9 OSA Finding/Non-Compliance
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CITY OF
CHANHASSEN
MEMORANDUM
TO:
Mayor
City Council
Scott A. Botcher, City Manager ~
'0 City e"'ter Drive, PO Box 147
ChanhaJJ"', Minn"ota 55317 FROM:
Phon, 612,937.1900
Cmeral FIIX 612,9315739 DATE:
~ngin,tring FIIX 612,937.9152
'ublic Saftty FIIX 612.934.2524 SUBJ:
Wéb www.ci.chanhassen.mn.UJ
June 21, 2000
OSA Finding of Non-Compliance
In a letter dated June 20, 2000, the Office of the State Auditor made a finding of
non-compliance as it relates to Tax Increment Financing District 2-1. I will not
regurgitate the letter for you, as you can simply read it yourself. A few critical
points should be understood:
1. With this finding, this letter and other correspondence between the
state and city as it relates to this issue, is no longer non-public data but
is considered a public record. This does not mean that any otherwise
privileged communications, primarily attorney/client communications,
are public record as that privilege extends throughout the process.
2, I believe it to be in our best interests, given the complexity of the issue,
to have the City have a single voice for comments as it relates to this
issue. My recommendation is that TlF Attorney Ron Batty and myself
be identified as individuals responsible for communications in
response to inquiries from the press and public.
3. Please be sensitive to the fact that most of your discussions will be
focused on legal strategies. These types of discussions should ..
appropriately be held in closed session. I do not want any discussions
to beheld in open session that might somehow undermine a tactical
legal position of the City of Chanhassen.
If you have any further questions about this issue, please feel free to contact me at
your convenience. Thank you.
c: Ron Batty, TlF Attorney
Todd Gerhardt, Assistant City Manager
Don Ashworth, Economic Development Director
Bruce Dejong, Finance Director
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STATE OF MINNESOTA
OFFICE OF THE STATE AUDITOR
SUITE 400
525 PARK STREET
SAINT PAUL, MN 55103-2139
Please respond to:
Tax Increment Financing Division
505 Spruce Tree Centre
1600 University Ave. W.
St Paul, MN 55104
RECEIVED
JUN 21 zooo
CITY OF CHANHASSEN
JUDITH H. DUTCHER
STATE AUDITOR
(651) 296-2551 (Voia
(651) 296-4755 <Fu
stateauditor@osa.state.mn.us (E-Mai:
1-800-627-3529 (Relay.Servia
TIF Division Phone: (651) 642-0767
TIF Division Fax: (651) 642-0769
Direct Dial: (651) 642-0837
June 20, 2000
The Honorable Nancy Mancino, Mayor
The Honorable Mark Engel, Council Member
The Honorable Mark Senn, Council Member
The Honorable Steve Labatt, Council Member
The Honorable Linda Jansen, Council Member
City of Chanhassen
690 City Center Dr.
Chanhassen, MN 55317
Re: Final Notice of Noncompliance
Chanhassen Economic Development Authority's Tax Increment Financing District 2-1
Dear Mayor Mancino and Council Members:
On March 21,2000, the Office ofth~ State Auditor (OSA) sent the Chanhassen City Council a notice
of nonéompliance regarding the Chanhassen Economic Development Authority's ( EDA) Tax
Increment Financing (TlF) District 2-1. Pursuant to Minn. Stat. § 469.1771, subd. 1 (c), the city was
required to respond in writing to the OSA within 60 days of the receipt of the notice of
noncompliance. On May 19,2000, the OSA received the city's response, a letter from City Manager
. ..
Scott Botcher.
The following is the OSA's final notice of noncompliance. Where appropriate, the fInding in the
initial notice of noncompliance has been modified to reflect the city's response.
FINDING OF NONCOMPLIANCE
The OSA found that the EDA improperly received $711,167.96 of tax increment from TIF District
2-1 after the statutory maximum duration limit for the district. TlF District 2-1 is an economic
development district. According to the applicable statute, this district reached its maximum duration
limit on May 23, 1998, which was ten years after approval of the TIF plan. The OSA determined
that the EDA received $711,167.96 of tax increment from this district after May 23, 1998. '
The city did not dispute that the maximum statutory duration limit of this district was reached on
May 23, 1998, nor did the city dispute that the EDA received $711,167.96 oftax increment from this
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An Equal Opportunity EmploYI
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Mayor Mancino and City Council Members, City of Chanhassen
June 20, 2000
Page 2
OFFICE OF THE STATE AUDITOR
district after May 23, 1998. Instead, the city's response reiterated its previously stated position that
Minn. Stat. § 469.1771, subd, 2 did not require the EDA to pay back the increment received after the
maximum statutory duration limit. The OSA addressed this issue in its initial notice of
noncompliance.
The city also responded that the application of the maximum statutory duration limit would deprive
the city of the full amount of tax increment intended by the Legislature. The city stated that the
Legislature intended to permit the EDA to receive tax increment from this economic development
district through the end of the eighth year after the year in which the EDA first received tax
increment from this district.
The applicable statute, however, provided that the EDA was not entitled to receive tax increment
from this economic development district "after eight years from the date of the receipt, or ten years
from approval of the tax increment financing plan, whichever is less." Minn. Stat. § 469.176, subd.
1 (e) (1988) (emphasis added), The city approved the nF plan forTIF District 2-1 on May23, 1988.
Eight years from the first receipt of tax increment, with the duration extension provided in Minn.
Stat. § 469.176, subd. Ib(b), was December 31,1999, Ten years from approval of the TIF plan was
May 23, 1998, which is less than December 31,1999. Therefore, according to the terms of the
applicable statute, the maximum duration limit is May 23,1998. The intent of the Legislature to
limit the maximum duration limit to the earlier of the two dates is clear and explicit in the text of the
statute.
The OSA reiterates its finding that the EDA improperly received $711,167.96 of tax increment from
TIF District 2-1 after the statutory maximum duration limit for the district. The EDA received these
payments after December 31, 1990, and therefore they are subject to the provisions of Minn. Stat.
§ 469,1771, subd. 2.
.
The OSA appreciates the time and attention the Chanhassen City Council devoted responding to the
notice of noncompliance. The OSA will refer the finding of noncompliance to the county attorney
pursuant to Minn. Stat. § 469.1771, subd, 1 (b). In addition, the OSA recommends that the city bring
the OSA's finding to the attention of the accountants who will perform the city's next annual audit.
If you have any questions or comments, please call me at (651) 642-0837,
Sincerely,
v~·cC2-.
William E. Connors, Director
Tax Increment Financing Division
cc: Scott A. Botcher, City Manager
Roger Knutson, City Attorney