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Item No: 09G Meeting Date: April 28, 2003 Type of Business: Council Business City of Mounds View Staff Report To: Honorable Mayor and City Council From: James Ericson, Interim City Administrator Item Title/Subject: Consideration of Resolution 6005, a Resolution Approving a Settlement Agreement between the City of Mounds View and the Minnesota Attorney General’s Office Regarding the Office of the State Auditor’s (OSA) Notice of Noncompliance Discussion: The Office of the State Auditor (OSA) conducted a tax increment financing (TIF) legal compliance audit of the Mounds View Economic Development Authority’s (EDA) TIF districts on March 6 through 16, 2001. On July 18, 2001, the OSA sent the Mounds View City Council a notice of noncompliance regarding the EDA’s TIF districts. Minnesota Statutes requires that cities respond in writing to the OSA within 60 days of the receipt of a notice of noncompliance. On September 17, 2001, the OSA received the City’s response, a letter dated September 17, 2001. The letter incorporated a September 4, 2001, letter from Jim O’Meara to the City. (Jim O’Meara is the City’s TIF counsel.) The City disagreed with the OSA’s interpretation of the TIF statutes and its findings of noncompliance. In response to the City’s response, the OSA delivered to the City its FINAL Notice of Noncompliance. The findings of noncompliance can be summarized as follows: 1. The EDA improperly spent $1,165,045.45 of TIF District #1’s tax increment on land acquisitions because the land acquisitions were not explicitly identified in the EDA’s TIF plan. 2. The EDA improperly spent $125,771.43 of TIF District #2’s tax increment on land acquisitions because the land acquisitions were not explicitly identified in the EDA’s TIF plan. 3. The EDA failed to provide an Estimate of Fiscal and Economic Implications to the school board and county board when the EDA approved the TIF Plans for Districts 1, 2 and 3. With regard to the first two, the City acknowledged the acquisitions occurred however W E argued that the TIF Plans did describe the “kind” of properties that the EDA intended to acquire to meet the stated goals of the TIF Plan. It was a matter of interpretation whether addresses or PIN #’s were required or that the TIF plan would need to be modified prior to each acquisition. With regard to the last item of noncompliance, the OSA claimed that because the City could not produce copies of the letters it had sent to the school board and the county board, the letters were therefore never sent. The City argued that the absence of a copy of a letter created in 1986 did not prove the letter never existed or that the letter had not been duly delivered. In fact, resolutions adopted by the Council in 1986 and 1988 indicate that notices had been sent to the county board and to the school board, which would seem to support the fact that letters had been provided consistent with Minnesota statutes.