Agenda - Council Work Session - 06/01/2010

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I Short Subjects Updated: January 2008 HOUSE RESEARCH Joel Michael TIF is often used to help redevelop real estate in blighted areas What areas can be designated as redevelopment TIF districts? What areas qualify as "blighted"? May districts be noncontiguous? TIF Redevelopment Districts The classic use of tax increment financing (TIF) is to foster redevelopment of "blighted" areas-Le., areas with rundown, dilapidated, or obsolete buildings and structures. The increase in property taxes that results from redevelopment (the "increment") is used to help finance redevelopment costs, such as land assembly and removal of blighted structures. In Minnesota, TIF was initially promoted principally for redevelopment. (It has since grown to be used in the state for housing, economic development, and general infrastructure finance.) According to the 2006 Tax Increment Financing Report of the State Auditor, there were more active TIF redevelopment districts (992) than any other type, about 46 p~rcent of all TIF districts (2,204) in 2005. Minnesota law allows redevelopment districts to be designated in areas that qualify under one of the following criteria: . Meet a statutory "blight test" . Are vacant or underused rail yards . Contain vacant or underused tank fa million gallons . Are qualified disaster areas To qualify under the blight test: R~ MStl-i r )( eM p-(' s with a capacity of at least one . 70 percent of the area ofthe district must be occupied by buildings, streets, utilities, or other improvements, and . More than 50 percent of the buildings must be structurally substandard. Buildings are substandard if they have sufficient defects or other problems to justify substantial renovation or clearance, in the judgment of the authority. The authority must determine this after conducting an interior inspection of the property, unless the property owner refuses to permit an inspection. The authority cannot find a building is substandard if it is in compliance with the building code for new buildings or could be brought into compliance for less than 15 percent of the cost of constructing a similar new building. Meeting this 15 percent test, however, does not itself qualify the building as substandard. Yes, TIF districts generally~ay consist of separate, noncontiguous areas. However, each separate noncontiguous area of a redevelopment district must individually meet one of the qualifying tests as: blighted, a railyard, a tank farm, or a qualified disaster area.