02-14-2024 Workshop Packet - Laserfiche WebLink

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25 4859-6924-4449\6 Five-Year Rule. The five-year rule essentially requires development activity for a TIF district to be finished within a five-year period that begins with certification of the district's original tax capacity. After this five-year period has expired, increments may only be spent to pay off obligations that were incurred to fund work done during the five-year period or to the extent permitted under the pooling rules. When these obligations are paid (or enough money has been collected to pay them), the district must be decertified. Pooling Restrictions. The term "pooling" refers to the use of tax increments for activities located outside of the boundaries of the district from which they were collected or outside of the five-year rule period. Minnesota law permits increments to be "pooled" or spent outside of the district (or, in some instances, outside the requirements set forth in the Five- Year Rule) on other activities. The amount that may be pooled is, however, subject to certain percentage limits based on the TIF District type. Financing and Bonding Powers Issuing General Obligation Bonds “An economic development authority may issue general obligation bonds in the principal amount authorized by two-thirds majority vote of its city’s council. The bonds may be issued in anticipation of income from any source. The bonds may be issued: (1) to secure funds needed by the authority to pay for acquired property or (2) for other purposes in sections 469.090 to 469.108. The bonds must be in the amount and form and bear interest at the rate set by the city council. Except as otherwise provided in sections 469.090 to 469.108, the issuance of the bonds is governed by chapter 475. The authority when issuing the bonds is a municipal corporation under chapter 475.” (Minn. Stat. § 469.102, Subd. 1). Issuing Revenue Bonds “An economic development authority may decide by resolution to issue its revenue bonds either at one time or in series from time to time. The revenue bonds may be issued to provide money to pay to acquire land needed to operate the authority, to purchase or construct facilities, to purchase, construct, install, or furnish capital equipment to operate a facility for economic development of any kind within the city, or to pay to extend, enlarge, or improve a project under its control. The issued bonds may include the amount the authority considers necessary to establish an initial reserve to pay principal and interest on the bonds. The authority shall state in a resolution how the bonds and their attached interest coupons are to be executed.” (Minn. Stat. § 469.103, Subd. 1). Because the credit strength of an EDA is usually very limited, the feasibility of a revenue bond offering is highly dependent upon the project to be financed. For example, if an EDA were to issue a revenue bond to finance the construction of a building to be leased to a manufacturing firm, the interest rate and security terms of the revenue bond would depend primarily on the creditworthiness of the manufacturer. For weaker projects and tenants, issuance may not be feasible.