1.1 	A bill for an act
1.2 	relating to taxation; making technical and minor policy changes related to 
1.3 	calculation and administration of tax increment financing; modifying the 
1.4 	procedures for issuing tax increment financing bonds;amending Minnesota 
1.5 	Statutes 2004, sections 469.175, subdivision 4; 469.176, subdivision 1; 469.1763, 
1.6 	subdivisions 3, 4; 469.1771, subdivision 2a; 475.58, subdivision 1; Minnesota 
1.7 	Statutes 2005 Supplement, sections 469.175, subdivisions 2, 5; 469.1763, 
1.8 	subdivision 6; 469.177, subdivision 1.
1.9 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.10 	Section 1. Minnesota Statutes 2005 Supplement, section 469.175, subdivision 2, 
1.11 	is amended to read:
1.12 		Subd. 2.Consultations; comment and filing. (a) Before formation of a tax 
1.13 	increment financing district, the authority shall provide the county auditor and clerk of 
1.14 	the school board with the proposed tax increment financing plan for the district and the 
1.15 	authority's estimate of the fiscal and economic implications of the proposed tax increment 
1.16 	financing district. The authority must provide the proposed tax increment financing plan 
1.17 	and the information on the fiscal and economic implications of the plan to the county 
1.18 	auditor and the clerk of the school district board at least 30 days before the public hearing 
1.19 	required by subdivision 3. The information on the fiscal and economic implications may 
1.20 	be included in or as part of the tax increment financing plan. The county auditor and 
1.21 	clerk of the school board shall provide copies to the members of the boards, as directed 
1.22 	by their respective boards. The 30-day requirement is waived if the boards of the county 
1.23 	and school district submit written comments on the proposal and any modification of the 
1.24 	proposal to the authority after receipt of the information.
1.25 	(b) For purposes of this subdivision, "fiscal and economic implications of the 
1.26 	proposed tax increment financing district" includes:
2.1 	(1) an estimate of the total amount of tax increment that will be generated over the 
2.2 	life of the district;
2.3 	(2) a narrative description of the probable impact of the district on city-provided 
2.4 	services such as police and fire protection, public infrastructure, and borrowing costs the 
2.5 	impact of any general obligation tax increment bonds attributable to the district upon the 
2.6 	ability to issue other debt for general fund purposes;
2.7 	(3) the estimated amount of tax increments over the life of the district that would 
2.8 	be attributable to school district levies, assuming the school district's share of the total 
2.9 	local tax rate for all taxing jurisdictions remained the same;
2.10 	(4) the estimated amount of tax increments over the life of the district that would be 
2.11 	attributable to county levies, assuming the county's share of the total local tax rate for all 
2.12 	taxing jurisdictions remained the same; and
2.13 	(5) any additional information regarding the size, timing, or type of development in 
2.14 	the district requested by the county or the school district that would enable it to determine 
2.15 	additional costs that will accrue to it due to the development proposed for the district.
2.16 	If a county or school district has not adopted standard questions in a written policy on 
2.17 	information requested for fiscal and economic implications, a county or school district 
2.18 	must request additional information no later than 15 days after receipt of the tax increment 
2.19 	financing plan and the request does not require an additional 30 days of notice before 
2.20 	the public hearing.

2.21 	EFFECTIVE DATE. This section is effective for proposed tax increment financing 
2.22 	plans provided after June 30, 2006.

2.23 	Sec. 2. Minnesota Statutes 2004, section 469.175, subdivision 4, is amended to read:
2.24 		Subd. 4.Modification of plan. (a) A tax increment financing plan may be modified 
2.25 	by an authority.
2.26 	(b) The authority may make the following modifications only upon the notice and 
2.27 	after the discussion, public hearing, and findings required for approval of the original plan:
2.28 	(1) any reduction or enlargement of geographic area of the project or tax increment 
2.29 	financing district that does not meet the requirements of paragraph (e);
2.30 	(2) increase in amount of bonded indebtedness to be incurred;
2.31 	(3) a determination to capitalize interest on the debt if that determination was not a 
2.32 	part of the original plan, or to increase or decrease the amount of interest on the debt to 
2.33 	be capitalized;
2.34 	(4) increase in the portion of the captured net tax capacity to be retained by the 
2.35 	authority;
3.1 	(5) increase in the estimate of the cost of the project, including administrative 
3.2 	expenses, that will be paid or financed with tax increment from the district; or
3.3 	(6) designation of additional property to be acquired by the authority.
3.4 	(c) If an authority changes the type of district to another type of district, this change 
3.5 	is not a modification but requires the authority to follow the procedure set forth in sections  
3.6 	469.174 to  469.179 for adoption of a new plan, including certification of the net tax 
3.7 	capacity of the district by the county auditor. 
3.8 	(d) If a redevelopment district or a renewal and renovation district is enlarged, 
3.9 	the reasons and supporting facts for the determination that the addition to the district 
3.10 	meets the criteria of section  469.174, subdivision 10, paragraph (a), clauses (1) and (2), 
3.11 	or subdivision 10a, must be documented. 
3.12 	(e) The requirements of paragraph (b) do not apply if (1) the only modification is 
3.13 	elimination of parcels from the project or district and (2)(A) the current net tax capacity 
3.14 	of the parcels eliminated from the district equals or exceeds the net tax capacity of 
3.15 	those parcels in the district's original net tax capacity or (B) the authority agrees that, 
3.16 	notwithstanding section  469.177, subdivision 1, the original net tax capacity will be 
3.17 	reduced by no more than the current net tax capacity of the parcels eliminated from the 
3.18 	district. The authority must notify the county auditor of any modification that reduces or 
3.19 	enlarges the geographic area of a district or a project area. 
3.20 	(f) The geographic area of a tax increment financing district may be reduced, but 
3.21 	shall not be enlarged after five years following the date of certification of the original net 
3.22 	tax capacity by the county auditor or after August 1, 1984, for tax increment financing 
3.23 	districts authorized prior to August 1, 1979.

3.24 	EFFECTIVE DATE. This section is effective for all districts, regardless of when 
3.25 	the request for certification was made, and applies to plan amendments adopted after the 
3.26 	day following final enactment.

3.27 	Sec. 3. Minnesota Statutes 2005 Supplement, section 469.175, subdivision 5, is 
3.28 	amended to read:
3.29 		Subd. 5.Annual disclosure. An annual statement showing for each district the 
3.30 	information required to be reported under subdivision 6, paragraph (c), clauses (1), (2), 
3.31 	(3), (11), (12), (18), and (19); the amounts of tax increment received and expended in the 
3.32 	reporting period; and any additional information the authority deems necessary must be 
3.33 	published in a newspaper of general circulation in the municipality that approved the 
3.34 	tax increment financing plan. The annual statement must inform readers that additional 
3.35 	information regarding each district may be obtained from the authority, and must explain 
4.1 	how the additional information may be requested. The authority must publish the annual 
4.2 	statement for a year no later than August 15 of the next year. The authority must identify 
4.3 	the newspaper of general circulation in the municipality to which the annual statement has 
4.4 	been or will be submitted for publication and provide a copy of the annual statement to the 
4.5 	county board, the county auditor, the school board, the state auditor, and, if the authority is 
4.6 	other than the municipality, the governing body of the municipality on or before August 
4.7 	1 of the year in which the statement must be published.
4.8 	The disclosure requirements imposed by this subdivision apply to districts certified 
4.9 	before, on, or after August 1, 1979.

4.10 	EFFECTIVE DATE. This section is effective for disclosures required to be 
4.11 	provided after June 30, 2006.

4.12 	Sec. 4. Minnesota Statutes 2004, section 469.176, subdivision 1, is amended to read:
4.13 		Subdivision 1.Duration of tax increment financing districts. (a) Subject to the 
4.14 	limitations contained in subdivisions 1a to 1f, any tax increment financing district as to 
4.15 	which bonds are outstanding, payment for which the tax increment and other revenues 
4.16 	have been pledged, shall remain in existence at least as long as the bonds continue to be 
4.17 	outstanding. The municipality may, at the time of approval of the initial tax increment 
4.18 	financing plan, provide for a shorter maximum duration limit than specified in subdivisions 
4.19 	1a to 1f. The specified limit applies in place of the otherwise applicable limit, unless the 
4.20 	authority modifies the plan following the procedures under section 469.175, subdivision 4, 
4.21 	paragraph (b).
4.22 	(b) The tax increment pledged to the payment of the bonds and interest thereon may 
4.23 	be discharged and the tax increment financing district may be terminated if sufficient funds 
4.24 	have been irrevocably deposited in the debt service fund or other escrow account held in 
4.25 	trust for all outstanding bonds to provide for the payment of the bonds at maturity or date 
4.26 	of redemption and interest thereon to the maturity or redemption date.
4.27 	(c) For bonds issued pursuant to section  469.178, subdivisions 2 and 3, the full 
4.28 	faith and credit and any taxing powers of the municipality or authority are pledged to the 
4.29 	payment of the bonds until the principal of and interest on the bonds has been paid in full. 

4.30 	EFFECTIVE DATE. This section is effective for all districts, regardless of when 
4.31 	the request for certification was made, and applies to plan amendments adopted after the 
4.32 	day following final enactment.

4.33 	Sec. 5. Minnesota Statutes 2004, section 469.1763, subdivision 3, is amended to read:
5.1 		Subd. 3.Five-year rule. (a) Revenues derived from tax increments are considered 
5.2 	to have been expended on an activity within the district under subdivision 2 only if one 
5.3 	of the following occurs:
5.4 	(1) before or within five years after certification of the district, the revenues are 
5.5 	actually paid to a third party with respect to the activity;
5.6 	(2) bonds, the proceeds of which must be used to finance the activity, are issued and 
5.7 	sold to a third party before or within five years after certification, the revenues are spent 
5.8 	to repay the bonds, and the proceeds of the bonds either are, on the date of issuance, 
5.9 	reasonably expected to be spent before the end of the later of (i) the five-year period, or 
5.10 	(ii) a reasonable temporary period within the meaning of the use of that term under section 
5.11 	148(c)(1) of the Internal Revenue Code, or are deposited in a reasonably required reserve 
5.12 	or replacement fund;
5.13 	(3) binding contracts with a third party are entered into for performance of the 
5.14 	activity before or within five years after certification of the district and the revenues are 
5.15 	spent under the contractual obligation;
5.16 	(4) costs with respect to the activity are paid before or within five years after 
5.17 	certification of the district and the revenues are spent to reimburse a party for payment 
5.18 	of the costs, including interest on unreimbursed costs; or
5.19 	(5) expenditures are made for housing purposes as permitted by subdivision 2, 
5.20 	paragraph paragraphs (b) and (d).
5.21 	(b) For purposes of this subdivision, bonds include subsequent refunding bonds if 
5.22 	the original refunded bonds meet the requirements of paragraph (a), clause (2).

5.23 	EFFECTIVE DATE. This section is effective for districts for which the request for 
5.24 	certification was made after April 30, 1990.

5.25 	Sec. 6. Minnesota Statutes 2004, section 469.1763, subdivision 4, is amended to read:
5.26 		Subd. 4.Use of revenues for decertification. (a) In each year beginning with the 
5.27 	sixth year following certification of the district, if the applicable in-district percent of the 
5.28 	revenues derived from tax increments paid by properties in the district exceeds the amount 
5.29 	of expenditures that have been made for costs permitted under subdivision 3, an amount 
5.30 	equal to the difference between the in-district percent of the revenues derived from tax 
5.31 	increments paid by properties in the district and the amount of expenditures that have 
5.32 	been made for costs permitted under subdivision 3 must be used and only used to pay or 
5.33 	defease the following or be set aside to pay the following:
5.34 	(1) outstanding bonds, as defined in subdivision 3, paragraphs (a), clause (2), and (b);
5.35 	(2) contracts, as defined in subdivision 3, paragraph (a), clauses (3) and (4); or
6.1 	(3) credit enhanced bonds to which the revenues derived from tax increments are 
6.2 	pledged, but only to the extent that revenues of the district for which the credit enhanced 
6.3 	bonds were issued are insufficient to pay the bonds and to the extent that the increments 
6.4 	from the applicable pooling percent share for the district are insufficient.; or
6.5 	(4) the amount provided by the tax increment financing plan to be paid under 
6.6 	subdivision 2, paragraphs (b) and (d).
6.7 	(b) The district must be decertified and the pledge of tax increment discharged 
6.8 	when the outstanding bonds have been defeased and when sufficient money has been set 
6.9 	aside to pay, based on the increment to be collected through the end of the calendar year, 
6.10 	the following amounts:
6.11 	(1) contractual obligations as defined in subdivision 3, paragraph (a), clauses (3) and 
6.12 	(4), the district must be decertified and the pledge of tax increment discharged.;
6.13 	(2) the amount specified in the tax increment financing for activities qualifying under 
6.14 	subdivision 2, paragraph (b), that have not been funded with the proceeds of bonds; and
6.15 	(3) the additional expenditures permitted by the tax increment financing plan for 
6.16 	housing activities under an election under subdivision 2, paragraph (d), that have not 
6.17 	been funded with the proceeds of bonds.

6.18 	EFFECTIVE DATE. This section is effective for districts for which the request for 
6.19 	certification was made after April 30, 1990.

6.20 	Sec. 7. Minnesota Statutes 2005 Supplement, section 469.1763, subdivision 6, is 
6.21 	amended to read:
6.22 		Subd. 6.Pooling permitted for deficits. (a) This subdivision applies only to 
6.23 	districts for which the request for certification was made before August 1, 2001, and 
6.24 	without regard to whether the request for certification was made prior to August 1, 1979.
6.25 	(b) The municipality for the district may transfer available increments from another 
6.26 	tax increment financing district located in the municipality, if the transfer is necessary to 
6.27 	eliminate a deficit in the district to which the increments are transferred. The municipality 
6.28 	may transfer increments as provided by this subdivision without regard to whether the 
6.29 	transfer or expenditure is authorized by the tax increment financing plan for the district 
6.30 	from which the transfer is made. A deficit in the district for purposes of this subdivision 
6.31 	means the lesser of the following two amounts:
6.32 	(1)(i) the amount due during the calendar year to pay preexisting obligations of 
6.33 	the district; minus
7.1 	(ii) the total increments collected or to be collected from properties located within 
7.2 	the district that are available for the calendar year including amounts collected in prior 
7.3 	years that are currently available; plus
7.4 	(iii) total increments from properties located in other districts in the municipality 
7.5 	including amounts collected in prior years that are available to be used to meet the 
7.6 	district's obligations under this section, excluding this subdivision, or other provisions of 
7.7 	law (but excluding a special tax under section 469.1791 and the grant program under Laws 
7.8 	1997, chapter 231, article 1, section 19, or Laws 2001, First Special Session chapter 5); or
7.9 	(2) the reduction in increments collected from properties located in the district for 
7.10 	the calendar year as a result of the changes in class rates in Laws 1997, chapter 231, article 
7.11 	1; Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243, and Laws 2001, First 
7.12 	Special Session chapter 5, or the elimination of the general education tax levy under 
7.13 	Laws 2001, First Special Session chapter 5.
7.14 	The authority may compute the deficit amount under clause (1) only (without regard 
7.15 	to the limit under clause (2)) if the authority makes an irrevocable commitment, by 
7.16 	resolution, to use increments from the district to which increments are to be transferred and 
7.17 	any transferred increments are only used to pay preexisting obligations and administrative 
7.18 	expenses for the district that are required to be paid under section 469.176, subdivision 
7.19 	4h, paragraph (a).
7.20 	(c) A preexisting obligation means:
7.21 	(1) bonds issued and sold before August 1, 2001, or bonds issued pursuant to a 
7.22 	binding contract requiring the issuance of bonds entered into before July 1, 2001, and 
7.23 	bonds issued to refund such bonds or to reimburse expenditures made in conjunction with 
7.24 	a signed contractual agreement entered into before August 1, 2001, to the extent that the 
7.25 	bonds are secured by a pledge of increments from the tax increment financing district; and
7.26 	(2) binding contracts entered into before August 1, 2001, to the extent that the 
7.27 	contracts require payments secured by a pledge of increments from the tax increment 
7.28 	financing district.
7.29 	(d) The municipality may require a development authority, other than a seaway port 
7.30 	authority, to transfer available increments including amounts collected in prior years that 
7.31 	are currently available for any of its tax increment financing districts in the municipality to 
7.32 	make up an insufficiency in another district in the municipality, regardless of whether the 
7.33 	district was established by the development authority or another development authority. 
7.34 	This authority applies notwithstanding any law to the contrary, but applies only to a 
7.35 	development authority that:
7.36 	(1) was established by the municipality; or
8.1 	(2) the governing body of which is appointed, in whole or part, by the municipality 
8.2 	or an officer of the municipality or which consists, in whole or part, of members of 
8.3 	the governing body of the municipality. The municipality may use this authority only 
8.4 	after it has first used all available increments of the receiving development authority to 
8.5 	eliminate the insufficiency and exercised any permitted action under section 469.1792, 
8.6 	subdivision 3, for preexisting districts of the receiving development authority to eliminate 
8.7 	the insufficiency.
8.8 	(e) The authority under this subdivision to spend tax increments outside of the area 
8.9 	of the district from which the tax increments were collected:
8.10 	(1) is an exception to the restrictions under section 469.176, subdivisions 4b, 4c, 
8.11 	4d, 4e, 4i, and 4j; the expenditure limits under section 469.176, subdivision 1c; and the 
8.12 	other provisions of this section; and the percentage restrictions under subdivision 2 must 
8.13 	be calculated after deducting increments spent under this subdivision from the total 
8.14 	increments for the district; and
8.15 	(2) applies notwithstanding the provisions of the Tax Increment Financing Act in 
8.16 	effect for districts for which the request for certification was made before June 30, 1982, 
8.17 	or any other law to the contrary.
8.18 	(f) If a preexisting obligation requires the development authority to pay an amount 
8.19 	that is limited to the increment from the district or a specific development within the 
8.20 	district and if the obligation requires paying a higher amount to the extent that increments 
8.21 	are available, the municipality may determine that the amount due under the preexisting 
8.22 	obligation equals the higher amount and may authorize the transfer of increments 
8.23 	under this subdivision to pay up to the higher amount. The existence of a guarantee of 
8.24 	obligations by the individual or entity that would receive the payment under this paragraph 
8.25 	is disregarded in the determination of eligibility to pool under this subdivision. The 
8.26 	authority to transfer increments under this paragraph may only be used to the extent 
8.27 	that the payment of all other preexisting obligations in the municipality due during the 
8.28 	calendar year have been satisfied.
8.29 	(g) For transfers of increments made in calendar year 2005 and later, the reduction in 
8.30 	increments as a result of the elimination of the general education tax levy for purposes of 
8.31 	paragraph (b), clause (2), for a taxes payable year equals the general education tax rate 
8.32 	for the school district under Minnesota Statutes 2000, section 273.1382, subdivision 1, 
8.33 	for taxes payable in 2001, multiplied by the captured tax capacity of the district for the 
8.34 	current taxes payable year.

9.1 	EFFECTIVE DATE. This section is effective for all districts, regardless of when 
9.2 	the request for certification was made, and applies retroactively to any transfer made 
9.3 	under subdivision 6.

9.4 	Sec. 8. Minnesota Statutes 2005 Supplement, section 469.177, subdivision 1, is 
9.5 	amended to read:
9.6 		Subdivision 1.Original net tax capacity. (a) Upon or after adoption of a tax 
9.7 	increment financing plan, the auditor of any county in which the district is situated shall, 
9.8 	upon request of the authority, certify the original net tax capacity of the tax increment 
9.9 	financing district and that portion of the district overlying any subdistrict as described in 
9.10 	the tax increment financing plan and shall certify in each year thereafter the amount by 
9.11 	which the original net tax capacity has increased or decreased as a result of a change in tax 
9.12 	exempt status of property within the district and any subdistrict, reduction or enlargement 
9.13 	of the district or changes pursuant to subdivision 4.
9.14 	(b) If the classification under section 273.13 of property located in a district changes 
9.15 	to a classification that has a different assessment ratio, the original net tax capacity of that 
9.16 	property must be redetermined at the time when its use is changed as if the property had 
9.17 	originally been classified in the same class in which it is classified after its use is changed.
9.18 	(c) The amount to be added to the original net tax capacity of the district as a result of 
9.19 	previously tax exempt real property within the district becoming taxable equals the net tax 
9.20 	capacity of the real property as most recently assessed pursuant to section 273.18 or, if that 
9.21 	assessment was made more than one year prior to the date of title transfer rendering the 
9.22 	property taxable, the net tax capacity assessed by the assessor at the time of the transfer. 
9.23 	If improvements are made to tax exempt property after certification of the municipality 
9.24 	approves the district and before the parcel becomes taxable, the assessor shall, at the 
9.25 	request of the authority, separately assess the estimated market value of the improvements. 
9.26 	If the property becomes taxable, the county auditor shall add to original net tax capacity, 
9.27 	the net tax capacity of the parcel, excluding the separately assessed improvements. If 
9.28 	substantial taxable improvements were made to a parcel after certification of the district 
9.29 	and if the property later becomes tax exempt, in whole or part, as a result of the authority 
9.30 	acquiring the property through foreclosure or exercise of remedies under a lease or other 
9.31 	revenue agreement or as a result of tax forfeiture, the amount to be added to the original 
9.32 	net tax capacity of the district as a result of the property again becoming taxable is the 
9.33 	amount of the parcel's value that was included in original net tax capacity when the parcel 
9.34 	was first certified. The amount to be added to the original net tax capacity of the district 
9.35 	as a result of enlargements equals the net tax capacity of the added real property as most 
10.1 	recently certified by the commissioner of revenue as of the date of modification of the tax 
10.2 	increment financing plan pursuant to section 469.175, subdivision 4.
10.3 	(d) If the net tax capacity of a property increases because the property no longer 
10.4 	qualifies under the Minnesota Agricultural Property Tax Law, section 273.111; the 
10.5 	Minnesota Open Space Property Tax Law, section 273.112; or the Metropolitan 
10.6 	Agricultural Preserves Act, chapter 473H, or because platted, unimproved property is 
10.7 	improved or market value is increased after approval of the plat under section 273.11, 
10.8 	subdivision 14, 14a, or 14b, the increase in net tax capacity must be added to the original 
10.9 	net tax capacity.
10.10 	(e) The amount to be subtracted from the original net tax capacity of the district 
10.11 	as a result of previously taxable real property within the district becoming tax exempt, 
10.12 	or a reduction in the geographic area of the district, shall be the amount of original net 
10.13 	tax capacity initially attributed to the property becoming tax exempt or being removed 
10.14 	from the district. If the net tax capacity of property located within the tax increment 
10.15 	financing district is reduced by reason of a court-ordered abatement, stipulation agreement, 
10.16 	voluntary abatement made by the assessor or auditor or by order of the commissioner of 
10.17 	revenue, the reduction shall be applied to the original net tax capacity of the district when 
10.18 	the property upon which the abatement is made has not been improved since the date of 
10.19 	certification of the district and to the captured net tax capacity of the district in each year 
10.20 	thereafter when the abatement relates to improvements made after the date of certification. 
10.21 	The county auditor may specify reasonable form and content of the request for certification 
10.22 	of the authority and any modification thereof pursuant to section 469.175, subdivision 4.
10.23 	(f) If a parcel of property contained a substandard building that was demolished 
10.24 	or removed and if the authority elects to treat the parcel as occupied by a substandard 
10.25 	building under section 469.174, subdivision 10, paragraph (b), the auditor shall certify the 
10.26 	original net tax capacity of the parcel using the greater of (1) the current net tax capacity 
10.27 	of the parcel, or (2) the estimated market value of the parcel for the year in which the 
10.28 	building was demolished or removed, but applying the class rates for the current year.
10.29 	(g) For a redevelopment district qualifying under section 469.174, subdivision 10, 
10.30 	paragraph (a), clause (4), as a qualified disaster area, the auditor shall certify the value of 
10.31 	the land as the original tax capacity for any parcel in the district that contains a building 
10.32 	that suffered substantial damage as a result of the disaster or emergency.

10.33 	EFFECTIVE DATE. This section is effective for improvements made to tax 
10.34 	exempt property made after June 30, 2006.

10.35 	Sec. 9. Minnesota Statutes 2004, section 469.1771, subdivision 2a, is amended to read:
11.1 		Subd. 2a.Suspension of distribution of tax increment. (a) If an authority fails to 
11.2 	make a disclosure or to submit a report containing the information required by section  
11.3 	469.175, subdivisions 5 and 6, regarding a tax increment financing district within the 
11.4 	time provided in section  469.175, subdivisions 5 and 6, the state auditor shall mail to 
11.5 	the authority a written notice that it or the municipality has failed to make the required 
11.6 	disclosure or to submit a required report with respect to a particular district. The state 
11.7 	auditor shall mail the notice on or before the third Tuesday of August of the year in which 
11.8 	the disclosure or report was required to be made or submitted. The notice must describe 
11.9 	the consequences of failing to disclose or submit a report as provided in paragraph (b). 
11.10 	If the state auditor has not received a copy of a disclosure or a report described in this 
11.11 	paragraph on or before the third Tuesday of November first day of October of the year 
11.12 	in which the disclosure or report was required to be made or submitted, the state auditor 
11.13 	shall mail a written notice to the county auditor to hold the distribution of tax increment 
11.14 	from a particular district. 
11.15 	(b) Upon receiving written notice from the state auditor to hold the distribution of 
11.16 	tax increment, the county auditor shall hold:
11.17 	(1) 25 100 percent of the amount of tax increment that otherwise would be 
11.18 	distributed, if the distribution is made after the third Friday in November first day of 
11.19 	October but during the year in which the disclosure or report was required to be made or 
11.20 	submitted; or
11.21 	(2) 100 percent of the amount of tax increment that otherwise would be distributed, 
11.22 	if the distribution is made after December 31 of the year in which the disclosure or report 
11.23 	was required to be made or submitted.
11.24 	(c) Upon receiving the copy of the disclosure and all of the reports described in 
11.25 	paragraph (a) with respect to a district regarding which the state auditor has mailed to the 
11.26 	county auditor a written notice to hold distribution of tax increment, the state auditor shall 
11.27 	mail to the county auditor a written notice lifting the hold and authorizing the county 
11.28 	auditor to distribute to the authority or municipality any tax increment that the county 
11.29 	auditor had held pursuant to paragraph (b). The state auditor shall mail the written notice 
11.30 	required by this paragraph within five working days after receiving the last outstanding 
11.31 	item. The county auditor shall distribute the tax increment to the authority or municipality 
11.32 	within 15 working days after receiving the written notice required by this paragraph.
11.33 	(d) Notwithstanding any law to the contrary, any interest that accrues on tax 
11.34 	increment while it is being held by the county auditor pursuant to paragraph (b) is not tax 
11.35 	increment and may be retained by the county.
12.1 	(e) For purposes of sections  469.176, subdivisions 1a to 1g, and  469.177, subdivision 
12.2 	11, tax increment being held by the county auditor pursuant to paragraph (b) is considered 
12.3 	distributed to or received by the authority or municipality as of the time that it would have 
12.4 	been distributed or received but for paragraph (b). 

12.5 	EFFECTIVE DATE. This section is effective for disclosures and reports required 
12.6 	to be filed after December 30, 2006.

12.7 	Sec. 10. Minnesota Statutes 2004, section 475.58, subdivision 1, is amended to read:
12.8 		Subdivision 1.Approval by electors; exceptions. Obligations authorized by law or 
12.9 	charter may be issued by any municipality upon obtaining the approval of a majority of 
12.10 	the electors voting on the question of issuing the obligations, but an election shall not be 
12.11 	required to authorize obligations issued:
12.12 	(1) to pay any unpaid judgment against the municipality;
12.13 	(2) for refunding obligations;
12.14 	(3) for an improvement or improvement program, which obligation is payable 
12.15 	wholly or partly from the proceeds of special assessments levied upon property specially 
12.16 	benefited by the improvement or by an improvement within the improvement program, or 
12.17 	of taxes levied upon the increased value of property within a district for the development of 
12.18 	which the improvement is undertaken from tax increments, as defined in section 469.174, 
12.19 	subdivision 25, including obligations which are the general obligations of the municipality, 
12.20 	if the municipality is entitled to reimbursement in whole or in part from the proceeds of 
12.21 	such special assessments or taxes tax increments and not less than 20 percent of the cost of 
12.22 	the improvement or the improvement program is to be assessed against benefited property 
12.23 	or is to be paid from the proceeds of federal grant funds or a combination thereof, or is 
12.24 	estimated to be received from such taxes within the district tax increments;
12.25 	(4) payable wholly from the income of revenue producing conveniences;
12.26 	(5) under the provisions of a home rule charter which permits the issuance of 
12.27 	obligations of the municipality without election;
12.28 	(6) under the provisions of a law which permits the issuance of obligations of a 
12.29 	municipality without an election;
12.30 	(7) to fund pension or retirement fund liabilities pursuant to section  475.52, 
12.31 	subdivision 6; 
12.32 	(8) under a capital improvement plan under section  373.40; and 
12.33 	(9) under sections  469.1813 to  469.1815 (property tax abatement authority bonds), if 
12.34 	the proceeds of the bonds are not used for a purpose prohibited under section  469.176, 
12.35 	subdivision 4g, paragraph (b). 

13.1 	EFFECTIVE DATE. This section is effective the day following final enactment.