1.1                          A bill for an act
  1.2             relating to tax increment financing; exempting small 
  1.3             cities from certain rules; amending Minnesota 
  1.4             Statutes, sections 273.1399, by adding a subdivision; 
  1.5             469.174, by adding a subdivision; 469.176, 
  1.6             subdivisions 4c, 4j, and 5; and 469.1763, by adding a 
  1.7             subdivision. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1996, section 273.1399, is 
  1.10  amended by adding a subdivision to read: 
  1.11     Subd. 9.  [SMALL CITIES EXEMPTION.] The provisions of this 
  1.12  section do not apply to any small city as defined in section 
  1.13  469.174. 
  1.14     Sec. 2.  Minnesota Statutes 1996, section 469.174, is 
  1.15  amended by adding a subdivision to read: 
  1.16     Subd. 25.  [SMALL CITY.] "Small city" means any home rule 
  1.17  charter or statutory city that has a population of 5,000 or less 
  1.18  and that is located ten miles or more from a city that has a 
  1.19  population of 10,000 or more. 
  1.20     Sec. 3.  Minnesota Statutes 1996, section 469.176, 
  1.21  subdivision 4c, is amended to read: 
  1.22     Subd. 4c.  [ECONOMIC DEVELOPMENT DISTRICTS.] (a) Revenue 
  1.23  derived from tax increment from an economic development district 
  1.24  may not be used to provide improvements, loans, subsidies, 
  1.25  grants, interest rate subsidies, or assistance in any form to 
  1.26  developments consisting of buildings and ancillary facilities, 
  2.1   if more than 15 percent of the buildings and facilities 
  2.2   (determined on the basis of square footage) are used for a 
  2.3   purpose other than:  
  2.4      (1) the manufacturing or production of tangible personal 
  2.5   property, including processing resulting in the change in 
  2.6   condition of the property; 
  2.7      (2) warehousing, storage, and distribution of tangible 
  2.8   personal property, excluding retail sales; 
  2.9      (3) research and development related to the activities 
  2.10  listed in clause (1) or (2); 
  2.11     (4) telemarketing if that activity is the exclusive use of 
  2.12  the property; 
  2.13     (5) tourism facilities; or 
  2.14     (6) space necessary for and related to the activities 
  2.15  listed in clauses (1) to (5).  
  2.16     (b) Notwithstanding the provisions of this subdivision, 
  2.17  revenue derived from tax increment from an economic development 
  2.18  district may be used to pay for site preparation and public 
  2.19  improvements, if the following conditions are met: 
  2.20     (1) bedrock soils conditions are present in 80 percent or 
  2.21  more of the acreage of the district; 
  2.22     (2) the estimated cost of physical preparation of the site 
  2.23  exceeds the fair market value of the land before completion of 
  2.24  the preparation; and 
  2.25     (3) revenues from tax increments are expended only for the 
  2.26  additional costs of preparing the site because of unstable soils 
  2.27  and the bedrock soils condition, the additional cost of 
  2.28  installing public improvements because of unstable soils or the 
  2.29  bedrock soils condition, and reasonable administrative costs. 
  2.30     (c) Notwithstanding the provisions of this subdivision, 
  2.31  revenues derived from tax increment from an economic development 
  2.32  district may be used to provide improvements, loans, subsidies, 
  2.33  grants, interest rate subsidies, or assistance in any form for 
  2.34  up to 15,000 square feet of any separately owned commercial 
  2.35  facility located within the municipal jurisdiction of a small 
  2.36  city. 
  3.1      Sec. 4.  Minnesota Statutes 1996, section 469.176, 
  3.2   subdivision 4j, is amended to read: 
  3.3      Subd. 4j.  [REDEVELOPMENT DISTRICTS.] At least 90 percent 
  3.4   of the revenues derived from tax increments from a redevelopment 
  3.5   district or renewal and renovation district must be used to 
  3.6   finance the cost of correcting conditions that allow designation 
  3.7   of redevelopment and renewal and renovation districts under 
  3.8   section 469.174.  These costs include, but are not limited to, 
  3.9   acquiring properties containing structurally substandard 
  3.10  buildings or improvements, acquiring adjacent parcels necessary 
  3.11  to provide a site of sufficient size to permit development, 
  3.12  demolition or rehabilitation of structures, removal or 
  3.13  remediation of hazardous substances, clearing of the land, and 
  3.14  installation of utilities, roads, sidewalks, and parking 
  3.15  facilities for the site.  The allocated administrative expenses 
  3.16  of the authority may be included in the qualifying costs. 
  3.17     Sec. 5.  Minnesota Statutes 1996, section 469.176, 
  3.18  subdivision 5, is amended to read: 
  3.19     Subd. 5.  [REQUIREMENT FOR AGREEMENTS.] No more than 25 
  3.20  percent, by acreage, of the property to be acquired within a 
  3.21  project which contains a redevelopment district, or ten percent, 
  3.22  by acreage, of the property to be acquired within a project 
  3.23  which contains a housing or economic development district, as 
  3.24  set forth in the tax increment financing plan, shall at any time 
  3.25  be owned by an authority as a result of acquisition with the 
  3.26  proceeds of bonds issued pursuant to section 469.178 unless 
  3.27  prior to acquisition in excess of the percentages, the authority 
  3.28  has concluded an agreement for the development or redevelopment 
  3.29  of the property acquired and which provides recourse for the 
  3.30  authority should the development or redevelopment not be 
  3.31  completed.  This subdivision does not apply to a parcel of a 
  3.32  district that is a designated hazardous substance site 
  3.33  established under section 469.174, subdivision 16, or part of a 
  3.34  hazardous substance subdistrict established under section 
  3.35  469.175, subdivision 7, or to a parcel that contains a building 
  3.36  which has been vacant for at least 90 days and is located in a 
  4.1   district in a small city.  
  4.2      Sec. 6.  Minnesota Statutes 1996, section 469.1763, is 
  4.3   amended by adding a subdivision to read: 
  4.4      Subd. 6.  [SMALL CITIES EXEMPTION.] The provisions of this 
  4.5   section do not apply to a small city. 
  4.6      Sec. 7.  [EFFECTIVE DATE.] 
  4.7      Sections 1 to 6 are effective the day following final 
  4.8   enactment.  
  4.9      Section 4 applies to all tax increment districts, whether 
  4.10  created prior to, on, or after the effective date of this act.  
  4.11  Section 4 is, in part, remedial in nature.  Any use of revenues 
  4.12  derived from tax increments to finance a qualifying cost under 
  4.13  section 4 is not invalid if used for that purpose prior to the 
  4.14  effective date of section 4.