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

Soils Condition TIF Districts

Duration Limit

How long can increments be collected from a district?

The law permits increments to be collected for 20 years after the receipt of the first increment from a soils condition district. Minn. Stat. § 469.176, subd. 1b(2). Thus, counting the first year of increment, 21 years of increment may be collected.

Does the 20-year duration limit apply to all soils condition districts?

No, soils districts created under prior laws were subject to shorter or longer duration limits. The legislature has changed the duration limit for soils condition districts twice. The original 1979 TIF Act allowed soils condition districts as a type of redevelopment district with a duration limit of 25 years. 1979 Minn. Laws 840-41, ch. 322, § 3(10)(a)(3), codified as Minn. Stat. § 273.73, subd. 10(a)(3) (1979 Suppl.).  In 1988, the legislature reduced the duration limit to 12 years from approval of the TIF plan, effective for requests for certification made after May 1, 1988. 1988 Minn. Laws 1988, ch. 719, art. 12, § 15, codified as Minn. Stat. § 469.176, subd. 1 (e) (1988). This change allowed (at most) ten years of increments and often less.  In 1997, the legislature increased the duration limit to the present limit of 20 years. 1997 Minn. Laws 2563, ch. 231, art. 10, § 6, codified as Minn. Stat. § 469.176, subd. 1b(a)(3) (1997 Suppl.).


Geographic Areas that Qualify

Where may a soils condition TIF district be created?

A soils condition TIF district may be created for a site only if two conditions are met:

  1. Hazardous substances, contaminants, or pollution are present on the site, and they must be cleaned up "to use" the property. The law does not specify whether this cleanup requirement applies to (1) any use of the property or (2) a proposed use of the property (e.g., under the plan) which may differ from the existing uses of the property. How this "to use" requirement is interpreted will affect whether a soils condition district can be used to clean up a site that is necessary for a new development, such as a housing development, but not for an existing use, such as manufacturing. Cleanup requirements may be more stringent for residential uses, as compared with industrial uses.
  2. The costs of cleanup exceeds the lesser of (1) the property’s fair market value or (2) $2 per square foot.  This test may be applied to the entire district or to each parcel of property (e.g., some parcels may qualify under the fair market value test, while others qualify under the $2 test). Minn. Stat. § 469.174, subd. 19.

What is the history of changes in the rules for soils condition TIF districts?

The legislature has made several substantial changes in the rules for qualifying soils districts.

  1. Original act. The original 1979 TIF Act allow creation of redevelopment districts for areas that had relatively low levels of soils preparation costs. To qualify under these rules, 80 percent or more of the district must require soil preparation (including installing utilities).  And this preparation must not increase the market value of the land by its full cost.  1979 Minn. Laws 840-41, ch. 322 § 3(10)(a)(3), codified at Minn. Stat. § 273.73, subd. 10(a)(3) (1979 Suppl.).
  2. 1982 definition tightened. The 1982 Legislature tightened up the qualifying definitions to require "unusual terrain and soil deficiencies required substantial filling, grading, or other physical preparation * * *." 1982 Minn. Laws 887, ch. 523, art. 38 § 1, codified at Minn. Stat. § 273.73, subd. 10(a)(3) (1982). These changes were effective for requests for certification made after June 30, 1982.  Even with these restrictions, the law remained very expansive. This lead to cases in which redevelopment districts were used for vacant land sites with modest soil preparation problems (e.g., the need to do grading, compaction, or install drainage systems) in prime development areas (e.g., high value suburban areas).
  3. Wetlands and planning requirements. The 1988 Legislature prohibited the use of soils districts to develop wetlands and required them to be consistent with land use plans for the area. 1988 Minn. Laws 1980-81, ch. 719, art. 12 § 8, codified at Minn. Stat. § 469.174, subd. 19 (1988). These changes were effective for requests for certification made after May 1, 1988.
  4. Cost test and hazardous substances. The 1993 Legislature added the presence of hazardous substances, contaminants, and pollution to permit an area to qualify as a soils condition district. More importantly, the cost test in present law was added–i.e., the cost of preparation or cleanup must exceed the fair market value of the property or $2 per square foot. 1993 Minn. Laws 2962, ch. 375, art. 14 § 4, codified at Minn. Stat. § 469.174, subd. 19 (1993 Suppl.). This change was effective for certification was made after August 1, 1993. The legislature has not adjusted the $2 amount for inflation since its enactment in 1993.
  5. Restriction to cleanup. The 1995 Legislature restricted soils condition districts to areas with hazardous substances, pollution, and contaminants.  1995 Minn. Laws 2971-72, ch. 264, art. 5 § 13, codified at Minn. Stat. § 469.174, subd. 19 (1995 Suppl.).

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Permitted Uses of Increments

What may soils district increments be spent on?

Soils district increments may be spent to pay for:

  1. Acquiring land containing hazardous substances, pollution, or contaminants
  2. The cost of removal and remedial actions
  3. Administrative expenses. Minn. Stat. § 469.176, subd. 4b.

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Data on Use of Districts

How many soils condition districts are active?

According to the March 2017 Report of the State Auditor, there were 10 soils condition districts at the end of calendar year 2015. Soils districts constituted less than 1 percent of all TIF districts.

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July 2017

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