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HRSR CANCELLED 12-24-2001 • „>• ‘‘.,'(* ia*/ City of Elk 4°. .--.---. River CANCELLATION NOTICE OF HOUSING AND REDEVELOPMENT AUTHORITY MEETING The regularly scheduled December 24, 2001, meeting of the Housing and Redevelopment Authority has been cancelled. TH ULAR' ----...',111,16(J.1 %TLD: ,� �rktrhMt ", gtea, ,� , • ! % ii/�i/i%lri�" iii / MP i /� 5:0 �p��1 ,�/ ,� � --. / �i��j Ear ..., //� ii/,✓�/j 4.1.1 i � � may/ . ,, % Rrver �, Hall „.,,m0,,:.07,,,,,,i,,,,,,,,7„:;-.:.,..4:!,8.,...:1177,.. �q Orono Pais .:::,„.711.11141, iii/% �j/moi% /;,, i / if� Larry Toth, Chair s:\clerk\mtginfo\hra mtg cancel.doc 0 City of Elk -�-1 River MEMORANDUM TO: Housing & Redevelopment Authority FROM: Catherine Mehelich, Director of Economic Development DATE: December 20, 2001 SUBJECT: December Meeting Cancellation Due to the Christmas holiday the December regular HRA meeting has been cancelled. Attached is a copy of the draft minutes from the November HRA meeting, as well as the minutes from the joint meeting with the City Council and Planning Commission. • The next regular HRA meeting will be January 28, 2001. The January meeting will include the following agenda items: • Annual Business • NE Corner Hwy 169 &Main Street Redevelopment Update • Downtown Sidewalk Project Summary • Review Downtown Revitalization Development Concepts Attached is a copy of an article from the December 10, 2001 MN Real Estate Journal regarding the current scrutiny of TIF redevelopment districts and its impact on future municipal redevelopment projects. Happy Holidays to you and your families! • • Page 8 • Minnesota Re .tate Journal Decem 10, 2001 REPORTS TIF still viable tool, but court decision is warning to cities A CASE STUDY ON goz n wi , ���,� � �r � * .��-^ that Walser could not challenge the inclu- WALSER BEST BUY t� s i sion of its property in the district. Never- ' � theless, the Court found that a May 15, 2000, amendment to the statute created a by Eric Galatz and Kathryn Hahne „ right to sue a municipality for wrongly including or retaining a property in a TIF • - , 17" 1 • district. Because the Walser property con- Last month, the Minnesota Court of tinued to be retained in the Interchange Appeals issued a decision that jeopar- : i " West TIF district after May 15, 2000, the dizes the availability of public assistance ' • Court held that Walser could challenge the for the Best Buy Corp. headquarters now '...'4,g1:444'.4.43,111.444, retention of its property in the district. GU � under con- ti4_ 54 a+ This decision puts municipalities on struction in the notice that for districts created before or Columnists city of Rich- after May 15, 2000, they are at risk of a field. In very • g 't1 ' t lawsuit for retaining in a district any prop- strong language, the Court of Appeals '"` xFF • erty that should not have been included in found that Richfield violated the statute y 4 i' 0 t the first place. that gives municipalities authority to use ,-fr _-.� d,4.,„- ,- - ! ti, Public purpose. The TIF act requires a tax increment financing (TIF) to encour- PHOTOS COURTESY OF LEONARD,STREET AND DEINARD municipality to find the TIF assistance pri- age development: Eric Galatz Kath n Hahne manly serves a public purpose. In the Exhibiting a particular municipal mean- rY Walser case, the Court of Appeals found ness, [Richfield] completely ignored the that the district court had only considered statutory prerequisites for exercise of this has specific requirements for creating the The Court found that,even if Richfield's whether the TIF assistance served some financing tool. The provisions of Minn. district and restrictions on the use of TIF reasoning was correct, Richfield was public purpose, without determining Stat. § 469.1771 (2000) are intended to funds. wrong to use nonstructural defects,inflat- whether the primary purpose was public. provide a means to ensure that such a bla- ed cost factors and unsupported assump- The Court of Appeals remanded the ques- tant disregard for limits on municipal How not to create a tions about the condition of the buildings tion to the district court for further consid- authority will be answerable. TIF redevelopment district to reach its conclusion that 91 percent of eration. It may be some time before the case is The Court of Appeals found that several the buildings that could not"by any means Critics of TIF often complain that TIF finally resolved. Whatever the final out- aspects of Richfield's TIF district creation be regarded as `rundown"'were neverthe- provides more of a direct benefit to a spe- come,the case will affect the way munici- were"fundamentally flawed" less structurally substandard. cific developer than to the taxpayers. palities provide public assistance to private To qualify as a redevelopment district, The Court found that Richfield failed to Future municipal findings about TIF dis- development throughout the state. more than 50 percent of the existing build- follow the statutory requirement to use tricts will almost certainly contain very ings in Best Buy's path had to be "struc- "best efforts to obtain permission” from specific findings about the relative weight Walser and the Best Buy project turally substandard." Richfield retained property owners to do interior inspections of public and private purposes. Richfield's Housing and Redevelopment consultants to evaluate the 74 residential to determine whether the buildings were Authority contracted to provide$48 mil- and 16 commercial properties in the dis- structurally substandard. Richfield sent TIF will go on lion in direct subsidy and another$7 mil- trict.In their proposal to Richfield,the con- property owners two letters requesting a Tax increment has become a significant- lion for construction of a new bridge at sultants noted that the residential proper- "voluntary inspection,"allowing one week ly less valuable development tool in recent Penn Avenue and Interstate 494 to assist ties in the proposed district were generally to respond to each letter.There were no fol- years for reasons unrelated to the Walser development of a$160 million corporate in good condition and could not"by any low-up telephone calls.No door knocking. litigation.The Minnesota Legislature has headquarters for Best Buy. The project is means be regarded as `rundown.— The The Court found that failure to use other placed substantial restrictions on TIF in the northeast quadrant of I-494 and Penn consultants recommended using an"alter- methods that were readily available and throughout the last decade to address real Avenue, in the Interchange West redevel- native approach" to reach the "desired often used in other TIF districts,along with and perceived abuses of the financing tool. opment area in Richfield. result." the fact that the city obtained access to only The 2002 property tax reform significantly Interchange West is an approximately 20 percent of the buildings,was"powerful reduces the source of revenues for TIF by 40-acre parcel that included 7 acres owned evidence that `best'efforts were not uti- reducing everyone's property taxes. In by members of the Walser family. The The Court' s holdings on lized." most districts, the reform will result in Walsers leased their property to two auto- The TIF statute requires that the strut- approximately 40 percent Jess in h F rev- mobile dealerships, which are also owned Richfield's use of TIF for Best turally substandard buildings be"reason- enues. by members of the family. Richfield took ably distributed" throughout the district. The Court's holdings on Richfield's use the Walser property by condemnation,dis- The Court found Richfield failed this test of TIF for Best Buy are instructive for placing both Walser dealerships for the Buy are instructive for cities because all of the allegedly substandard cities undertaking similar projects and a Best Buy project. buildings were in the northern 60 percent warning to those who would by-pass statu- The Walsers challenged the condemna- undertaking similar projects of the proposed district, almost all were tory requirements to achieve a "desired tion,TIF subsidy,adequacy of the environ- residential properties and"the city conve- result." mental review,municipal zoning and land- niently drew the TIF district lines to But the decision should not alarm use approvals, Minnesota Pollution Con and a warning for those include the valuable property with 1-494 municipalities that have diligently followed trol Agency(MPCA) indirect source per- frontage,even though none of the alleged- the statute.The decision does not place any mits and the failure of the Metropolitan who would by-pass ly substandard buildings were found with- new restrictions on a city's use of TIF. Council to conduct a Metropolitan Signify- in this region." Indeed,TIF is alive and well, and remains cance Review.This article addresses only The Court found that "even a cursory a viable tool for development. However, the TIF lawsuit. statutory requirements to review of the exhibits submitted reveals the Walser decision should make everyone that the allegedly substandard properties involved in publicly assisted real estate TIF in a nutshell achieve a "desired result." were not `reasonably distributed'through- projects more aware and respectful of the TIF is one of the few tools a municipal- out the district at all." rules that govern this valuable development ity can use to provide financial assistance tool. J to a private development. TIF allows a Standing and public purpose municipality to divert the increase in prop- The consultants determined that almost The Court's holdings with respect to Eric Galatz is an attorney in the real erty tax revenues generated by a project all of the residential structures were"strut- standing and public purpose may have a estate, construction and public law groups from the general fund to pay for specified turally substandard,"almost entirely on the broader effect on existing and future TIF of Leonard,Street and Deinard PA.He rep- project costs. assumption that the buildings built in the projects than its holdings on creation of this resents developers of publicly assisted pm- The TIF statute imposes strict limits on 1960s and 1970s were not insulated up to particular TIF district. jects and has lectured on TIF,smart growth how a municipality can use TIF.A munici- the standards for new construction in the Standing. Standing is the right to sue. and new urbanism. pality must find the subsidy primarily current energy code.The Court of Appeals The TIF act specifically grants "owners of serves a public purpose and that, "but for" rejected the alternative approach,in part, taxable property located in the city" the Kathryn Hahne, also anattorney at the the subsidy, the developer would not pro- because substandard insulation is not a right to bring suit against a municipality for firm,practices in the areas of government ceed with the project. The municipality structural defect. failure to comply with the TIF act, with relations, real estate and public law. She must also establish a TIF district,defining The Court criticized Richfield for"flip- limits on what the property owner can represents developers and public agencies the geographic area in which the project ping" a statutory guideline. The statute recover from the municipality. In the on tax increment and other types of devel- will be located and from which the munic- says that a building that can be brought into Walser case, the Court found that before opment projects. ipality will take the TIF funds for the pro- compliance with the building code for 15 May 15,2000,a property owner could sue ject. percent of its replacement cost is not struc- a municipality for wrongly including or Leonard, Street and Deinard and Malk- The TIF statute creates different types of turally substandard. Richfield took the retaining a property in a TIF district. erson Gilliland &Martin LLP represent TIF districts for different purposes,includ- view that a building that cannot be brought Because Richfield included the Walser Walser in its several actions against the ing housing,redevelopment and hazardous in compliance for that cost is then struc- property in the Interchange West TIF dis- city of Richfield. waste cleanup. Each type of TIF district turally substandard. trict before May 15, 2000,the Court held 10,