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Four types of governmental units have some role under the TIF law:
A development authority or authority is a government entity authorized by the TIF law to exercise tax increment financing powers. Minn. Stat. § 469.174, subd. 2. Authorities include the following entities:
Municipalities (cities and sometimes counties and towns) may act as authorities by exercising the powers of an HRA, EDA, or a port authority under a general or special law that gives them these powers. In some cases, the members of a city council serve on the governing body of separate development authorities (e.g., an HRA or EDA). In still other cases, the governing bodies of the city and the development authority may be the same (e.g., the city council is also the HRA or EDA governing body).
Although precise statistics are not gathered on the types of authorities exercising TIF, conventional wisdom is that most TIF is done by EDAs, HRAs, and cities themselves acting under the municipal development district law.
Development authorities make almost all of the TIF decisions, at least initially. Their powers to do so are determined by both the TIF Act and by the separate laws that authorize and grant powers to the authority. The authority approves the TIF plan. The municipality must also approve the plan. The plan sets out the important parameters for the use of TIF including:
Perhaps, even more importantly, the authority carries out this plan. The authority makes the day-to-day decisions about spending increments under the plan. Thus, the authority negotiates development agreements with developers. It may contract for construction of public improvements or other costs. It typically hires the consultants, lawyers, and other advisors that shape many of the plans and decisions.
Under the TIF law, a municipality must approve some of the authority’s decisions. Thus, it is important to be able to identify the municipality. In most circumstances, the law provides that the city in which the TIF district is located is the municipality. For districts located outside of a city, the municipality may be either an urban town or a county.
The principal responsibility of the municipality is to approve the TIF plan and substantial amendments or changes to the plan. Minn. Stat. § 469.175, subd. 3. These approval requirements also apply to major amendments to TIF plans. Minn. Stat. § 469.175, subd. 4. However, municipal approval and findings are not required for hazardous substance subdistricts. The development authority carries out these responsibilities. Minn. Stat. § 469.175, subd. 7(a).
The law sets out specific requirements for municipal approval of TIF plans. Minn. Stat. § 469.175, subd. 3. The major requirements include:
The findings and the factual basis for the findings must be documented in writing.
The municipality also must meet these requirements (publication, public hearing, and findings) for major amendments to the TIF plan. Minn. Stat. § 469.175, subd. 4. These include:
Other TIF responsibilities and powers of the municipality include:
Counties have fairly limited roles in making TIF decisions, although county officials are responsible for administering the collection and distribution of increments for TIF districts. The counties’ powers and responsibilities consist of three components:
Before approving a TIF district, the development authority must notify the county and provide a copy of the proposed TIF plan and an estimate of the impact on the county. Minn. Stat. § 469.175, subd. 2. This must be done at least 30 days before the public hearing is scheduled. For housing or redevelopment districts, separate notices must also be given to individual county commissioners who represent the area of the district. Minn. Stat. § 469.175, subd. 2a. If the county disagrees with the TIF proposal, its only power is to persuade the authority to abandon or modify its plans. It cannot veto or delay adoption of the plan.
The county may charge the TIF authority for county road costs, if:
After receiving the TIF plan, the county has 45 days to submit the road costs to the development authority. Minn. Stat. § 469.175, subd. 1(b). The authority is required to add the improvements to the TIF plan. Since the TIF plan can be approved within 30 days and road costs may be submitted after 45 days, this may require a plan amendment. If the costs “break the budget” in the TIF plan, the authority and county are to negotiate an agreement to permit the financing. If they cannot agree, the dispute must be submitted to binding arbitration. Minn. Stat. § 469.1762.
Although counties have a very limited decision-making role in TIF, county officials have a substantial role in administering TIF. Specifically, county officials:
Yes, the county may require the development authority to pay these costs. Increments from the district are generally used for this purpose. Minn. Stat. § 469.176, subd. 4h.
Schools are provided notice of the TIF plan and its estimated fiscal impact. The school district may make comments and provide advice to the authority. As is the case with the county, a school district’s only power is to persuade the authority to abandon or modify its plans.
November 2009