SF 284

as introduced - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act
  1.2             relating to taxation; restricting the use of tax 
  1.3             increment financing; requiring additional disclosure; 
  1.4             amending Minnesota Statutes 1994, sections 469.174, 
  1.5             subdivisions 12, 19, and 21; 469.175, subdivisions 3 
  1.6             and 5; 469.176, subdivisions 4b and 4c; 469.1763, 
  1.7             subdivisions 2 and 4; 469.177, subdivision 10; 
  1.8             469.179, by adding a subdivision. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  Minnesota Statutes 1994, section 469.174, 
  1.11  subdivision 12, is amended to read: 
  1.12     Subd. 12.  [ECONOMIC DEVELOPMENT DISTRICT.] "Economic 
  1.13  development district" means a type of tax increment financing 
  1.14  district which consists of any project, or portions of a 
  1.15  project, not meeting the requirements found in the definition of 
  1.16  redevelopment district, renewal and renovation district, soils 
  1.17  condition district, mined underground space development 
  1.18  district, or housing district, but which the authority finds to 
  1.19  be in the public interest because: 
  1.20     (1) it will discourage commerce, industry, or manufacturing 
  1.21  from moving their operations to another state or municipality; 
  1.22  or 
  1.23     (2) it will result in increased employment in the state; or 
  1.24     (3) it will result in preservation and enhancement of the 
  1.25  tax base of the state. 
  1.26     Sec. 2.  Minnesota Statutes 1994, section 469.174, 
  1.27  subdivision 19, is amended to read: 
  2.1      Subd. 19.  [SOILS CONDITION DISTRICT.] (a) "Soils condition 
  2.2   district" means a type of tax increment financing district 
  2.3   consisting of a project, or portions of a project, within which 
  2.4   the authority finds by resolution that the following conditions 
  2.5   exist: 
  2.6      (1) unusual terrain, the presence of hazardous substances, 
  2.7   pollution, or contaminants, or soil deficiencies for 80 percent 
  2.8   of the acreage in the district require substantial filling, 
  2.9   grading, requires removal or remedial action, or other physical 
  2.10  preparation for use; 
  2.11     (2) the estimated cost of the physical preparation under 
  2.12  clause (1), but excluding costs directly related to roads as 
  2.13  defined in section 160.01 and local improvements as described in 
  2.14  sections 429.021, subdivision 1, clauses (1) to (7), (11), and 
  2.15  (12), and 430.01, proposed removal and remedial action exceeds 
  2.16  the fair market value of the land before completion of the 
  2.17  preparation. 
  2.18     The requirements of clause (2) need not be satisfied, if 
  2.19  each parcel of property in the district either satisfies the 
  2.20  requirements of clause (2) or the estimated costs of the 
  2.21  proposed removal or remedial action exceeds $2 per square foot 
  2.22  for the area of the parcel. 
  2.23     (b) An area does not qualify as a soils condition district 
  2.24  if it contains a wetland, as defined in section 103G.005, unless 
  2.25  the development agreement prohibits draining, filling, or other 
  2.26  alteration of the wetland or other binding legal assurances for 
  2.27  preservation of the wetland are provided. 
  2.28     (c) If the district is located in the metropolitan area, 
  2.29  the proposed development of the district in the tax increment 
  2.30  financing plan must be consistent with the municipality's land 
  2.31  use plan adopted in accordance with sections 473.851 to 473.872 
  2.32  and reviewed by the metropolitan council under section 473.175.  
  2.33  If the district is located outside of the metropolitan area, the 
  2.34  proposed development of the district must be consistent with the 
  2.35  municipality's comprehensive municipal plan. 
  2.36     Sec. 3.  Minnesota Statutes 1994, section 469.174, 
  3.1   subdivision 21, is amended to read: 
  3.2      Subd. 21.  [CREDIT ENHANCED BONDS.] "Credit enhanced bonds" 
  3.3   means special obligation bonds that are: 
  3.4      (1) payable primarily from tax increments (i) derived from 
  3.5   a tax increment financing district within which the activity, as 
  3.6   defined in section 469.1763, subdivision 1, financed by at least 
  3.7   75 90 percent of the bond proceeds is located and (ii) estimated 
  3.8   on the date of issuance to be sufficient to pay when due the 
  3.9   debt service on the bonds, and 
  3.10     (2) further secured by tax increments (i) derived from one 
  3.11  or more tax increment financing districts and (ii) determined by 
  3.12  the issuer to be necessary in order to make the marketing of the 
  3.13  bonds feasible. 
  3.14     Sec. 4.  Minnesota Statutes 1994, section 469.175, 
  3.15  subdivision 3, is amended to read: 
  3.16     Subd. 3.  [MUNICIPALITY APPROVAL.] (a) A county auditor 
  3.17  shall not certify the original net tax capacity of a tax 
  3.18  increment financing district until the tax increment financing 
  3.19  plan proposed for that district has been approved by the 
  3.20  municipality in which the district is located.  If an authority 
  3.21  that proposes to establish a tax increment financing district 
  3.22  and the municipality are not the same, the authority shall apply 
  3.23  to the municipality in which the district is proposed to be 
  3.24  located and shall obtain the approval of its tax increment 
  3.25  financing plan by the municipality before the authority may use 
  3.26  tax increment financing.  The municipality shall approve the tax 
  3.27  increment financing plan only after a public hearing thereon 
  3.28  after published notice in a newspaper of general circulation in 
  3.29  the municipality at least once not less than ten days nor more 
  3.30  than 30 days prior to the date of the hearing.  The published 
  3.31  notice must include a map of the area of the district from which 
  3.32  increments may be collected and, if the project area includes 
  3.33  additional area, a map of the project area in which the 
  3.34  increments may be expended.  The hearing may be held before or 
  3.35  after the approval or creation of the project or it may be held 
  3.36  in conjunction with a hearing to approve the project.  Before or 
  4.1   at the time of approval of the tax increment financing plan, the 
  4.2   municipality shall make the following findings, and shall set 
  4.3   forth in writing the reasons and supporting facts for each 
  4.4   determination: 
  4.5      (1) that the proposed tax increment financing district is a 
  4.6   redevelopment district, a renewal or renovation district, a 
  4.7   mined underground space development district, a housing 
  4.8   district, a soils condition district, or an economic development 
  4.9   district; if the proposed district is a redevelopment district 
  4.10  or a renewal or renovation district, the reasons and supporting 
  4.11  facts for the determination that the district meets the criteria 
  4.12  of section 469.174, subdivision 10, paragraph (a), clauses (1) 
  4.13  and (2), or subdivision 10a, must be retained and made available 
  4.14  to the public by the authority until the district has been 
  4.15  terminated. 
  4.16     (2) that the proposed development or redevelopment, in the 
  4.17  opinion of the municipality, would not reasonably be expected to 
  4.18  occur solely through private investment within the reasonably 
  4.19  foreseeable future and therefore the use of tax increment 
  4.20  financing is deemed necessary that the increased market value of 
  4.21  the site that could reasonably be expected to occur without the 
  4.22  use of tax increment financing would be less than the increase 
  4.23  in the market value estimated to result from the proposed 
  4.24  development after subtracting the present value of the projected 
  4.25  tax increments for the maximum duration of the district 
  4.26  permitted by the plan. 
  4.27     (3) that the tax increment financing plan conforms to the 
  4.28  general plan for the development or redevelopment of the 
  4.29  municipality as a whole. 
  4.30     (4) that the tax increment financing plan will afford 
  4.31  maximum opportunity, consistent with the sound needs of the 
  4.32  municipality as a whole, for the development or redevelopment of 
  4.33  the project by private enterprise. 
  4.34     (5) that the municipality elects the method of tax 
  4.35  increment computation set forth in section 469.177, subdivision 
  4.36  3, clause (b), if applicable. 
  5.1      (6) that the projected public benefits of the project 
  5.2   exceed the costs, including the costs of the county, school 
  5.3   district, special taxing districts, and the state, determined on 
  5.4   a present value basis. 
  5.5      When the municipality and the authority are not the same, 
  5.6   the municipality shall approve or disapprove the tax increment 
  5.7   financing plan within 60 days of submission by the authority, or 
  5.8   the plan shall be deemed approved.  When the municipality and 
  5.9   the authority are not the same, the municipality may not amend 
  5.10  or modify a tax increment financing plan except as proposed by 
  5.11  the authority pursuant to subdivision 4.  Once approved, the 
  5.12  determination of the authority to undertake the project through 
  5.13  the use of tax increment financing and the resolution of the 
  5.14  governing body shall be conclusive of the findings therein and 
  5.15  of the public need for the financing. 
  5.16     (b) The county auditor may not certify the original net tax 
  5.17  capacity of a district until the tax increment financing plan 
  5.18  has been approved by a resolution of the governing body of the 
  5.19  school district in which the district is located, if either of 
  5.20  the following apply: 
  5.21     (1) The district is a housing district. 
  5.22     (2) The tax increment financing plan proposes construction 
  5.23  of ten or more new housing units or proposes rehabilitation or 
  5.24  redevelopment of ten or more existing, but unoccupied, housing 
  5.25  units. 
  5.26     The governing body of the school district may approve the 
  5.27  tax increment financing district under this paragraph only after 
  5.28  holding a public hearing on the question with notice provided in 
  5.29  the usual manner for its public meetings. 
  5.30     Sec. 5.  Minnesota Statutes 1994, section 469.175, 
  5.31  subdivision 5, is amended to read: 
  5.32     Subd. 5.  [ANNUAL DISCLOSURE.] For all tax increment 
  5.33  financing districts, whether created prior or subsequent to 
  5.34  August 1, 1979, on or before July 1 of each year, the authority 
  5.35  shall submit to the county board, the county auditor, the school 
  5.36  board, the commissioner of revenue and, if the authority is 
  6.1   other than the municipality, the governing body of the 
  6.2   municipality, a report of the status of the district.  The 
  6.3   report shall include the following information:  the amount and 
  6.4   the source of revenue in the account, the amount and purpose of 
  6.5   expenditures from the account, the amount of any pledge of 
  6.6   revenues, including principal and interest on any outstanding 
  6.7   bonded indebtedness, the original net tax capacity of the 
  6.8   district, the captured net tax capacity retained by the 
  6.9   authority, the captured net tax capacity shared with other 
  6.10  taxing districts, the tax increment received, and any additional 
  6.11  information necessary to demonstrate compliance with any 
  6.12  applicable tax increment financing plan.  An annual statement 
  6.13  showing the tax increment received and expended in that year, 
  6.14  the original net tax capacity, captured net tax capacity, amount 
  6.15  of outstanding bonded indebtedness, the amount of the district's 
  6.16  increments paid to other governmental bodies, the amount paid 
  6.17  for administrative costs, and the sum of increments paid, 
  6.18  directly or indirectly, for activities and improvements located 
  6.19  outside of the district, and any additional information the 
  6.20  authority deems necessary shall be published in a newspaper of 
  6.21  general circulation in the municipality.  The authority must 
  6.22  include in the published annual statement a short narrative 
  6.23  explanation of the major activities of the district during the 
  6.24  past year, including any new activities undertaken and the 
  6.25  reason for payments for improvements and activities located 
  6.26  outside of the district.  This explanation must be written in 
  6.27  plain and simple language, easily understandable by an 
  6.28  individual not familiar with tax increment financing and real 
  6.29  estate development finance. 
  6.30     Sec. 6.  Minnesota Statutes 1994, section 469.176, 
  6.31  subdivision 4b, is amended to read: 
  6.32     Subd. 4b.  [SOILS CONDITION DISTRICTS.] Revenue derived 
  6.33  from tax increment from a soils condition district under section 
  6.34  469.174, subdivision 19, may be used only to (1) acquire parcels 
  6.35  on which the improvements described in clause (2) will occur; 
  6.36  (2) pay for the cost of correcting the unusual terrain or soil 
  7.1   deficiencies and the additional cost of installing public 
  7.2   improvements directly caused by the deficiencies removal or 
  7.3   remedial action; and (3) pay for the administrative expenses of 
  7.4   the authority allocable to the district, including the cost of 
  7.5   preparation of the development action response plan.  The sale 
  7.6   by the authority of a parcel acquired and improved as described 
  7.7   in clauses (1) and (2) must be for a price that is no less than 
  7.8   the cost of acquisition. 
  7.9      Sec. 7.  Minnesota Statutes 1994, section 469.176, 
  7.10  subdivision 4c, is amended to read: 
  7.11     Subd. 4c.  [ECONOMIC DEVELOPMENT DISTRICTS.] (a) Revenue 
  7.12  derived from tax increment from an economic development district 
  7.13  may not be used to provide improvements, loans, subsidies, 
  7.14  grants, interest rate subsidies, or assistance in any form to 
  7.15  developments consisting of buildings and ancillary facilities, 
  7.16  if more than 15 percent of the buildings and facilities 
  7.17  (determined on the basis of square footage) are used for a 
  7.18  purpose other than:  
  7.19     (1) the manufacturing or production of tangible personal 
  7.20  property, including processing resulting in the change in 
  7.21  condition of the property; 
  7.22     (2) warehousing, storage, and distribution of tangible 
  7.23  personal property, excluding retail sales; 
  7.24     (3) research and development related to the activities 
  7.25  listed in clause (1) or (2); 
  7.26     (4) telemarketing if that activity is the exclusive use of 
  7.27  the property; 
  7.28     (5) tourism facilities; or 
  7.29     (6) space necessary for and related to the activities 
  7.30  listed in clauses (1) to (5).  
  7.31     (b) (1) Notwithstanding the provisions of this subdivision, 
  7.32  revenue derived from tax increment from an economic development 
  7.33  district may be used to provide improvements, loans, subsidies, 
  7.34  grants, interest rate subsidies, or assistance in any form for 
  7.35  up to 5,000 square feet of commercial and retail facilities 
  7.36  within the municipal jurisdiction of a home rule charter or 
  8.1   statutory city that has a population of 5,000 or less.  The 
  8.2   5,000 square feet limitation is cumulative and applies to all 
  8.3   facilities in all the economic development districts within the 
  8.4   municipal jurisdiction. 
  8.5      (2) The provisions of this paragraph apply only if the 
  8.6   following conditions are met: 
  8.7      (A) The population of the city in which the district is 
  8.8   located does not exceed 5,000, according to the last decennial 
  8.9   census, a more recent special census, or the most recent 
  8.10  estimate of the state demographer, whichever is least. 
  8.11     (B) The per capita adjusted net tax capacity of the city is 
  8.12  ten percent or more below the state average for the most 
  8.13  recently available assessment year, according to data provided 
  8.14  to the city by the commissioner of revenue.  The commissioner 
  8.15  shall compute per capita adjusted net capacity using the 
  8.16  definition of adjusted net tax capacity in section 124A.02, 
  8.17  subdivision 3a, and the definition of population in section 
  8.18  477A.011, subdivision 3.  Adjusted tax capacity also includes 
  8.19  the value of all captured tax capacity. 
  8.20     Sec. 8.  Minnesota Statutes 1994, section 469.1763, 
  8.21  subdivision 2, is amended to read: 
  8.22     Subd. 2.  [EXPENDITURES OUTSIDE DISTRICT.] (a) For each tax 
  8.23  increment financing district, an amount equal to at least 75 90 
  8.24  percent of the revenue derived from tax increments paid by 
  8.25  properties in the district must be expended on activities in the 
  8.26  district or to pay bonds, to the extent that the proceeds of the 
  8.27  bonds were used to finance activities in the district or to pay, 
  8.28  or secure payment of, debt service on credit enhanced bonds.  
  8.29  Not more than 25 ten percent of the revenue derived from tax 
  8.30  increments paid by properties in the district may be expended, 
  8.31  through a development fund or otherwise, on activities outside 
  8.32  of the district but within the defined geographic area of the 
  8.33  project except to pay, or secure payment of, debt service on 
  8.34  credit enhanced bonds.  The revenue derived from tax increments 
  8.35  for the district that are expended on costs under section 
  8.36  469.176, subdivision 4h, paragraph (b), may be deducted first 
  9.1   before calculating the percentages that must be expended within 
  9.2   and without the district.  
  9.3      (b) In the case of a housing district, a housing project, 
  9.4   as defined in section 469.174, subdivision 11, is an activity in 
  9.5   the district.  
  9.6      (c) All administrative expenses are for activities outside 
  9.7   of the district. 
  9.8      Sec. 9.  Minnesota Statutes 1994, section 469.1763, 
  9.9   subdivision 4, is amended to read: 
  9.10     Subd. 4.  [USE OF REVENUES FOR DECERTIFICATION.] (a) 
  9.11  Beginning with the sixth year following certification of the 
  9.12  district, 75 90 percent of the revenues derived from tax 
  9.13  increments paid by properties in the district that remain after 
  9.14  the expenditures permitted under subdivision 3 must be used only 
  9.15  to pay: 
  9.16     (1) outstanding bonds, as defined in subdivision 3, 
  9.17  paragraphs (a), clause (2), and (b); 
  9.18     (2) contracts, as defined in subdivision 3, paragraph (a), 
  9.19  clauses (3) and (4); or 
  9.20     (3) credit enhanced bonds to which the revenues derived 
  9.21  from tax increments are pledged, but only to the extent that 
  9.22  revenues of the district for which the credit enhanced bonds 
  9.23  were issued are insufficient to pay the bonds and to the extent 
  9.24  that the increments from the unrestricted 25 ten percent share 
  9.25  are insufficient. 
  9.26     (b) When the outstanding bonds have been defeased and when 
  9.27  sufficient money has been set aside to pay contractual 
  9.28  obligations as defined in subdivision 3, paragraph (a), clauses 
  9.29  (3) and (4), the district must be decertified and the pledge of 
  9.30  tax increment discharged. 
  9.31     Sec. 10.  Minnesota Statutes 1994, section 469.177, 
  9.32  subdivision 10, is amended to read: 
  9.33     Subd. 10.  [PAYMENT TO SCHOOL FOR REFERENDUM LEVY.] (a) The 
  9.34  provisions of this subdivision apply to tax increment financing 
  9.35  districts and projects for which certification was requested 
  9.36  before May 1, 1988, that are located in a school district in 
 10.1   which the voters have approved new local tax rates or an 
 10.2   increase in local tax rates after the tax increment financing 
 10.3   district was certified.  
 10.4      (b)(1) If there are no outstanding bonds on May 1, 1988, to 
 10.5   which increment from the district is pledged, or if the 
 10.6   referendum is approved after May 1, 1988, and there are no bonds 
 10.7   outstanding at the time the referendum is approved, that were 
 10.8   issued before May 1, 1988, the authority must annually pay to 
 10.9   the school district an amount of increment equal to the 
 10.10  increment that is attributable to the increase in the local tax 
 10.11  rate under the referendum.  
 10.12     (2) If clause (1) does not apply, upon approval by a 
 10.13  majority vote of the governing body of the municipality and the 
 10.14  school board, the authority must pay to the school district an 
 10.15  amount of increment equal to the increment that is attributable 
 10.16  to the increase in the local tax rate under the referendum.  
 10.17     (c) The amounts of these increments may be expended and 
 10.18  must be treated by the school district in the same manner as 
 10.19  provided for the revenues derived from the referendum levy 
 10.20  approved by the voters.  The provisions of this subdivision 
 10.21  apply to projects for which certification was requested before, 
 10.22  on, and after August 1, 1979. 
 10.23     (d) The school district must report to the commissioner of 
 10.24  education any payments received under this subdivision and 
 10.25  notify the commissioner of any agreement entered into under 
 10.26  paragraph (b), clause (2).  The commissioner of education shall 
 10.27  provide this information to the commissioner of revenue upon 
 10.28  request. 
 10.29     Sec. 11.  Minnesota Statutes 1994, section 469.179, is 
 10.30  amended by adding a subdivision to read: 
 10.31     Subd. 4.  [PRE-1990 DISTRICTS; USE OF REVENUES TO 
 10.32  DECERTIFY.] (a) This subdivision applies to a district or 
 10.33  project area for which the request for certification was made 
 10.34  before May 1, 1990, whether or not the request for certification 
 10.35  was made before or after August 1, 1979. 
 10.36     (b) Revenues derived from tax increments may only be used 
 11.1   for the following costs: 
 11.2      (1) to pay outstanding bonds that are secured by revenues 
 11.3   of the district and that were issued and sold before February 1, 
 11.4   1995, or bonds issued to refund the principal amount of the 
 11.5   bonds issued before February 1, 1995; 
 11.6      (2) to pay a binding, written contract with a third party, 
 11.7   secured by or to be paid from revenues of the district, if the 
 11.8   contract was executed before January 15, 1995; 
 11.9      (3) to fund an escrow account to make future payments under 
 11.10  a binding contract meeting the requirements of clause (2); 
 11.11     (4) to make payments to a school district under section 
 11.12  469.177, subdivision 10; or 
 11.13     (5) to pay reasonable administrative expenses, subject to 
 11.14  the otherwise applicable limits on administrative expenses. 
 11.15     (c) The authority must decertify the district when the 
 11.16  following conditions occur: 
 11.17     (1) all the outstanding bonds have been paid or defeased; 
 11.18     (2) all the contractual obligations have been satisfied or 
 11.19  sufficient funds have been placed in an escrow account, which 
 11.20  with interest on the invested escrow account, will satisfy them. 
 11.21     Sec. 12.  [EFFECTIVE DATE.] 
 11.22     Sections 5 to 11 are effective the day following final 
 11.23  enactment and apply to all tax increment financing districts 
 11.24  regardless of when the request for certification was made, 
 11.25  including requests made before August 1, 1979.  The rest of the 
 11.26  act is effective for districts for which the request for 
 11.27  certification is made after the day following final enactment.