EDSR INFORMATION 06-12-1995 LAW OFFICES
BRIGGS AND MORGAN
PROFESSIONAL ASSOCIATION
. 2200 FIRST NATIONAL BANK BUILDING
SAINT PAUL,MINNESOTA 55101
TELEPHONE (9121 223-9000
FACSIMILE (012) 223-0450
MINNEAPOLIS OFFICE
2400 IDS CENTER
WRITER'S DIRECT DIAL NUMBER May 24, 1995 MINNEAPOLIS,MINNESOTA 55402
TELEPHONE(012)334-8400
FACSIMILE!012)334-8650
(612) 223-6420
INFORMATION
MEMORANDUM
FROM: Jim O'Mearap,
DATE: May 24, 1995
RE: Final Tax Increment Provisions of the Omnibus Tax Bill
The Legislature has passed the Tax Bill. If and when the Governor signs it, I will
provide you a more detailed summary of the tax increment provisions, but for now offer the
following very general observations:
1. The Bill DOES NOT CONTAIN many of the controversial proposals made by
Representative Ozment and others. The following earlier proposals did not
survive in any form in the Bill:
(a) The drastic restriction of the usability of tax increments from pre-5/1/90
tax increment districts.
(b) A similar curtailment that was proposed for pre-5/1/88 redevelopment
tax increment districts (including pre-1979 districts).
(c) The elaborate cost/benefit analysis that had been proposed as a
required finding for establishing tax increment districts.
(d) The requirement of finding that an economic development district had
to be for a project that would otherwise go to another state.
(e) The suggestions that TIF districts be approved by the State Auditor,
the School Board, or the County Board also did not survive.
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BRIGGS nND MORGAN
Memorandum
May 24, 1995
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(f) The "clawback" provision,which would've required payback of the TIF
assistance on a declining percentage scale for beneficiaries that bail out
of their projects.
There was significant progress made on the LGA/HACA front. There was a
liberalized exemption for ethanol projects (now up to $1,500,000 of TIF) and
for a new class of exempt projects for "agricultural processing facilities". In
addition, and of more general usefulness, there is now an alternative to opt
out of the general LGA/HACA penalty provisions by making a "qualifying
local contribution"which would be 10% for economic development, housing,
and renewal or renovation districts and 7.5% for redevelopment and other
types of tax increment districts. There would be a cap on the total of these
contributions at 2% of the city's net tax capacity, and the contribution must
come from unrestricted moneys of the tax increment authority or the
municipality (or the other local jurisdictions); the required contribution
amount would be cut in half if certain state grants or incentives were involved.
For many projects, this will prove quite useful. It is effective for tax increment
areas requested for certification after June 30, 1994 (yes, 1994), except that
for tax increment plans approved before July 1, 1995, the municipality must
III "opt in" to this program by adopting a resolution to do so prior to the end of
this year. This is the best news in years.
3. There was a proposal to change the anti-pooling rules from a 75/25% standard
to a 90/10% standard. The final Bill changed this to an 80/20% standard, a
minor change.
4. While the elaborate cost/benefit analysis was stricken from the required
findings, there was retained the concept of determining that the market value
of the new project, after subtracting the present value of the maximum tax
increment, would exceed the market value that would otherwise appear if the
tax increment weren't given.
5. There were adopted significant and lengthy new provisions regarding
disclosure, reporting and enforcement.
6. Effective June 30, 1995, soils conditions districts are restricted basically to
hazardous substance, polluted, or contaminated sites; there were also a
number of "remedial" provisions regarding hazardous substance subdistricts.
7. The 5,000 square foot one-time exception for commercial facilities in smaller
IPcommunities for economic development districts was deleted and there was
BRIGGS aND MORGAN
Memorandum
May 24, 1995
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added the ability to do that type of tax increment district for "bedrock soils
condition".
8. There were a number of provisions restricting the availability of special laws
in the tax increment area, including provisions which would hereafter require
the approval of all the local jurisdictions, including the county and the school
district, if a tax increment district is to be extended beyond its normal
statutory duration.
9. The 1/10th of 1% fee to be paid to the state for defraying its enforcement
costs will be effective January of next year.
10. There were limits on including in a new tax increment district any property
which was within the agricultural open space, or certain other classifications
within the past five years.
The above is very general. This Article of the Bill runs for 49 sections.
If, prior to receiving my more detailed summary if and when the Bill becomes law,
you have any particular questions on how any of this might affect your tax increment districts
or projects, please feel free to call me at 612-223-6420. On other fronts, neither the tax
freeze or the revocation of the tax-exemption of interest (even on State bonds) survived.
/lbh
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