1999 Minnesota Statutes

     469.1763 Restrictions on pooling; five-year limit. 

    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. 

    Subd. 2.    Expenditures outside district.  (a) For each 
 tax increment financing district, an amount equal to at least 75 
 percent of the 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 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 revenue 
 derived from tax increments for 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. 

    Subd. 3.    Five-year rule.  (a) Revenues derived from 
 tax increments 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; or 

    (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. 

    (b) For purposes of this subdivision, bonds include 
 subsequent refunding bonds if the original refunded bonds meet 
 the requirements of paragraph (a), clause (2). 

    Subd. 4.    Use of revenues for decertification.  (a) 
 Beginning with the sixth year following certification of the 
 district, the applicable in-district percent of the revenues 
 derived from tax increments paid by properties in the district 
 that remain after the expenditures permitted under subdivision 3 
 must be used only to pay: 

    (1) outstanding bonds, as defined in subdivision 3, 
 paragraphs (a), clause (2), and (b); 

    (2) contracts, as defined in subdivision 3, paragraph (a), 
 clauses (3) and (4); or 

    (3) credit enhanced bonds to which the revenues derived 
 from tax increments are pledged, but only to the extent that 
 revenues of the district for which the credit enhanced bonds 
 were issued are insufficient to pay the bonds and to the extent 
 that the increments from the applicable pooling percent share 
 for the district are insufficient. 

    (b) When the outstanding bonds have been defeased and when 
 sufficient money has been set aside to pay contractual 
 obligations as defined in subdivision 3, paragraph (a), clauses 
 (3) and (4), the district must be decertified and the pledge of 
 tax increment discharged. 

    Subd. 5.    Credit enhanced bonds.  Except as otherwise 
 provided in this section, revenues derived from tax increments 
 may be used to pay debt service on credit enhanced bonds issued 
 to finance activities outside of the district from which the 
 revenues are derived, regardless of when the district is 
 created.  For purposes of this subdivision, "district" includes 
 a district or a project area for which certification to collect 
 increments was requested before August 1, 1979. 

    Subd. 6.    Pooling permitted for deficits.  (a) This 
 subdivision applies only to districts for which the request for 
 certification was made before June 2, 1997. 

    (b) The municipality for the district may transfer 
 available increments from another tax increment financing 
 district located in the municipality, if the transfer is 
 necessary to eliminate a deficit in the district to which the 
 increments are transferred.  A deficit in the district for 
 purposes of this subdivision means the lesser of the following 
 two amounts: 

    (1)(i) the amount due during the calendar year to pay 
 preexisting obligations of the district; minus 

    (ii) the total increments to be collected from properties 
 located within the district that are available for the calendar 
 year; plus 

    (iii) total increments from properties located in other 
 districts in the municipality that are available to be used to 
 meet the district's obligations under this section, excluding 
 this subdivision, or other provisions of law (but excluding a 
 special tax under section 469.1791 and the grant program under 
 Laws 1997, chapter 231, article 1, section 19); or 

    (2) the reduction in increments collected from properties 
 located in the district for the calendar year as a result of the 
 changes in class rates in Laws 1997, chapter 231, article 1; 
 Laws 1998, chapter 389, article 2; and Laws 1999, chapter 243. 

    (c) A preexisting obligation means bonds issued and sold 
 before June 2, 1997, and bonds issued to refund such bonds or to 
 reimburse expenditures made in conjunction with a signed 
 contractual agreement entered into before June 2, 1997, to the 
 extent that the bonds are secured by a pledge of increments from 
 the tax increment financing district.  For purposes of this 
 subdivision, bonds exclude an obligation to reimburse or pay a 
 developer or owner of property located in the district for 
 amounts incurred or paid by the developer or owner. 

    (d) The municipality may require a development authority, 
 other than a seaway port authority, to transfer available 
 increments for any of its tax increment financing districts in 
 the municipality to make up an insufficiency in another district 
 in the municipality, regardless of whether the district was 
 established by the development authority or another development 
 authority.  This authority applies notwithstanding any law to 
 the contrary, but applies only to a development authority that: 

    (1) was established by the municipality; or 

    (2) the governing body of which is appointed, in whole or 
 part, by the municipality or an officer of the municipality or 
 which consists, in whole or part, of members of the governing 
 body of the municipality. 

    (e) The authority under this subdivision to spend tax 
 increments outside of the area of the district from which the 
 tax increments were collected: 

    (1) may only be exercised after obtaining approval of the 
 use of the increments, in writing, by the commissioner of 
 revenue; 

    (2) is an exception to the restrictions under section 
 469.176, subdivision 4i, and the other provisions of this 
 section, and the percentage restrictions under subdivision 2 
 must be calculated after deducting increments spent under this 
 subdivision from the total increments for the district; and 

    (3) applies notwithstanding the provisions of the Tax 
 Increment Financing Act in effect for districts for which the 
 request for certification was made before June 30, 1982, or any 
 other law to the contrary. 

    HIST: 1990 c 604 art 7 s 21; 1991 c 291 art 10 s 7-11; 1995 c 
 264 art 5 s 26,27; 1999 c 243 art 10 s 3