1. Tax Increment Financing Districts1
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CITY OF
�HANBASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
MEMORANDUM
' TO: Kate Aanenson, Planning Director
FROM: Todd Gerhardt, Assistant City Manager
DATE: March 13, 1996
SUBJ: Tax Increment Financing Presentation
Listed below is an outline of my presentation to the `planning Commission on tax increment
financing on March 20, 1996. I have also attached a paper that Todd Hoffman completed as a
part of his courses at Hamline University. I think Todd's paper gives a good overview of tax
increment financing.
' Outline of Presentation on Tax Increment Financing
1. Summary of Types of Tax Increment Financing Districts.
2. Why should a city use Tax Increment Financing?
' 3. Project Example: Entertainment Complex/Redevelopment District.
4. Questions and Answers.
a w .....
Attached you will also find:two examples of other cities using tax increment financing —Eden
Prairie and Bloomington.
Attachments
1. Todd Hoffman's Paper on Minnesota Tancrement Financing
2. Project Example Information
3. Articles about TIF
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MINNESOTA TAX IN
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ANCING
By Todd Hoffman
Public Fiscal Management, MAPA Course
GPA 803, Hamline University
`DarrSilomone
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' Tax Increment Financing (TIF) was originally authorized by the state legislature in 1947.
Its wide spread use, however, did not occur until the late 1970s. TIF allows governmental
' agencies the opportunity to util pp y e property tax revenues for the economic development and
redevelopment of certain "districts." These districts may include deteriorating and dilapidated
downtowns, areas in need of low to moderate income housing, areas deficient in industrial and
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y h commercial properties, and other special districts. Historically, aid programs such as the US
Housing Act of 1949 and the Neighborhood Development Program (NDP) of 1968 provided
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k� sources of revenue for financing public redevelopment costs. These programs were abandoned
" in 1974 by the White House Office of Management and Budget, in favor of the Housing and
Community Development Act. Under this Act, the Community Development Block Grant
' Program (CDBG) was created. Local officials finding the former programs had been more
comprehensive and better funded were not pleased with CDBG, and began to look for an
alternative. Soon after, TIF became the preferred method for funding redevelopment.
Tax Increment Financing is a funding tool which utilizes the increase in assessed value
in property taxes attributable to development or redevelopment to fund public and private
' development costs. Allowable expenses must directly or indirectly i
P y y the quality of life
' for those residing in the areas affected by the creation of a TIF district. Many cities contain
commercial, industrial, or residential areas which are in some stage of deterioration. Businesses,
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industrial buildings and homes, and the infrastructure necessary to serve them become outdated,
start to fall apart, and eventually succumb to use or misuse. The private sector, in many
instances, is not willing to burden themselves with the rising costs of operating under these
conditions. Often, the private sector will look to vacant land found in the surrounding outlying
areas to build their next "home." In the business world, this may be good policy, but it strangles
many communities, leaving them with the skeletons of a once vibrant community. Policy makers
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concerned with this dilemma surmised that public assistance would be necessary to curb this
dilemma. The costs of acquiring land, relocating tenants and owners, and clearing blighted areas
would have to be eliminated or substantially reduced for the private sector developer.
Minnesota tax increment financing, in its current form, was adopted on August 1, 1979,
and with the exceptions contained in State Statutes, Section 469.179' of the Act applies only to
tax increment districts for which certification was requested on or after August 1, 1979. The Act
has been amended every year since 1979, with the most significant changes occurring as a result
of the 1988, 1989 and 1990 amendments. By definition, "Tax increment is the difference in the
assessed valuation and tax revenues generated by the property in a district after new construction
has occurred compared with the assessed valuation and tax revenues generated by the property
before new construction. " Tax increment financing can be applied to a variety of physical
locations or districts. Prior to naming a district, a project area which is contiguous must be
' Minnesota Statutes. Section 469.179 Existing Projects, Subdivision 1, Exemption.
The provisions of Sections 469.174 to 469.178 shall not affect any project for which tax
increment certification was requested pursuant to law prior to August 1, 1979, 1990, p. 9655
2 "Tax Increment Financing ", Department of Energy and Economic Development,
Community Development Division in Cooperation with League of Minnesota Cities, May
1984, p. 1.
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defined. Upon definition, one or more T'IF districts may be established in any one project area.
One of five types of local governing authorities may create project areas and TTF districts: 1)
Housing and Redevelopment Authorities (HRAs), 2) Rural Development Finance Authorities, 3)
Port Authorities, 4) municipalities (State Statutes Chapter 472A), and 5) municipalities or other
redevelopment agencies (Chapter 474). The project area must meet the criteria of one of seven
types of districts:
1. Redevelopment Districts: A distric which the authorizing agency finds one of the
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following conditions exist:
a. Buildings, streets, utilities, and other improvements occupy 70% of the
district area, and more than 50% of the buildings, excluding out buildings,
are structurally substandard to a degree requiring substantial renovation or
clearance; or
b. Property consists of vacant, unused, underused, and inappropriately used,
or infrequently used rail yards, rail storage facilities, or excessive or
vacated rail right -of -way.
2. Renewal and Renovation Districts: A type of district consisting of a project in
which 70% of the area of the district is occupied by buildings, streets, utilities, or
other improvements of which at least 20% are structurally substandard, and 30%
of the remaining buildings require renovation or clearance to address inadequate
design; incompatible land use relationships; overcrowding; obsolete buildings; and
other identified hazards to the health, safety and general well being of a
community.
3
3. Housing District: An area intended for occupancy in part by persons or families
of low and moderate income as defined in State Statutes Chapter 462A, Title 2
of the National Housing Act of 1934, and other subsequent related acts. A project
does not qualify under this subdivision if the fair market value of the
improvements which are constructed for commercial use or other uses other than
low and moderate income housing, consists of more than 20% of the total fair
market value of the planned improvements.
4. Economic Development District: A district not meeting the definitions of any of
the other four districts, but which the authority finds to be in the public interest
because:
a. It will discourage commerce, industry, or manufacturing from moving their
operations to another state or municipality; or
b. It will result in increased employment in the state; or
C. It will result in preservation and enhancement of the tax base of the state.
5. Mined Underground Snace Development: This is a district consisting of a project
for the development or redevelopment of mined underground spaces pursuant to
State Statute Sections 469.135 to 469.141.
6. Soils Condition District: A Soils Condition District consists of a project in which
the authority finds the following conditions to exist:
a. Less than 70% of the district is occupied by buildings, streets, utilities, or
other improvements; and unusual terrain or soil conditions require that
s Minnesota Statutes, Chapter 462A, Housing Financing Agency, 1990, pp. 9428 -9464.
4
substantial filling, grading, or other physical preparations be made to 80%
of the district; and
b. If the district is located in the metropolitan area, its development must be
consistent with the municipality's Land Use Plan, and no parcel shall be
included in the district unless the authority has agreements for
development of at least 50% of the district.
7. Hazardous Substance Sites: This means any parcel or parcels of land in which the
sponsoring authority has entered into an agreement for the removal actions or
remedial actions of a hazardous substance as specified in a development response
action plan.
DURATION OF DISTRICTS
State statutes limit the duration of the various districts, limiting the number of years any
increment can be paid to a redevelopment, mined underground space, housing, or hazardous
substance district to 25 years. Soils Condition Districts are limited to 12 years, and Economic
Development Districts are limited to 8 years from the first date of receipt of increment or ten
years from the approval of the TIF Plan, whichever is less. Economic Development Districts are
intended to be a short-term catalyst to spur on private development, whereas, redevelopment,
housing, mining, and hazardous substance districts are long term commitments taken on by the
public sector. Districts created before August 1, 1979, are considered a separate category, and
may have a duration of up to 30 years.
The early 1980s saw a proliferation of TIF districts driven by the slow economy and
subsequent withdrawal of the federal government from local development initiatives. In 1980,
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there were 81 cities using TIF compared with only 4 cities who were generating tax increments
in 1974. Today, nearly 300 Minnesota cities have boarded the TIF train; de =
There has been a rapid decline in a formation of new districts since 1985. The effect of which
may be a sharp decrease in the growth of tax increment captured in the near future. Increment
tax payable in 1989 was $186.1 million - -a 20.56% growth over captured tax payable in 1988.
The chart below shows this as the smallest growth factor for increment taxes in over 10 years.
Growth topped out in the years 1980 -81, with a 98.9% increase.
Percent Growth in Captured Tax
100 °,� - ,
90%
800 .
70 °!0 ......
60 °!°
50%
40 % \
20%
1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
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The current distribution of TIF districts by classification is:
Distribution by Type of District
50% illllllll 527 lll�liiiiiii■
40%
30%
20%
10%
0%
9
CWIMIUC mousing Mined Underground Redevelopment Redevelopment/
Development Space Housing
1
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There are currently 985 TIF districts in Minnesota. One hundred seventeen (117) of
which are pre -1979, and must be decertified by the year 2009. Of the remaining districts,
approximately 553 redevelopment districts and 109 post -1984 Economic Development
Districts will also be decertified by 2009. Together these districts represent 2/3 of the current
existing TIF districts. This, combined with the current rapid decline in formation of TIF districts
will result in future increment revenues diminishing rapidly around the turn of the century.
Which some analysts contend will be good medicine for a bad case of over indulgence.
TIF has always had critics which, in part due to their scrutiny, has resulted in many
amendments to the 1979 Act. Questions on the merits and pitfalls of TIF have certainly fueled
many debates over the years; however, these debates have never led to TIF's demise. Do TIF
districts result in higher local tax rates and therefore higher taxes on all properties? TIF districts
do reduce city, county, and school district property tax base values, but the affects of fiscal
disparities and aid to schools often off -set these reductions. State aids and credits to local
governments commonly increase as a result of TIF. Competition among municipalities in the
area of economic development is fierce in our state. The TIF "buck" has to come from
somewhere, but the way most cities think, it's better to get your hand in the pot before the bucks
are all gone. If a city has the opportunity to use TIF, but chooses not to participate, on the 1 c
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premise that the program is wrong, they may be called meritorious, but probably not intelligent.
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TIF has been taken to task over the years, resulting in a plethora of regulations and stipulations ,,
being tagged or . Act to remedy the ills with which it was born. Theoretically, public
intervention in private development is based on the premise that the development will serve some
public good, and that th development and thus public g ood would not have occurred without
intervention. Critics point out that TIF has been used for development that would have occurred
anyway. Would the public have realized a greater benefit if the money had been spent on other
services such as health care and education? Additionally, claims have been made that certain
districts are not meeting the goals for which they were established. I hold the belief that if we
` were all to wait for fault -free programs before becoming involved, life would be eternal. The
operation of a state is a complex business. Apply an single act or pro gram PP Y Y g p gram to the diverse
VA conditions which it will meet in practice and a few bumps and bruises are going to result. Rather
1 than sitting on hands, I think one must run, walk, or crawl, whichever applies, forward.
Legislation enacted by the state allows that only certain "authorities" as previously described,
establish and maintain TIF districts. Objectives such as increased employment opportunities,
improving the economy of the state, encouraging development in areas not being used to their
k potential, and providing for additional infrastructure must be met. A public purpose must be
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:� found in adopting a TIF plan. Additionally, to ensure that the purposes of these districts are met,
the state imposes many statutes in regard to TIF, some of the most notable are:
Section 469.176 Subdivision 4. Use of Tax Increment.
All revenues derived f ro m districts shall be used in accordance with the
�� •� � ,t� �� TIF di tax increment
n'' financing plan.
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Section 469.176. Subdivision 2. Excess Tax Increment
In any year in which tax increment exceeds the amount necessary to pay costs authorized
by the TIF plan, the city shall use the excess amount to do any of the following: 1) prepay any
outstanding bonds, 2) discharge the pledge of tax increment therefore, 3) pay into an escrow
account dedicated to the payment of bonds, or 4) return the excess amount to the County Auditor,
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who shall distribute the excess amount to the city, the count and the school tY Y, oo district in direct
' proportion to their respective tax capacity rates.
Section 469.176. Subdivision 3, Limitation on Administrative Expenses
' Administrative expenses are limited to 1
P 0% of the total tax increment expenditures.
Section 469.175. Estimate of Captured Tax Capacity
' The authority must estimate the amount of captured tax which the district will collect, and
demonstrate this amount will be necessary to finance the public expenditures called for in a
' district. An estimated impact on other taxing jurisdictions showing the "estimated tax loss" must
' also be rendered.
Section 469.175. Subdivision 6. Annual Financial Report
' An annual financial report for each district must be filed by July 1 of each year with the
' school board, the county board and the state auditor. The report shall include: 1) the original
tax capacity of the TIF district; 2) the captured tax capacity of the TIF district, including the
' amounts being shared with other districts; 3) the outstanding principal amount of bonds issued
or other loans incurred to finance projects in the district; 4) the amount budgeted under the TIF
plan and the actual amount expended; 5) for property sold to developers, the total cost of the
property to the city and the price paid by the developer; and 6 the amount of tax exempt
P ) pt
obligations which were issued on behalf of private entities for facilities located in the TIF district.
In addition, the city must report annually by March 1 to the Minnesota Commissioner of
Revenue,,.,,,. Zhe complexity and detail of these .statutes is one reason the League of Minnesota
9 .
Cities recommends, "Cities or HRAs should not undertake this method of financing community
development projects without the advice of an attorney and professional consultants. "
Legislation enacted in 1988, 1989, and 1990 demonstrates that even with these detailed
restrictions and reporting requirements, the state further wishes to restrict the TIF concept. These
restrictions apply only to districts created after the effective dates of the legislation, and generally
said things such as:
Ninety percent (90 %) of the increments generated must be used to correct conditions used
to designate the TIF District.
Two- thirds (2/3) of the market value of a housing district must consist of low and
moderate income housing.
Increments from Soil Condition Districts may be used only to pay costs of correcting soil
and terrain difficulties.
In the Twin Cities metropolitan area, increments for Economic Development Districts may
not be used to subsidize developments consisting of 25% or more of retail food or
beverage, automobile sales or service, or recreational facilities.
- Mined Underground Space Districts may only use increments to pay the cost of
excavating, supporting and providing public access to mined underground space.
Hazardous Substance Districts may only use increments for the cost of clearing up
hazardous substance pollution, and related activities such as testing and legal costs.
More specifically:
° Handbook for Minnesota Cities, Community Development and Redevelopment, Tax
Increment Financing, p. 247 -248, 1990 Supplement.
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The 1988 Amendments
As stated earlier, the 1979 TIF Act generally does not apply to the pre -1979 districts.
However, these districts were subjected to a duration date of 2009, thirty years after the effective
date of the 1979 Act. In 1988, the legislature further restricted the life of the pre- 1979s. The
maximum duration of a district continues to be 2009, however, after the year 2001, increments
could only be used to pay the debt service on bonds issued before April 1, 1990. The two year
window between 1989 and 1990 was granted to allow those authorities in need of extra time a
chance to administer any housekeeping necessary in their financing plan. The legislation does
allow an authority to refinance existing debt which could have been paid off by 2001, effectively
extending the life of the district.
The 1989 Amendments
During the 1989 special session, amendments again meant substantial changes for districts
requesting certification on or after October 10, 1989. The amendments included changes in the
requirements for creation of economic redevelopment districts, reduced the expenditures allowed
in a housing district, reduced some duration limits, applied additional administrative expense
limitations, and added new provisions regarding violations and penalties.
The 1990 Amendments
The 1990 tax bill severely reduced tax increment financing aid payments. Nicknamed the
"dilemma of 1990," reduction amendments concerning LGA/HACA were the most economically
harsh to date. Mr. Joel Michael, Legal Services Coordinator, for the House Research Department
points out, "Section 1 provides that local government aid (LGA) and homestead and agricultural
credit aid (HACA) payments will be reduced by all or a portion of tax increment financing aid
11
being received."' Cities /counties can no longer have their cake and eat it too. The amount
deducted from LGA or HACA will increase the levy authority of the city or county. The amount
of revenue available to the governmental subdivision will not be affected, but the proportion
received from aid versus property tax will change. In addition, the law prohibits the use of
increments for financing the cost of general municipal buildings or to avoid the limitations on
property tax levies. Increments may not be used for the costs of general government, although
10% may be used for administrative expenses. The new regulations, coupled with a relatively
flat development market have put the lid on the establishment of new TIF districts. Speculative
development which resulted in rapid growth in the 1980s is no longer safe, and some types of
developments for which TIF can be used is now over - developed.
Is the result of the Minnesota Tax Increment Financing Act an increased tax base that will
benefit all Minnesotans? Under a successful program, many would offer a "yes" to that question.
Critics, however, will continue to argue that development would have occurred without the
intervention of TIF, contending TIF affects only the location of development, not the total
amount. I believe that both these positions can be substantiated. However,.the decision must
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still be made, sit on your hands or join the TIF "game."
r
S Joel Michael, Legal Services Coordinator, Research Department, Minnesota House of
Representatives.
12
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Q INSURANCE
Protected from discrimination
Victims of domestic abuse will
be protected from discrimination
/ by insurance companies under a
signed new state law.
by the
gove,nor Effective Aug. 1, 1996, the law
Will prohibit insurance compa-
nies from using domestic abuse as a negative
underwriting factor for life or health insur-
ance.
Such discrimination is occurring, House
sponsor Rep. Dee Long (DFL -Mpls) has said,
and that sends the wrong message to abuse
victims.
In most circles, abuse victims are encour-
aged to speak out and to seek help. Insurance
companies, however, are sending a message
that abuse victims should stay silent or face
consideration as a high risk and denial of
coverage.
The proposal was sponsored in the Senate
by Sen. Deanna Wiener (DFL- Eagan).
HF2344/SF1815 */CH278
N LAW
Unnecessary laws repealed
Laws regulating the state's non - existent
ferry boat industry would be scratched from
the books under a bill passed by the House
March 1. The vote was 131 -0.
The bill (HF2377) would repeal a diverse
mix of obsolete, and in some cases arcane,
laws ranging from outdated directives to state
agencies to provisions regarding long -un-
funded programs.
Under the proposal, more than 250 provi-
sions in current law — largely technical and
inconsequential ones — would be deleted
from the books.
Bill sponsor Mike Delmont (DFL- Lexing-
ton) said the goal is to "clear out anything that
is no longer needed." Co- sponsor RonAbrams
(R- Minnetonka) said the bill would get rid of
"a lot of dead wood" in state law.
Eliminated would be 70- year -old sections
of law regulating the state's ferry boat indus-
try, which apparently disappeared entirely
after the 1958 completion of the Baudette-
Rainy River Bridge.
Dashed would be measures, enacted in
1969, that set requirements for contracts for
social skills instruction and contracts for
patrons of dance halls or studios. The mea-
sure forbids any such contracts exceeding
$500 in an apparent effort to protect con-
sumers from unseemly dance teachers.
And nixed would be a 1937 provision
giving the University of Minnesota permis-
sion to establish a law enforcement school.
The U of M has yet to set up such a school and
wouldn't need statutory permission to do so,
anyway.
Delmont and Abrams said the bill was
drafted to avoid controversy. Provisions that
created any controversy were removed from
the bill in committee and on the House floor.
One such provision would have lifted a
ban on picking the state flower.
An earlier version of the bill would have
dropped a prohibition on the gathering of
certain wildflowers, including Minnesota's
state flower, the showy lady slipper.
Current law makes it a misdemeanor to
dig, cut, or pull the wildflowers from public
land and, except under specific circumstances,
from private land. The law, however well -
intentioned, has not been actively enforced.
Delmont said he received notice from hor-
ticulturists and others opposed to the repeal
of the wildflower law so it was dropped from
the bill.
TX 0 1
�EYTS1,r1�A
U
U
Two-year -old Dominic Servent of Winon�
attended a welfare rights rally with about 10[
others March 7 in the Capitol rotunda. Th:
rally, sponsored by the Welfare Right
Committee, was designed to send a stron.
message to legislators, demanding an end tc
attacks on the poor.
1
HF2377 now goes to the Senate. '
(See Jan. 26,1996, Session Weekly, page 12)
N LOCAL GOVERNMENT I
Pay up or no permit
i � Effective Aug. 1, 1996, anyone
who seeks a city permit to re-
/ model a home or business must
signed first prove all outstanding taxes,
by the
9-e,nw penalties, or interest on the prop-
- erty have been paid under a new
law.
The law is designed to help local govern-
ments collect unpaid dues and fines. The law
allows town and county boards to require
applicants for permits to certify that all prop-
erty and/or special assessment district taxes,
penalties, and interest due are paid. Local
governments would not be required to adopt
the regulation.
Property owners who are appealing a tax
levy or penalty are exempt from the new law.
Rep. Dee Long (DFL -Mpls) and Sen. Jim
Vickerman (DFL- Tracy) sponsored the mea-
sure.
HF23 5 5 */S F 1964/C H282
u ■ iu gwiK
I TAXES
Megamall TIF changes
A bill that would establish a tax increment
financing district on one of the Upper
Midwest's most valuable pieces of land passed
the House Taxes Committee March 6.
Under Minnesota law, cities can offer tax
breaks to companies to help create jobs in
their communities. In exchange for creating
jobs, a city can agree to forego property taxes
on a business for a set number of years.
Proponents say these tax increment fi-
nancing (TIF) district arrangements place
businesses — and j obs — in Minnesota cities
that would otherwise build elsewhere.
HF3012,sponsored by Rep. Dee Long
(DFL - Mpls), aims to redirect the expansion
of the Mall of America in order to save the
Metropolitan Airports Commission and the
city of Bloomington money in the event the
Minneapolis -St. Paul International Airport
builds a new runway.
The bill would authorize the city of Bloom-
ington to transfer a nine - year -old TIF district
east of the mall to the north side of the mall.
The new area is the former site of Met Center,
and because of its close proximity to the mall
and the airport, is one of the most lucrative
March 8 1995 / CF¢¢inK, %Aiceviv. n
Committee. ort from a form of recreation to a major
10 SESSION WEEKLY March 8, 1996
part of the state's tourism industry. That
popularity has caused funding shortfalls,
House sponsor Rep. Kris Hasskamp (DFL -
Crosby- Ironton) has said.
The law also requires the Department of
Natural Resources to prepare a report that
contains a plan for using at least 65 percent of
all money from the snowmobile trails and
enforcement account for snowmobile grants -
in -aid, beginning in fiscal year 1998. In addi-
tion, the report must contain recommenda-
tions for additional funding sources for snow-
mobile grants, which would provide funding
to local snowmobile clubs to develop and
maintain trails.
The proposal was sponsored in the Senate
by Sen. Doug Johnson (DFL- Cook).
HF3125/SF2802 */CH293
TRANSPORTATION
Omnibus transportation bill
The House passed a $50.3 million trans-
portation bill Feb. 29 that would spend more
on highway repair than Gov. Arne Carlson
recommended but would not provide the
additional state troopers he sought.
The bill (HF3137/SF2702 *), sponsored
by Rep. Bernie Lieder (DFL- Crookston),
would provide $43.1 million to Department
of Transportation for road construction,
maintenance, and project engineering.
Carlson recommended spending $4.5 mil-
lion less for highway projects.
Under the bill, the transportation depart-
ment appropriation also would provide $1
million to bolster public transit in greater
Minnesota, $100,000 for repair of the his-
toric Stone Arch Bridge in Minneapolis, and
$100,000 for driver education programs at
the St. Cloud State University highway safety
center.
None of those items were included in the
governor's budget recommendations.
The governor asked for funds earmarked
for hiring more state troopers to be included
in a $4.8 million appropriation to the Depart-
ment of Public Safety.
The House bill includes only enough money
to hire four additional state patrol dispatch-
ers. The measure would provide $150,000
for the new positions in a $1.3 million appro-
priation to the department.
Carlson wanted 46 new troopers to beef up
law enforcement efforts on state highways, to
improve Capitol security, and to staff his
proposed high -crime area sweep programs.
During debate on the House floor,
Minority Leader Rep. Steve Sviggum (R-
•
•)
6
pieces of real estate in the Upper Midwest.
Omnibus bill
The reasoning is that mall expansion —
which is required under the mall's contract
Provisions of the omnibus tax bill published in the
with the city of Bloomington — would occur
March 1, 1996, Session Weekly, should have
wherever the TIF district exists.
read as follows:
The major impetus behind redirecting de-
Northwest Airlines would get a tax break
velopment with a TIF transfer is the possibil-
eginning in 1998 under a provision that
ity of the nearby airport's expansion. In the
xempts some "leased movable property"
absence of a newly constructed airport, the
rom Minnesota taxes.
current one would likely expand with a new
The provision, part of the omnibus tax bill
north -south runway. A federal law which
'HF3249) which passed the House March 7
requires runways to include "safety exclusion
on a 104 -29 vote, modifies how leased mov-
zones" would mean the mall's proposed de-
able property is treated in determining busi-
velopment on the east would have to be
ness income for corporate income tax pur-
razed. Despite the likelihood of federal aid to
assist with such a demolition, the airport's
poses.
Currently, receipts from the leasing of
acquisition of the land on the east of the mall
movable property such as airplanes, automo-
after development could cost the commis-
biles, or railroad cars are accounted for in the
sion and the city of Bloomington a lot of
state where the lessee is based. Under the
money.
By redirecting mall expansion, which must
provision, such receipts would be accounted
occur in the next couple of years, the bill would
for in the state where the property is used.
allow for a potential north -south runway with-
The provision would cost the state $3.6
out the problems and costs of acquiring the
million in tax revenue in the next biennium.
land and destroying part of the mall.
Also under HF3249, cities and towns could
The TIF transfer also would allow the state
either increase or decrease their share of state
to undo what Rep. Ron Abrams (R-
aid by setting performance goals. Rep. Andy
Minnetonka) called one of the top TIF blun-
Dawkins' (DFL -St. Paul) measure would re-
"performance
ders in state history.
quire that cities establish mea-
The current TIF district to the east of the
sures" in order to get aid from a newly estab-
lished "performance aid" fund. The measure
mall— originally called the Kelly farm site—
was established in 1986 through a loophole
aims to increase the accountability of local
of sorts, when rules governing such redevel-
governments by requiring cities and towns to
opment areas were much looser. The valu-
adopt goals and work toward them.
The current homestead and agricultural
able land, which today would not qualify for
credit aid (HACA) program would be modi-
TIF under the Legislature's stricter regula-
fied to create the performance aid fund. Cur -
tions, became a redevelopment district be-
rently, cities and counties receive $2 per
cause one run -down building on the prop-
capita from HACA. Under Dawkins' mea-
erty met the requirements for such districts.
sure, HACA payments to cities and counties
Subsequently, the state has paid millions in
would be reduced by $1 per capita and
school aid dollars that would have been col-
would be adjusted for inflation. The measure
lected by the school district in property tax
would cost $2.1 million in the next bien-
revenue had it not been for the TIF district.
The Legislature has since made changes to
nium.
TIF laws which would prevent a such a TIF
designation from reoccurring.
Long's bill comes with a degree of urgency
TOURISM
because the Metropolitan Sports Facilities
Commission has indicated they want to sell
Improved snowmobile trails
the Met Center property soon. If the land is
sold to a company other than the mall, the
A new law, effective March 2,
mall would probably have to expand on the
1996, marks $600,000 in emer-
land to its east.
gency funding for snowmobile
HF3012 also includes changes to the way
Signed trails.
the Metropolitan Council makes loans and
g o The law provides emergency
transfers money from the right -of -way acqui-
funding for trail maintenance and
sition loan fund (RALF). The bill also in-
s fety efforts. The money will come from the
cludes a provision to allow the Metropolitan
owmobile trails and enforcement account
Council to issue general obligation bonds to
i the state natural resources fund, according
acquire land for airport expansion.
the legislation.
The bill now goes to the Ways and Means
e boom in snowmobiling has elevated
Committee. ort from a form of recreation to a major
10 SESSION WEEKLY March 8, 1996
part of the state's tourism industry. That
popularity has caused funding shortfalls,
House sponsor Rep. Kris Hasskamp (DFL -
Crosby- Ironton) has said.
The law also requires the Department of
Natural Resources to prepare a report that
contains a plan for using at least 65 percent of
all money from the snowmobile trails and
enforcement account for snowmobile grants -
in -aid, beginning in fiscal year 1998. In addi-
tion, the report must contain recommenda-
tions for additional funding sources for snow-
mobile grants, which would provide funding
to local snowmobile clubs to develop and
maintain trails.
The proposal was sponsored in the Senate
by Sen. Doug Johnson (DFL- Cook).
HF3125/SF2802 */CH293
TRANSPORTATION
Omnibus transportation bill
The House passed a $50.3 million trans-
portation bill Feb. 29 that would spend more
on highway repair than Gov. Arne Carlson
recommended but would not provide the
additional state troopers he sought.
The bill (HF3137/SF2702 *), sponsored
by Rep. Bernie Lieder (DFL- Crookston),
would provide $43.1 million to Department
of Transportation for road construction,
maintenance, and project engineering.
Carlson recommended spending $4.5 mil-
lion less for highway projects.
Under the bill, the transportation depart-
ment appropriation also would provide $1
million to bolster public transit in greater
Minnesota, $100,000 for repair of the his-
toric Stone Arch Bridge in Minneapolis, and
$100,000 for driver education programs at
the St. Cloud State University highway safety
center.
None of those items were included in the
governor's budget recommendations.
The governor asked for funds earmarked
for hiring more state troopers to be included
in a $4.8 million appropriation to the Depart-
ment of Public Safety.
The House bill includes only enough money
to hire four additional state patrol dispatch-
ers. The measure would provide $150,000
for the new positions in a $1.3 million appro-
priation to the department.
Carlson wanted 46 new troopers to beef up
law enforcement efforts on state highways, to
improve Capitol security, and to staff his
proposed high -crime area sweep programs.
During debate on the House floor,
Minority Leader Rep. Steve Sviggum (R-
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John Sundet, Sled Dogs' president and
CEO since 1993, declined to provide details
of the acquisition search, but'described it as
p a rt of the company's long -term strategy._' .
"Our objective has been to create a diver-
sified sporting goods company, ",Sundet said
from the Ski, Snowboard and Outdoor Sports
Show in Las Vegas. "We've developed some
real core competencies in sports building and
brand building that we'd like to leverage."
For the moment, though, Sled Dogs' sole
business is snow skates and related acces-
sories.. Snow skates look like regular ski
boots, but have a flat, ski -like base attached to
the bottom. - '
Sundet and chief operating officer Mary
Horwath are both former executives at
Minnetonka -based Rollerblade Inc., and they
have tried to replicate that company's success
in launching a new sports craze. For the past
few years, the company has aimed its aggres-
sive marketing at in -line skaters, especially
males in their teens and early 20s; company
CENTER
from page
"We would love to bring a Dayton's to
Eden Prairie, provided we can find the right
economic package," she said.
Stark said Dayton Hudson had previously
given Chicago -based Homart Development
Co., the mall's previous owner, a list of
requirements the retailer would need in order
to move into the center. Those requirements,
which she would not disclose, still stand, she
said.
General Growth officials declined com-
ment. "Right now, we're not prepared to dis-
cuss it. We will within the next couple of
weeks," said Randy Richardson, senior vice
president of asset management.
Chris Enger, Eden Prairie assistant city
manager, said plans call for converting the
mall's existing Sears Roebuck & Co. store
into additional retail space for the mall, then
building a replacement Sears store and a new
department anchor that would be attached to
the existing site.
Other proposed improvements include
building a new parking ramp, renovating the
mall's food court and movie theater and
adding a "community space" the city could
use for events like art exhibits. Enger said
General Growth officials would like to begin
construction in October and to have the pro-
ject completed by fall 1998.
City officials have long sought additional
anchor tenants for the 861,000- square -foot
mall, and have specifically lobbied for a
Dayton's. Their efforts were rebuffed last year
when Dayton Hudson instead_ announced
plans to expand into Maplewood, the compa-
ny's first new store since 1978. That store is
scheduled to open next year.
The city has also pursued Seattle -based
Poor snow conditions earlier tuts winter in; _
California — a big in -line skating market that
Sled Dogs views as one of its key markets —
also hampered sales, Horwath said.
Part of the reason Sled Dogs has been slow
to take off, observers say, is that the original
snow skates were' too limited. They weren't ,
very fast or maneuverable, and they worked
best on downhill runs and packed powder.
And at least some of the young males in Sled
Dogs' target market have adopted snowboard-
ing — the fastest - growing 'segment of the
sporting goods industry.
Sled Dogs has responded by revamping its
four skate models, adding metal edges and
new base materials that make the skates faster
and more maneuverable.
At Afton Alps Ski Area in Hastings, Lynn
Bourdaghs, departmental manager, said more
people have tried snow skating this season
than in the past, and that interest has been
building, albeit "very, very slowly."
"The only [snow skates] we see on the
Nordstrom Inc., a Dayton's competitor with a
local store at Mall of America, but Nordstrom
officials say they haven't had discussions
with General Growth or the city about the site
for several months.
Built in 1976, Eden Prairie Center was
conceived as a regional mall, designed to
compete with major centers like Ridgedale in
Minnetonka and Southdale in Edina.
But the center has never been able to land
the higher -end retailers those centers boast.
Last year, the center's Carson Pirie Scott store
was purchased by Dayton Hudson and
replaced with Mervyn's, Dayton Hudson's
struggling midrange store. Other major ten-
ants at the center include Kohl's Department
Store.
Enger said the lack of higher -end retailers
has prompted consumers from the affluent,
rapidly growing city to spend their money
somewhere else. The city estimates that Eden
Prairie residents spend $40 million annually
just at Southdale, which boasts a Dayton's.
The proposed overhaul would help keep
those dollars in the city, he said, and would
also draw consumers from burgeoning com-
munities to the west like Chaska and
Chanhassen. Enger said city officials estimate
that the renovation would add $42 million to
the center's $17 million market value.
"The mall has a lot of space languishing
there," he said. "I don't think anything good
or meaningful there is going to happen left on
its own, and I think that's the greater risk
[than investing in a renovation]."
Eden Prairie would set up a 17 -year TIF
district to fund its contribution to the center,
Enger said, and would ask General Growth to
guarantee the city's investment. A TIF district
redirects money that normally would go for
property taxes to fund project improvements.
Dayton Hudson has 19 Dayton's stores, 12
of them in Minnesota. ■
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CITY OF
�
SANBASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
MEMORANDUM
TO: Planning Commission
FROM: Todd Hoffman, Park & Recreation Director
DATE: March 14, 1996
SUBJ: Land Acquisition Funding Sources
The following overview identifies the most widely recognized financial tools available for land
acquisition within the city.
Park Dedication Ordinance: The city can, at its discretion, acquire either land or cash in an
amount equal to the value of said land from every subdivision approved by the city.
Property zoned residential is subject to a dedication of one acre of land for every 75 persons
introduced to the community (3 persons /single family home or 1 person/bedroom for multi-
family). Property zoned commercial/industrial is subject to a dedication of up to 10% of
developable land. Cash equivalent park fees in lieu of land dedication are established annually
by city council resolution.
Accounts for approximately 30% of current holdings.
Purchase by Referendum: Past parkland referendums have resulted in the acquisition of the
first and largest landholdings at Lake Ann Park and the purchase of the Bandimere' Community
Parkland.
Accounts for approximately 20% of current holdings.
Acquisitions Within Tax Increment Financing Districts: Parkland holding within the
Chanhassen Business Center and at the Chanhassen Recreation Center have been financed with
tax increment proceeds.
Accounts for approximately 10% of current holdings.
Planning Commission
March 14, 1996
Page 2
Grants: Grants, predominantly LAWCON and LCMR, were instrumental in securing South
Lotus Lake Park, North Lotus Lake parkland, and portions of Lake Ann Park. This pipeline of
funds, after flowing freely in the late 70's and 80's, has dried up to a trickle.
Accounts for approximately 10% of current holdings.
Donations: Herman Field Neighborhood Park and the O'Shaughnessy open space property have
been received through tax deductible donations.
Accounts for approximately 10% of current holdings.
Cash Purchase with Park & Trail Acquisition and Development Funds (410): Cash acquired
from park and trail fees are deposited into this capital project fund. Recent acquisitions financed
by Fund 410 include the Forest Meadow (JMS Homes) parkland on Galpin Boulevard and The
Oaks at Minnewashta parkland at the intersection of Minnewashta Parkway and Kings Road.
Total properties acquired through these cash sale was approximately 12 acres costing $30,000
per acre.
Accounts for 20% of current holdings.
General Fund: A sacred cow which the commission attempts to tap into every year. To date,
they have been unsuccessful in securing general funds for land acquisition projects.
Accounts for 0% of current holdings.
t
I MEMORANDUM
CITY OF
�
8AN8ASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
' TO: Park and Recreation Commission
FROM: Jay Kronick, Chair, 1995 Park Task Force
' Jane Quilling, Vice - Chair, 1995 Park Task Force
Todd Hoffman, Secretary, 1995 Park Task Force
' DATE: August 2, 1995
SUBJ: Preliminary Findings and Recommendations of the 1995 Park Task Force
' The 1995 Park Task Force received its full compliment of members on June 26, 1995. Since
that date, three regular meetings of the Task Force has been held. Members also participated
in a tour of potential project and acquisition sites.
' The Task Force, upon completing introductory exercises, has begun to focus on its work.
Background material compiled during the past 12 months has assisted the Task Force. These
' materials represent the "referendum" work completed to date by both the Park & Recreation
Commission and City Council. Like the commission and council, the Task Force has focused
their attention on three issues:
' 1. The acquisition of open lands.
2. The construction of multi - purpose trails.
3. The development of Bandimere Community Parkland.
The acquisition of open lands is further defined by the following descriptions:
' a. Preservation of the Bluff Creek Corridor.
b. Preservation of wooded lands.
' C. Acquisition of land for use as future community park(s).
The deliberations of the Task Force revolve around a general premise:
' The City must remain an active force in the development of our community.
0
U 3
Park & Recreation Commission '
August 2, 1995
Page 2 '
To that end, the 1995 Park Task Force is proposing to forward the following
preliminary recommendations to the Chanhassen City Council on August 14, 1995. '
1. Regarding the acquisition of open lands:
To accomplish preservation of the Bluff Creek Corridor , p ursue acquisition of '
q
the following parcels:
Parcel 2A '
Size: Greater than 40 acres.
Land Owners: Degler, Degler, Peterson, Chaska Investment '
Corporation/Wallingford Properties, Jeurissen and Laurent.
Parcel 2B (a newly identified property) '
Size: 8.65 acres
Land Owner: Edwards '
To accomplish the preservation of wooded lands, pursue acquisition of the
following parcels: '
Parcel 1 A
Size: 30 -40 acres ,
Land Owner: Fox
Parcel 1 B
Size: 15 -20 acres
'
Land Owner: Chaska Investment Corporation/Wallingford Properties
To accomplish the acquisition of land for future community rk use, ,ursue p
acquisition of either the combination of Parcel 3C and 3D or the combination
of Parcels 3E and 3F (newly identified properties).
'
Parcels 3C and 3D
Size: Approximately 80 acres each.
Land Owner 3C: Peterson
'
Land Owner 3D: Chaska Investment Corporation/Wallingford Properties
Parcels 3E and 3F
Size Parcel 3E: 67.3 acres
Land Owners: Dean and Lois Degler
'
Size Parcel 3F: 80 acres
Land Owners: Gayle and Lois Degler
Park & Recreation Commission
August 2, 1995
Page 3
Parcel 3G (newly identified property)
Size: 5± acres
Land Owner: Hanson
2. Regarding the construction of multi - purpose trails:
It is recommended that the following trail segments be pursued:
a. Powers Boulevard north from Santa Vera Drive to the City of
Shorewood.
b. Highway 101 north from South Shore Drive to the City of
Shorewood /Minnetonka border.
3. Regarding the development of Bandimere Community Park:
It is recommended that this item, at a cost of approximately $1.2 million be
included as a stand alone referendum question.
In addition, the following recommendations are being made:
1. The referendum voting day be targeted for Tuesday, October 17, 1995.
2. The city attorney's office be retained to negotiate all purchase options
and purchase agreements.
It is the unanimous opinion of the Task Force that any and all purchase options be in place
prior to the referendum being held.
c: All landowners listed