Minnesota Legislature
SF 993
as introduced - 89th Legislature (2015 - 2016) Posted on 02/20/2015 09:26am
Current Version - as introduced
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A bill for an act
relating to taxation; tax increment financing; modifying definitions; clarifying
interfund loan requirements; providing technical corrections; amending
Minnesota Statutes 2014, sections 469.174, subdivision 14; 469.176, subdivision
4; 469.1763, subdivisions 1, 2, 3; 469.178, subdivision 7.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2014, section 469.174, subdivision 14, is amended to read:
Subd. 14.
Administrative expenses.
"Administrative expenses" means all
expenditures of an authority other than:
(1) amounts paid for the purchase of land;
(2) amounts paid to contractors or others providing materials and services, including
architectural and engineering services, directly connected with the physical development
of the real property in the project;
(3) relocation benefits paid to or services provided for persons residing or businesses
located in the project;
(4) amounts used to pay principal or interest on, fund a reserve for, or sell at a
discount bonds issued pursuant to section 469.178; deleted text begin or
deleted text end
(5) amounts used to pay other financial obligations to the extent those obligations
were used to finance costs described in clauses (1) to (3)deleted text begin .deleted text end new text begin ; or
new text end
new text begin
(6) usual and customary maintenance costs necessary for the preservation of
property acquired or constructed with tax increments and owned by the authority or the
municipality, including, without limitation, amounts needed for ordinary and extraordinary
repairs and maintenance, and capital reserves in an amount not greater than ten percent of
the market value of the property.
new text end
For districts for which the requests for certifications were made before August 1,
1979, or after June 30, 1982, "administrative expenses" includes amounts paid for services
provided by bond counsel, fiscal consultants, and planning or economic development
consultants.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment
and applies to all districts, regardless of when the request for certification was made.
new text end
Sec. 2.
Minnesota Statutes 2014, section 469.176, subdivision 4, is amended to read:
Subd. 4.
Limitation on use of tax increment; general rule.
All revenues derived
from tax increment shall be used in accordance with the tax increment financing plan. The
revenues shall be used solely for the following purposes: (1) to pay the principal of and
interest on bonds issued to finance a project; (2) by a rural development financing authority
for the purposes stated in section 469.142, by a port authority or municipality exercising the
powers of a port authority to finance or otherwise pay the cost of redevelopment pursuant to
sections 469.048 to 469.068, by an economic development authority to finance or otherwise
pay the cost of redevelopment pursuant to sections 469.090 to 469.108, by a housing and
redevelopment authority or economic development authority to finance or otherwise pay
public redevelopment costs pursuant to sections 469.001 to 469.047, by a municipality or
economic development authority to finance or otherwise pay the capital and administration
costs of a development district pursuant to sections 469.124 to 469.133, by a municipality
or authority to finance or otherwise pay the costs of developing and implementing a
development action response plan, by a municipality or redevelopment agency to finance
or otherwise pay premiums for insurance or other security guaranteeing the payment when
due of principal of and interest on the bonds pursuant to chapter 462C, sections 469.152 to
469.165, or both, or to accumulate and maintain a reserve securing the payment when due
of the principal of and interest on the bonds pursuant to chapter 462C, sections 469.152 to
469.165, or both, which revenues in the reserve shall not exceed, subsequent to the fifth
anniversary of the date of issue of the first bond issue secured by the reserve, an amount
equal to 20 percent of the aggregate principal amount of the outstanding and nondefeased
bonds secured by the reservenew text begin ; and (3) to pay the costs listed in section 469.174, subdivision
14, but not in excess of the limitation on administrative expenses under subdivision 3.
Tax increment as defined in section 469.174, subdivision 25, clause (2), may be used to
pay usual and customary operation and maintenance costs, including, but not limited to,
amounts needed for capital reserves in an amount not greater than ten percent of the
market value of the property, and ordinary and extraordinary repairs and maintenance of
the property purchased by the authority or the municipality with tax incrementsnew text end .
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment
and applies to all districts, regardless of when the request for certification was made.
new text end
Sec. 3.
Minnesota Statutes 2014, section 469.1763, subdivision 1, is amended to read:
Subdivision 1.
Definitions.
(a) For purposes of this section, the following terms
have the meanings given.
(b) "Activities" means acquisition of property, clearing of land, site preparation, soils
correction, removal of hazardous waste or pollution, installation of utilities, construction
of public or private improvements, and other similar activities, but only to the extent that
tax increment revenues may be spent for such purposes under other law.
(c) "Third party" means an entity other than (1) the person receiving the benefit
of assistance financed with tax increments, or (2) the municipality or the development
authority or other person substantially under the control of the municipality.
(d) "Revenues derived from tax increments paid by properties in the district" means
only tax increment as defined in section 469.174, subdivision 25, clause (1), and does
not include tax increment as defined in section 469.174, subdivision 25, clauses (2)deleted text begin ,
(3), and (4)deleted text end new text begin to (5)new text end .
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end
Sec. 4.
Minnesota Statutes 2014, section 469.1763, subdivision 2, is amended to read:
Subd. 2.
Expenditures outside district.
(a) For each tax increment financing
district, an amount equal to at least 75 percent of the total revenue derived from tax
increments paid by properties in the district must be expended on activities in the district
or to pay bonds, to the extent that the proceeds of the bonds were used to finance activities
in the district or to pay, or secure payment of, debt service on credit enhanced bonds.
For districts, other than redevelopment districts for which the request for certification
was made after June 30, 1995, the in-district percentage for purposes of the preceding
sentence is 80 percent. Not more than 25 percent of the total revenue derived from tax
increments paid by properties in the district may be expended, through a development fund
or otherwise, on activities outside of the district but within the defined geographic area of
the project except to pay, or secure payment of, debt service on credit enhanced bonds.
For districts, other than redevelopment districts for which the request for certification was
made after June 30, 1995, the pooling percentage for purposes of the preceding sentence is
20 percent. The deleted text begin revenuedeleted text end new text begin revenuesnew text end derived from tax increments deleted text begin fordeleted text end new text begin paid by properties innew text end
the district that are expended on costs under section 469.176, subdivision 4h, paragraph
(b), may be deducted first before calculating the percentages that must be expended within
and without the district.
(b) In the case of a housing district, a housing project, as defined in section 469.174,
subdivision 11, is an activity in the district.
(c) All administrative expenses are for activities outside of the district, except that
if the only expenses for activities outside of the district under this subdivision are for
the purposes described in paragraph (d), administrative expenses will be considered as
expenditures for activities in the district.
(d) The authority may elect, in the tax increment financing plan for the district,
to increase by up to ten percentage points the permitted amount of expenditures for
activities located outside the geographic area of the district under paragraph (a). As
permitted by section 469.176, subdivision 4k, the expenditures, including the permitted
expenditures under paragraph (a), need not be made within the geographic area of the
project. Expenditures that meet the requirements of this paragraph are legally permitted
expenditures of the district, notwithstanding section 469.176, subdivisions 4b, 4c, and 4j.
To qualify for the increase under this paragraph, the expenditures must:
(1) be used exclusively to assist housing that meets the requirement for a qualified
low-income building, as that term is used in section 42 of the Internal Revenue Code; and
(2) not exceed the qualified basis of the housing, as defined under section 42(c) of
the Internal Revenue Code, less the amount of any credit allowed under section 42 of
the Internal Revenue Code; and
(3) be used to:
(i) acquire and prepare the site of the housing;
(ii) acquire, construct, or rehabilitate the housing; or
(iii) make public improvements directly related to the housing; or
(4) be used to develop housing:
(i) if the market value of the housing does not exceed the lesser of:
(A) 150 percent of the average market value of single-family homes in that
municipality; or
(B) $200,000 for municipalities located in the metropolitan area, as defined in
section 473.121, or $125,000 for all other municipalities; and
(ii) if the expenditures are used to pay the cost of site acquisition, relocation,
demolition of existing structures, site preparation, and pollution abatement on one or
more parcels, if the parcel contains a residence containing one to four family dwelling
units that has been vacant for six or more months and is in foreclosure as defined in
section 325N.10, subdivision 7, but without regard to whether the residence is the owner's
principal residence, and only after the redemption period has expired.
(e) For a district created within a biotechnology and health sciences industry zone
as defined in Minnesota Statutes 2012, section 469.330, subdivision 6, or for an existing
district located within such a zone, tax increment derived from such a district may be
expended outside of the district but within the zone only for expenditures required for the
construction of public infrastructure necessary to support the activities of the zone, land
acquisition, and other redevelopment costs as defined in section 469.176, subdivision 4j.
These expenditures are considered as expenditures for activities within the district. The
authority provided by this paragraph expires for expenditures made after the later of (1)
December 31, 2015, or (2) the end of the five-year period beginning on the date the district
was certified, provided that date was before January 1, 2016.
(f) The authority under paragraph (d), clause (4), expires on December 31, 2016.
Increments may continue to be expended under this authority after that date, if they are
used to pay bonds or binding contracts that would qualify under subdivision 3, paragraph
(a), if December 31, 2016, is considered to be the last date of the five-year period after
certification under that provision.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end
Sec. 5.
Minnesota Statutes 2014, section 469.1763, subdivision 3, is amended to read:
Subd. 3.
Five-year rule.
(a) Revenues derived from tax increments new text begin paid by
properties in the district new text end are considered to have been expended on an activity within the
district under subdivision 2 only if one of the following occurs:
(1) before or within five years after certification of the district, the revenues are
actually paid to a third party with respect to the activity;
(2) bonds, the proceeds of which must be used to finance the activity, are issued and
sold to a third party before or within five years after certification, the revenues are spent
to repay the bonds, and the proceeds of the bonds either are, on the date of issuance,
reasonably expected to be spent before the end of the later of (i) the five-year period, or
(ii) a reasonable temporary period within the meaning of the use of that term under section
148(c)(1) of the Internal Revenue Code, or are deposited in a reasonably required reserve
or replacement fund;
(3) binding contracts with a third party are entered into for performance of the
activity before or within five years after certification of the district and the revenues are
spent under the contractual obligation;
(4) costs with respect to the activity are paid before or within five years after
certification of the district and the revenues are spent to reimburse a party for payment
of the costs, including interest on unreimbursed costs; or
(5) expenditures are made for housing purposes as permitted by subdivision 2,
paragraphs (b) and (d), or for public infrastructure purposes within a zone as permitted
by subdivision 2, paragraph (e).
(b) For purposes of this subdivision, bonds include subsequent refunding bonds if
the original refunded bonds meet the requirements of paragraph (a), clause (2).
(c) For a redevelopment district or a renewal and renovation district certified after
June 30, 2003, and before April 20, 2009, the five-year periods described in paragraph (a)
are extended to ten years after certification of the district. For a redevelopment district
certified after April 20, 2009, and before June 30, 2012, the five-year periods described in
paragraph (a) are extended to eight years after certification of the district. This extension is
provided primarily to accommodate delays in development activities due to unanticipated
economic circumstances.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment.
new text end
Sec. 6.
Minnesota Statutes 2014, section 469.178, subdivision 7, is amended to read:
Subd. 7.
Interfund loans.
new text begin (a) new text end The authority or municipality may advance or loan
money to finance expenditures under section 469.176, subdivision 4, from its general fund
or any other fund under which it has legal authority to do so.
new text begin (b) Not later than 60 days after money is transferred, advanced, or spent, whichever
is earliest,new text end the loan or advance must be authorizeddeleted text begin ,deleted text end new text begin : (1)new text end by resolution of the governing
body or of the authority, whichever has jurisdiction over the fund from which the advance
or loan is authorizeddeleted text begin , before money is transferred, advanced, or spent, whichever is
earliestdeleted text end new text begin ; or (2) in writing by an appropriate officer of the municipality or the authority to
whom the municipality or authority has delegated by resolution power to administer and
set the terms and conditions of the interfund loannew text end .
new text begin (c)new text end The resolution may generally grant to new text begin the municipality or new text end the authoritynew text begin or an
appropriate officer thereofnew text end the power to make interfund loans under one or more tax
increment financing plans or for one or more districts.new text begin The resolution may be adopted
or the interfund loan may be otherwise documented before or after the adoption of the
tax increment financing plan or the creation of the tax increment financing district from
which the advance or loan is to be repaid.
new text end
new text begin (d) new text end The terms and conditions for repayment of the loan must be provided in writing
deleted text begin anddeleted text end new text begin . The written terms and conditions may be in any form, but mustnew text end include, at a
minimum, the principal amount, the interest rate, and maximum term.new text begin Written terms may
be modified or amended in writing by the municipality or the authority, or an appropriate
officer thereof, before the latest termination of the tax increment financing district from
which the interfund loan will be paid.new text end The maximum rate of interest permitted to be
charged is limited to the greater of the rates specified under section 270C.40 or 549.09
as of the date the loan or advance is authorized, unless the written agreement states that
the maximum interest rate will fluctuate as the interest rates specified under section
270C.40 or 549.09 are from time to time adjusted.new text begin Loans or advances may be structured
as draw-down or line-of-credit obligations of the lending fund.
new text end
new text begin
(e) The authority shall report in the annual report submitted pursuant to section
469.175, subdivision 6:
new text end
new text begin
(1) the amount of any interfund loan or advance made in a calendar year; and
new text end
new text begin
(2) any amendment of an interfund loan or advance made in a calendar year.
new text end
new text begin
(f) The provisions of this subdivision do not apply to an interfund loan or advance
made by a municipality or an authority for any: (1) administrative expenses; (2) planning,
inspection, architectural, engineering, surveying, and soil testing expenses, or similar costs
that are incurred before establishing a tax increment financing district; or (3) transfers
made in anticipation of a negative cash balance in a fund that does not exceed 12 months.
new text end
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective the day following final enactment
and applies to all districts, regardless of when the request for certification was made.
new text end