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LE-28. Revisions to the OSA Audit <br />Function <br />Issue: Pursuant to Minn Stat. § 469.1771, <br />the Office of the State Auditor (OSA) is <br />responsible for tax increment financing <br />(TIF) oversight. As part of its review of TIF <br />districts, the OSA identifies alleged <br />violations of the TIF laws and issues <br />noncompliance notices to TIF authorities. In <br />recent years, a number of cities have <br />received letters of inquiry from the OSA that <br />raise questions about practices long - <br />accepted by the OSA or limit statutory <br />definitions that have not been amended by <br />the legislature for over a decade. The audit <br />power in Minn. Stat. § 469.1771 is <br />necessary to ensure that individual cities <br />comply with the TIF statutes, but is not <br />effective in clarifying the legislative intent <br />of the TIF statutes. <br />In addition, the TIF statute requires that <br />authorities respond to noncompliance <br />notices within 60-days of receiving the <br />notification. There is no deadline for the <br />OSA to respond, and authorities often do not <br />receive timely responses on the matter from <br />the OSA. Government agencies typically <br />have response -time deadlines, and it is <br />appropriate for the OSA to respond by a <br />time certain to provide finality to the audit <br />process. Any final disposition notice must <br />be clear about the final disposition of the <br />matter. <br />Finally, the statutory audit enforcement <br />process does not create an environment <br />where these policy questions can be fairly <br />and sufficiently resolved. County attorneys <br />lack the resources to prioritize TIF disputes <br />and lack the subject matter expertise needed <br />to analyze the merits of the OSA's audit <br />findings. This results in excessive deference <br />granted to the OSA's original audit findings. <br />Faced with the potential loss of increment, <br />payment of attorney fees, and small <br />likelihood of success on the merits, cities <br />often acquiesce to the OSA to save time and <br />money. <br />Response: The League of Minnesota <br />Cities believes there should be a more <br />defined process to establish rules or <br />guidelines for TIF authorities with <br />adequate input from local government <br />officials and public finance professionals <br />prior to their adoption. <br />In the event that the OSA determines to <br />issue a final noncompliance notice to a <br />TIF authority, the Legislature should <br />require the OSA to issue the notice within <br />60 days of receiving the authority's <br />response. Any final noncompliance notice <br />should contain the OSA's final position <br />on the matter, the date upon which it <br />forwarded the matter to the county <br />attorney, and the next steps that are <br />required to be taken according to state <br />law. Upon expiration of the 60-day <br />period, the authority should be deemed to <br />be in compliance with the TIF laws if no <br />final noncompliance notice is received. <br />In order to ensure a fair process to <br />resolve disputes over TIF findings of the <br />OSA, the Legislature should consider <br />whether the authority to resolve such <br />disputes should be shifted from county <br />attorneys to the Office of Administrative <br />Hearings. <br />LE-29. OSA Time Limitations <br />Issue: The Office of the State Auditor <br />(OSA) has the authority to issue <br />noncompliance notices for every existing tax <br />increment financing (TIF) district in the <br />state for alleged violations of the TIF laws. <br />This authority extends retroactively to the <br />inception of the district. Accordingly, TIF <br />authorities can receive noncompliance <br />notices for alleged violations that occurred <br />League of Minnesota Cities <br />2018 City Policies Page 70 <br />