
 35.19  or a portion of an abatement levy for a prior year was 
 35.20  uncollected, the political subdivision may add the uncollected 
 35.21  amount to its abatement levy for the current year.  The tax 
 35.22  amounts shown on the proposed notice under section 275.065, 
 35.23  subdivision 3, and on the property tax statement under section 
 35.24  276.04, subdivision 2, are the total amounts before the 
 35.25  reduction of any abatements that will be granted on the property.
 35.26     [EFFECTIVE DATE.] This section is effective beginning with 
 35.27  property taxes levied in 2002, payable in 2003. 
 35.28     Sec. 28.  Laws 1997, chapter 231, article 10, section 25, 
 35.29  is amended to read: 
 35.30     Sec. 25.  [EFFECTIVE DATE.] 
 35.31     Sections 1, 3 to 6, 7, and 10, are effective for districts 
 35.32  for which the requests for certification are made after June 30, 
 35.33  1997. 
 35.34     Section 2, clauses clause (1) and is effective for all 
 35.35  districts, regardless of whether the request for certification 
 35.36  was made before, on, or after August 1, 1979.  Section 2, 
 36.1   clause (4), are is effective for districts for which the 
 36.2   requests for certification were made after July 31, 1979, and 
 36.3   for payments and investment earnings received after July 1, 
 36.4   1997.  Section 2, clauses (2) and (3), are effective for 
 36.5   districts for which the request for certification was made after 
 36.6   June 30, 1982, and proceeds from sales and leases of properties 
 36.7   purchased by the authority after June 30, 1997, and repayments 
 36.8   of advances and loans that were made after June 30, 1997.  
 36.9      Sections 8 and 9 apply to all tax increment districts, 
 36.10  whenever certified, insofar as the underlying law applies to 
 36.11  them, and any uses of tax increment expended prior to the date 
 36.12  of enactment of this act which are in compliance with the 
 36.13  provisions of those sections are deemed valid. 
 36.14     Sections 12 and 13 are effective on the day the chief 
 36.15  clerical officer of the city of Columbia Heights complies with 
 36.16  Minnesota Statutes, sections 645.021, subdivision 3. 
 36.17     Sections 17 to 20 are effective the day following final 
 36.18  enactment and upon compliance by the governing body with 
 36.19  Minnesota Statutes, section 645.021, subdivision 3. 
 36.20     Section 24 is effective the day following final enactment. 
 36.21     [EFFECTIVE DATE.] This section is effective the day 
 36.22  following final enactment.