4E, Approval of Special Legislation Re Tax Increment Financing

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OlJtLINE OF SPECIAL TIF LEGISLATION FOR TeAAP PROJECT CITY OF ARDEN HILLS November 24, 2008 The Problem. Minnesota Statutes, Sections 469.174 to 469 .1799 (the "TIP Act") creates several difficulties for the use of tax increment financing in large-scale, multi-phase redevelopment efforts. The problems are exacerbated in the case of TCAAP, for these reasons: . Based on preliminary analysis by a consulting architect, the TCAAP Site easily qualifies as a redevelopment district, but a detailed study of approximately 160 abandoned structures would require a significant uI1hecessary expenditure. . While the TCAAP Site qualifies as a redevelopment district, the 5-year rule and 26-year duration do not match up with a development schedule that will likely extend for more than a decade. . If smaller, separate TIP districts were created, pooling rules prevent the financing of project-wide infrastructure, which may be located outside the boundaries of individual TIF districts. . The redevelopment requires large initial investment (demolition, infrastructure, grading, clean-up), followed by a slow and uncertain build-out, which hinders the city's ability to determine when the first significant increment will be received, and creates the possibility that 26 years of increment will include, many partial years, substantially reducing the overall tax increment revenues. The Proposed Solution. Under proposed special legislation, the City of Arden Hills would be authoriz~d to establish a tax increment district under these general principals: 1. The City is authorized to establish the TCAAP Site (legally defined in the legislation) as a redevelopment tax increment district, subject to the 'rules described below. The TCAAP Site is deemed to meet the criteria for redevelopment districts under Minnesota Statutes, Section 469.174, subd. 1 O( a). 2. The five-year rule under Section 469.1763, subd. 3, regarding the reimbursement of eligible project costs, is extended to ten yeats. 3. The City may collect increment for a period of 30 years after first 'receipt of increment (extending the duration under general law from 26 to 31 years).