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Legislature > House of Representatives > House Research > Property Taxes > Tax Increment Financing

Renewal and Renovation TIF Districts

Duration Limit

How long can increments be collected from a renewal and renovation district?

The law permits renewal and renovation district increments to be collected for 15 years after the receipt of the first increment. Minn. Stat. § 469.176, subd. 1b(2).  Thus, counting the first year of increment, 16 years of increment may be collected.

What is the history of changes in the duration limit for renewal and renovation districts?

The duration limit for renewal and renovation districts has been changed once since the Tax Increment Financing Act was passed in 1979. The current duration limit was enacted by the 1990 Legislature and applies to requests for certification made after April 30, 1990. 1990 Minn. Laws 2588-89, ch. 604, art. 7 § 15, codified at Minn. Stat. § 469.176, subd. 1b.  The original 1979 TIF act allowed areas meeting the criteria for renewal and renovation districts to qualify as redevelopment districts. Thus, these districts had the same 25-year duration limits that apply to redevelopment districts. 1979 Minn. Laws 840 and 844, ch. 322 §§ 3, 5, codified at Minn. Stat. §§ 273.73, subd. 10(a)(2); 273.75, subd. 1 (1979 Suppl.).

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Geographic Areas that Qualify

Where may a renewal and renovation district be created?

An area must meet a "blight test" to qualify for establishment of a renewal and renovation district. This test is similar to that required for redevelopment districts. However, areas that contain lower proportions of structurally substandard buildings qualify. In return, renewal and renovation are subject to a shorter duration limit than redevelopment districts.

What areas qualify under the blight test?

To qualify under the blight test:

  1. 70 percent of the area of the district must be occupied by buildings, streets, utilities, or other improvements.
  2. 20 percent of the buildings must be structurally substandard.
  3. 30 percent of the other buildings must have conditions that require clearance or substantial renovation.  Minn. Stat. § 469.174, subd. 10a.

The statute lists the conditions that satisfy #3:

  • inadequate street layout
  • incompatible uses or land use relationships
  • overcrowding of buildings on the land
  • excessive dwelling unit density
  • obsolete buildings not suitable for improvement or conversion
  • other identified hazards to the health, safety, and general well-being of the community.

As is the case with the blight test for redevelopment districts, application of these criteria requires a good deal of subjective judgment by the authority.

How do the blight tests for redevelopment districts compare with those for renewal and renovation districts?

This table compares the two blight tests.

Blight Criterion Redevelopment Districts Renewal and Renovation Districts
Area occupied by buildings and improvements 70% 70%
Substandard buildings 50% 20%
Obsolete or incompatible land uses etc. NA 30%

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Permitted Uses of Increments

What are the permitted uses of renewal and renovation district increments?

The spending restrictions applicable to a redevelopment district also apply to renewal and renovation districts: 90 percent of the increments must be spent for blight correction – i.e., fixing the conditions that allowed designation of the district. The statute contains a list of qualifying expenditures:

  • Site acquisition of blighted sites or sites requiring pollution cleanup
  • Acquisition of adjacent parcels to assemble a site large enough to redevelop
  • Cleanup of hazardous substances, pollution, or contaminants
  • Site preparation, such as clearing the land and installation of utilities, roads, sidewalks
  • Providing parking facilities.  Minn. Stat. § 469.176, subd. 4j.

The law explicitly provides that this is not an exhaustive list. Administrative expenses of the authority that are allocated to these activities also meet the 90 percent test.

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Data on Use of Districts

How many renewal and renovation districts are active?

According to the March 2017 Report of the State Auditor, there were 25 renewal and renovation districts at the end of calendar year 2015. This is less than 1 percent of all active districts, the smallest category of TIF districts.

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July 2017

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