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    Subdivision 1. City powers. Any city however organized, except in those counties situated
in a metropolitan area as defined in Minnesota Statutes 1961, Section 473.02, Subdivision
5, which contain cities of the first class, may by ordinance adopted in the manner provided in
this section divide its area into an urban service district and a rural service district, constituting
separate taxing districts for the purpose of all municipal property taxes except those levied
for the payment of bonds and judgments and interest thereon. In proceedings for annexation,
incorporation, or consolidation being conducted pursuant to chapter 414, the director of the Office
of Strategic and Long-Range Planning may divide a municipality into an urban service district
and a rural service district, such districts to be designated in accordance with the criteria set out in
subdivision 2. Thereafter, said urban service district and rural service district may be changed in
the same manner that an ordinance or amendment is changed in accordance with this section.
    Subd. 2. Division of lands by ordinance. The rural service district shall include only
such unplatted lands as in the judgment of the governing body at the time of the adoption of
the ordinance are rural in character, and are not developed for commercial, industrial, or urban
residential purposes, and for these reasons are not benefited to the same degree as other lands
by municipal services financed by general taxation. The rural service district may include lands
which are not contiguous to one another. The ordinance may designate lands outside the city
which, if annexed, shall be included within the rural service district. The urban service district
shall include all lands within the boundaries of the city which are not included in the rural service
district. The ordinance shall determine the approximate ratio which in the judgment of the
governing body exists between the benefits resulting from tax supported municipal service to
parcels of land of like market value, situated in the rural service district and in the urban service
district, respectively. By amendment of the ordinance this benefit ratio may be changed, and lands
may be added to or removed from the rural service district; but no amendment shall be required
to remove lands by the procedure provided in subdivision 5.
    Subd. 3. Publication; public hearing. Every ordinance and amendment introduced under
subdivision 2, before final adoption, shall be published in the official newspaper of the city, with
notice of the time and place of a hearing thereon which shall be held by the governing body not
less than 30 days after the publication. At the hearing, which may be adjourned from time to time
by public announcement to those present, the governing body shall give reasonable hearing and
consideration to all objections to and comments on the ordinance or amendment, made by or on
behalf of any resident or taxpayer of the city or of any outside area described in the ordinance
or amendment, whether presented orally or by written communication to the municipal clerk.
Objections may be addressed to the establishment or extension of the rural service district as a
whole, or to the inclusion or exclusion of any specified lands, or to the benefit ratio proposed to
be established by the ordinance. They may be based on the character of the lands included or
excluded or on the relative nature and extent of tax supported municipal service and benefit to
lands of rural and urban character.
    Subd. 4. Publication of final ordinance; appeal. At or after the hearing the governing body
shall modify the ordinance in any respect and to any extent which it considers equitable, and shall
cause it to be published in the form in which it is finally adopted, and a copy mailed to each person
entitled to appear at the hearing who has requested a copy at the hearing or by written notice to
the clerk. Within 30 days after the publication of the ordinance or amendment, any person entitled
to appear at the hearing may appeal to the district court by serving a notice upon the clerk of the
city, stating the grounds for such appeal, specifying the provisions of the ordinance or amendment
which are claimed to be unreasonable, and alleging the facts on the basis of which such claim is
made. The notice shall be filed with the court administrator of the district court within ten days
after its service. It may be filed by the appellant not only for the appellant but also on behalf of all
others of the class to which the appellant belongs, as described in the notice of appeal. The clerk
of the city shall furnish the appellant certified copies of all proceedings and records in the clerk's
custody which are reasonably required to present the appeal. The appeal shall be placed upon
the calendar of the next general term commencing more than ten days after the date of serving
the notice and shall be tried in accordance with the provisions of the district court Rules of Civil
Procedure. If the appellant does not prevail upon the appeal, the costs incurred shall be taxed by
the court and judgment entered therefor. All objections to the ordinance or amendment shall be
deemed waived unless presented on such appeal; except that any person having any estate, right,
title, or interest in or lien upon any parcel of land, who claims that any provision of the ordinance
is unreasonable and that, by reason of such provision, any tax upon such parcel exceeds the
amount which would be taxable thereon but for such provision, may have the validity of the claim
determined by the district court in the manner provided in chapter 278, if the claimant alleges
and proves to the satisfaction of the court that the claimant had no actual notice of the hearing
held thereon pursuant to this section, and the claimant's rights were not adequately protected as a
member of any class of persons for whom an appeal was taken pursuant to this section.
    Subd. 5. Development of land in rural district. Whenever any parcel of land, owned by
one person or by two or more persons jointly or in common at the time of its inclusion in the rural
service district, is platted, in whole or in part, and whenever application is made for a permit for
the construction of a commercial, industrial, or urban residential development or improvement to
be situated on such parcel or any part thereof, the board or officer approving such plat or building
permit shall report this to the governing body, which shall make and enter an order transferring
such parcel from the rural service district to the urban service district.
    Subd. 6. Filing with county auditor; allocation of taxes. A certified copy of every
ordinance, amendment, and order adopted or entered under this section shall be filed with the
county auditor before it becomes effective. For the purposes of taxation, if the ordinance,
amendment, or order is certified on or before August 1 of a levy year, it may be implemented
that same levy year. If the ordinance, amendment, or order is certified after August 1 of a levy
year, it may not be implemented until the following levy year. The amount of taxes levied each
year by each city shall be certified to the county auditor in the manner now or hereafter provided
by law. Taxes levied for payment of bonds and judgments and interest thereon shall continue to
be spread upon all taxable property within the boundaries of the city in proportion to the net tax
capacity thereof. The remaining amount of the taxes levied each year shall be allocated by the
county auditor to the urban service district and the rural service district in amounts proportionate
to the current benefit ratio times the current ratio between the market values of all taxable property
within the urban service district and all taxable property within the rural service district. Within
each district, the amount so allocated shall be spread upon all taxable property in proportion to
the net tax capacity thereof.
    Subd. 7. Tax classification of parcels not affected. This section does not affect the
classification of individual parcels of land for purposes of taxation under the provisions of section
273.13. No law or charter limiting the incurring of indebtedness or the levy of taxes by any city by
reference to its population or the net tax capacity of taxable property therein is amended by this
section in its application to any city whose area is divided into urban and rural service districts.
    Subd. 8. Platted parcels. Notwithstanding the provisions of subdivisions 2 and 5, a rural
service district established by any city may include platted parcels of land which the governing
body determines to be rural in character and not developed for urban residential, commercial, or
industrial purposes. Whenever any lot or portion of a platted parcel which is included in the rural
service district is developed for commercial, industrial or urban residential purposes, or basic
urban services such as sewer, water, or street improvements are extended to any such lot or
portion, the governing body shall transfer the entire platted parcel to the urban service district. The
governing body of such city shall annually review the tax ratio applicable to such platted parcels
as determined under subdivision 2, and shall annually review the status of all such platted parcels
to determine whether such parcels continue to qualify for inclusion in the rural service district.
History: 1965 c 712 s 1; 1971 c 569 s 1; 1971 c 778 s 1; 1973 c 123 art 5 s 7; 1975 c 271 s
6; 1975 c 339 s 8; 1986 c 444; 1Sp1986 c 3 art 1 s 82; 1988 c 719 art 5 s 84; 1989 c 329 art 13 s
20; 1991 c 291 art 12 s 7; 2003 c 2 art 5 s 4