2021.07.27 WS Packet v.2 - Laserfiche WebLink

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,74 3. Fundamentals of Tax Increment Financing (TIF) V Four Year Rule: Minnesota Statutes section 469.176 sub 6 requires that, within four years from certification date, certain activities must have taken place on each parcel with the TIF district. Required activities include demolition, rehabilitation, renovation and site improvements. If these activities have not taken place within the required time, the parcel is `knocked down' from the district, meaning, that no increment may be collected from that individual parcel for the duration of the district. The law does, however, allow for reinstatement procedures should the required activity later occur on the parcel. Five Year Rule For post-90 districts, the majority of activities of the district must occur within 5 years of certification. After 5 years, spending is limited to existing obligations, administrative expenses and limited future activities that are subject to the pooling percentage limitations. In order to qualify under the 5-year rule, tax increments are considered to have been spent within a TIF District if such amounts are: • actually paid to a third party for activities performed within the TIF District within five years after certification of the district. • used to pay bonds that were issued and sold to a third party, the proceeds of which are reasonably expected on the date of issuance to be spent within the later of the five-year period or a reasonable temporary period or are deposited in a reasonably required reserve or replacement fund. • used to make payments or reimbursements to a third party under binding contracts for activities performed within the TIF District, which were entered into within five years of certification of the district; or • used to reimburse a party for payment of eligible costs (including interest) incurred within five years from certification of the district. Six Year Rule Beginning with the sixth year following certification of the TIF District, at least 75% of the tax increments must be spent or obligated to pay outstanding bonds or make contractual payments obligated within the first five years. When outstanding bonds have been defeased and sufficient money has been set aside to pay for such contractual obligations, the TIF District must be decertified. Administrative Expenses Administrative expenses include amounts paid for services provided by bond counsel, fiscal consultants, planning or economic development consultants, and city staff time. The City may allocate administrative expenses on a district-by-district basis. 7