"Administrative" TIF Plan Modifications

From time to time, the Office of the State Auditor (OSA) sees language in tax increment financing (TIF) plans that may reflect an incorrect understanding of the process required to implement particular types of modifications to the TIF plan in the future. While the TIF Act allows some modifications to the TIF Plan to be made without the authority having to go through the more robust consultation, notice, public hearing process that was followed for the original Plan, other types of modifications require that full process. See Minnesota Statutes, section 469.175.

One example of confusion that sometimes arises has to do with changes in cost line items in the TIF Plan. Some TIF Plans include language that suggests that the authority may make changes to the amounts of specific line items describing costs without following the full notice and hearing process, provided that the "overall" or "total" cost remains unchanged. However, this may not be in compliance with the TIF Act, depending on what costs are being addressed.

The TIF Act distinguishes between estimates of the "cost of the project, including administrative expenses," and estimates of "interest as a financing cost." Therefore, if the "total" or "overall" cost that is not changing includes both line items related to (1) the cost of the project, including administrative expenses, and (2) estimates of interest as a financing cost, then the authority needs to determine whether there is an increase to the cost of the project, including administrative expenses. If there is, then even if there are reductions in the estimates of interest as a financing cost that completely offset that increase, the modification does require the authority to follow the consultation, notice, public hearing, and findings process.

Date this Avoiding Pitfall was most recently published: 3/12/2021