2023 TIF Legislation

The 2023 Legislature amended or enacted 14 special laws providing exceptions to the TIF Act for 12 authorities. The Legislature also made the following change to the TIF Act (all but the first of which were proposed by the OSA):

Small Cities The definition of small city (which had previously been a city with a population of 5,000 of less located ten miles ten or more miles from a Minnesota city of 10,000 or more) was amended to change the distance parameter from ten miles to five miles, thereby allowing additional cities to meet the definition. This change is effective for districts with a request for certification made after July 1, 2023.

Administrative Expenses The definition of administrative expenses (Minn. Stat. Section 469.174, subd. 14) was amended to add a non-exhaustive list of items that are included as administrative expenses, while continuing to identify items that are excluded. The changes notably clarify that amounts used for the usual and customary maintenance and operation of properties purchased with tax increment are administrative expenses and that amounts paid for property taxes or payments in lieu of taxes are excluded. The administrative expense limit provision (Minn. Stat. Section 469.176, subd. 3) was amended to clarify some language and provide an exception where the use of increments that are from sales and lease proceeds that are used for the usual and customary maintenance and operation of properties purchased with tax increment are not subject to the limit.

Pooling Provisions Substantial changes were made to pooling provisions with the intention of clarifying ambiguities and providing a clearer calculations and procedures, especially with respect to the Six-Year Rule. Changes included:

  • Amending the overall pooling limit (under Minn. Stat. Section 469.1763, subd. 2) to clarify that payments of county admin fees, like county road costs, are not part of the limit calculation; clarify how the limit should be calculated when increment is returned to the count; and clarify other language;
  • Amending the Five-Year Rule (under Minn. Stat. Section 469.1763, subd. 3) to delete an obsolete reference, clarify language, and remove reference to “2(d) pooling” as it is better addressed under the Six-Year Rule rather than also being included in the Five-Year Rule in a way that introduces confusion; and
  • Significant changes to the Six-Year Rule (under Minn. Stat. Section 469.1763, subd. 4) to:
    • remove the annual limit that had been in prior law that was difficult for authorities to understand, difficult to monitor and oversee, and offered questionable value beyond the overall pooling limit; and
    • to rework the decertification requirement by replacing ambiguous language with a clearer calculation, address more explicitly how it applies to pay-as-you-go contracts and notes (which includes required parcel removals in some instances), clarify timing and processes, and clarify an authority’s ability to pool for affordable housing under the “2(d)” election.

Violation Provisions Several clarifications were made to provisions in Minn. Stat. Section 469.1771 that address violations of the TIF Act, including:

  • Deletion of an obsolete sentence in the provision relating to the improper collection of increment, (Minn. Stat. Section 469.1771, subd. 2), that seemed to have been based on an assumption that is not consistent with how current-day processes have evolved;
  • Streamlining language in the provision relating to suspension of distribution of increment, (Minn. Stat. Section 469.1771, subd. 2a), that was an artifact of past law changes; and
  • Correcting a reference related to expenditures made in violation (under Minn. Stat. Section 469.1771, subd. 3) to properly cover all such violations under the full TIF Act (versus a narrower portion of it).

Miscellaneous Changes also included:

  • A new definition of “pay-as-you-go contract and note” (in Minn. Stat. Section 469.174, subd. 30);
  • A change to require that only the year of first receipt of increment is a required reporting item instead of the month and year (under Minn. Stat. Section 469.175, subd. 6);
  • A technical, grammatical correction to clarify that administrative expenses are authorized under the general rule for how tax increment may be used (under Minn. Stat. Section 469.176, subd. 4); and
  • A technical correction to pooling for deficits language (under Stat. Section 469.176, subd. 6) to fix a flaw in the determination of deficit amounts where it should equal one amount minus the sum of two other amounts, rather than the first amount, minus the second, plus the third.