Jim Graham writes, in part:
"Is it true NRP is not a City Program, it is a State
mandated program set up by State of Minnesota Statute?"
While this might be technically true, here is the actual situation.
First, State law fairly specifically controls how and where cities
may use Tax Increment Financing. There have been some additional
restrictions imposed over the years because of what the legislature
saw as abuses in use of TIF (one example - an Iron Range city
used TIF to lure an automobile dealership from an adjacent city two
miles away).
In addition, city use of TIF took tax dollars away from the county
and school district which otherwise would have benefited from the
tax dollars collected. The state then had to make up, with state
tax dollars, the loss to the school districts. Anyway, a number of
changes were made in TIF to correct some of these problems.
The Minneapolis Neighborhood Revitalization Program was set up by
re-directing and dedicating repayment dollars from TIF districts
which otherwise would have gone into the city's treasury to be used
either for additional spending or property tax reductions. In order
for the city to re-direct these tax increment revenues to NRP programs,
they needed the consent of the state. The city thus came to the
legislature asking for permission in statute to set up the program.
The program is specific to Minneapolis. No other cities were
included in the enabling legislation, and as far as I know, none
have since asked for similar programs. As I recall,the original bill was
very loosely drafted. As the bill passed through various committees,
much more specificity was incorporated into it. It was still fairly
controversial. A number of legislators felt that Minneapolis, which
gets the "lion's share" of the state's local government aid dollars,
shouldn't be diverting dollars into neighborhood programs when no other
city had a similar opportunity. There was also a feeling that Minneapolis
was guilty of over-using tax increment financing, promoting developments
which may have occurred without the additional TIF cost to the taxpayers.
The version which passed specified some payments from the increments to
the school district and county and iterated the uses for which the NRP
funds could be expended. It is important to note that the law specifies
that 75 percent of the program dollars, after deducting the school district
and county payments, must be expended on HOUSING PROGRAMS AND RELATED
PURPOSES (emphasis mine). There has been some feeling around the
legislature that this has not been honored by the program.
Lastly, when the legislature reduced the tax rates on commercial/industrial
property, the TIF proceeds expected by cities participating in TIF were
reduced accordingly. This directly effected the dollars available for
NRP programs, as well as other TIF dollars and other commercial/industrial
tax dollars available to the city. While the impact of these tax changes
has been substantial, the changes shouldn't have taken anybody by surprise.
During my last decade or so in the legislature, the cities were warned time
and time again that such reductions would eventually occur, whether or not
we supported them, and that they should be very careful in relying on TIF
revenues and in engaging in more use of tax increment financing.
To read the relevant statutes, go to http://www.revisor.leg.state.mn.us
and find sections 469.1781 and
469.1831.
Dee Long
Recovering Career Politician
East Isles
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