2007 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.
(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), (3), and (4).
    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 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, 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;
(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.
(e) For a district created within a biotechnology and health sciences industry zone as defined
in 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. Public infrastructure expenditures are considered as expenditures for
activities within 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;
(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).
    Subd. 4. Use of revenues for decertification. (a) In each year beginning with the sixth year
following certification of the district, if the applicable in-district percent of the revenues derived
from tax increments paid by properties in the district exceeds the amount of expenditures that have
been made for costs permitted under subdivision 3, an amount equal to the difference between the
in-district percent of the revenues derived from tax increments paid by properties in the district
and the amount of expenditures that have been made for costs permitted under subdivision 3 must
be used and only used to pay or defease the following or be set aside to pay the following:
(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);
(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; or
(4) the amount provided by the tax increment financing plan to be paid under subdivision 2,
paragraphs (b), (d), and (e).
(b) The district must be decertified and the pledge of tax increment discharged when the
outstanding bonds have been defeased and when sufficient money has been set aside to pay, based
on the increment to be collected through the end of the calendar year, the following amounts:
(1) contractual obligations as defined in subdivision 3, paragraph (a), clauses (3) and (4);
(2) the amount specified in the tax increment financing plan for activities qualifying under
subdivision 2, paragraph (b), that have not been funded with the proceeds of bonds qualifying
under paragraph (a), clause (1); and
(3) the additional expenditures permitted by the tax increment financing plan for housing
activities under an election under subdivision 2, paragraph (d), that have not been funded with the
proceeds of bonds qualifying under paragraph (a), clause (1).
    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 August 1, 2001, and without regard to whether
the request for certification was made prior to August 1, 1979.
(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. The municipality may transfer
increments as provided by this subdivision without regard to whether the transfer or expenditure
is authorized by the tax increment financing plan for the district from which the transfer is made.
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 collected or to be collected from properties located within the
district that are available for the calendar year including amounts collected in prior years that
are currently available; plus
(iii) total increments from properties located in other districts in the municipality including
amounts collected in prior years 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 Laws 2001, First Special Session chapter 5); 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, and Laws 2001, First Special
Session chapter 5, or the elimination of the general education tax levy under Laws 2001, First
Special Session chapter 5.
The authority may compute the deficit amount under clause (1) only (without regard to
the limit under clause (2)) if the authority makes an irrevocable commitment, by resolution, to
use increments from the district to which increments are to be transferred and any transferred
increments are only used to pay preexisting obligations and administrative expenses for the
district that are required to be paid under section 469.176, subdivision 4h, paragraph (a).
(c) A preexisting obligation means:
(1) bonds issued and sold before August 1, 2001, or bonds issued pursuant to a binding
contract requiring the issuance of bonds entered into before July 1, 2001, and bonds issued to
refund such bonds or to reimburse expenditures made in conjunction with a signed contractual
agreement entered into before August 1, 2001, to the extent that the bonds are secured by a pledge
of increments from the tax increment financing district; and
(2) binding contracts entered into before August 1, 2001, to the extent that the contracts
require payments secured by a pledge of increments from the tax increment financing district.
(d) The municipality may require a development authority, other than a seaway port
authority, to transfer available increments including amounts collected in prior years that are
currently available 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. The municipality may use this authority only after it has first used all
available increments of the receiving development authority to eliminate the insufficiency and
exercised any permitted action under section 469.1792, subdivision 3, for preexisting districts of
the receiving development authority to eliminate the insufficiency.
(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) is an exception to the restrictions under section 469.176, subdivisions 4b, 4c, 4d, 4e, 4i,
and 4j ; the expenditure limits under section 469.176, subdivision 1c; 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
(2) 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.
(f) If a preexisting obligation requires the development authority to pay an amount that is
limited to the increment from the district or a specific development within the district and if
the obligation requires paying a higher amount to the extent that increments are available, the
municipality may determine that the amount due under the preexisting obligation equals the
higher amount and may authorize the transfer of increments under this subdivision to pay up to
the higher amount. The existence of a guarantee of obligations by the individual or entity that
would receive the payment under this paragraph is disregarded in the determination of eligibility
to pool under this subdivision. The authority to transfer increments under this paragraph may only
be used to the extent that the payment of all other preexisting obligations in the municipality due
during the calendar year have been satisfied.
(g) For transfers of increments made in calendar year 2005 and later, the reduction in
increments as a result of the elimination of the general education tax levy for purposes of
paragraph (b), clause (2), for a taxes payable year equals the general education tax rate for the
school district under Minnesota Statutes 2000, section 273.1382, subdivision 1, for taxes payable
in 2001, multiplied by the captured tax capacity of the district for the current taxes payable year.
History: 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; 2000 c 490 art 11 s 28; 1Sp2001 c 5 art 15 s 16; 2002 c 377 art 7 s 3; art 9 s 14; 2003
c 127 art 10 s 14-16; 1Sp2003 c 21 art 10 s 5,6; 2005 c 152 art 2 s 16,17; 2006 c 259 art 10 s 5-8