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I I I I I I I I I I I I I I This b~ckgrour~ section describes the various to~ls used by the public sector to guide real estate de~_lopm~nt. B~al estate subsidies are ]nut c~e pieoe of what is cc~,nnly called econ~c derek. The ecc~m~ic develop~nt of our cities is oo~tin~ent upc~ d~mographic charges, natio~l an~ international ec~x~_ _ lc trends, and a host of other fact(xs uloon which cities exert very little oontrol. ~his report c~ly deals with those efforts on the part of the federal, state and local governments to influer~e th~ development of real estate. II. Major Tools Cities Use to Finance and Influer~e Real Estate DeveSt Because development assistar~e o~es from a variety of souroes, this listin9 groups the development tools into four categories: those tools generally initiated by cities, those initiated by the state, tt~se initiated by the federal govenm~nt, ar~ tl~se initiated by ir~ividuals. For each tool there is a brief description of what it is, where it is used, how ~uch mc~ey it in,lyes, and possible modificatior~ of it. Ir~c~ntives the Cit~ Initiates A) Industrial Revenue Bonds What they are.--State ar~ local g(m,'erm my i~u~ ir~ustrial revenue bc~ds (IRBs) to provide financirg f~r private investment in plants ar~ equipment. The IRBs'. tax ex~pt status er~ hi es businesses to borrow funds at below-market interest rates. Unlike gemeral obligation ~ which are backed by th~ full faith ar~ credit of the governmental unit issuirg them, rever~e bo~ds are backed by the ir~me from the assisted k~siness. ~h~ issuin9 unit of goverr~ent has no liability. The federal ar~ state governments regulate IRB use by local gover _nments. In June 1984 (tx~ress determined the use of IRBs would sunset Dec~_ bet 31, 1986, exoept for those IRBs used for ma~tfacturirg facilities which ~ould sunset at the er~ of 1988. Oor~ress further limited the uses of ~ ~ the amount cities and states oculd issue. ~ ~-~nt of IRBs allowed in the state is restricted to the greater of $150 per capita, or $200 million (except for an unlimited a.~nt of bo~ds a~ailable for lmablicly owned facilities like airports, docks, wharfs, mass transit facilities, ~c~ventic~ ar~ trade show facilities, and certain parkirg facilities. ) About $612 million was authorized for ~ in 1984. As noted above, in 1983 wl~a~ amounts of IRBs were still %mrestricted, cities ar~ other gc~e.r~al units across the state authorized $1.3 billion of IRBs. I States are allowed to allocate those limited bor~s authorized by federal law. Last year the Mir~esota Legislature ~!ocated ~ific amounts to three designated users (the Higher Bdunation Goordinatirg Board, ~he Iron Range iBesources and Rehabilitation Board, ar~ the Depaxtment of ~ergy and Eooncmic DeveSt). Of the remainirg state oeilirg, 80 percent goes to entitlement issuers, that is, those cities who issued an average of over $1 million IRBs in three of the last four years. ~he r~inirg 20 percent of the state ceiling is Ipooled ar~ avai!~hle to ~ll other cities on a competitive hasis.