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DORSEY & WHITNEY LLP 44 _ r Mr. Roger Larson October 23, 2001 Page 2- in school funding and property tax reform enacted by the Legislature this year, you have asked whether there are any restrictions under the Agreement as to expenditure by the City of such funds. Section 3.3 clearly states that the contribution required to be made by Ste. Marie Company may be applied by the City in any manner as it shall determine. The provisions of Minnesota Statutes, Section 469.1766, which provides that developer payments, such as the contribution by Ste. Marie Company, must be treated as tax increment revenue and may only be spent for the purposes for which tax increments may be spent, is not applicable to the contribution because this section is not applicable to the Apache TIF District. Minnesota Statutes, Section 469.1766 was enacted by the Legislature in 1993 and is effective for TIF districts for which request for certifications of the district were made after August 1, 1993. The request for certification of the Apache TIF District was made to Ramsey County on April 21, 1993. In connection with the TIF assistance provided to Ste. Marie Company the amount of the contribution was specifically negotiated to cover the estimated present value of the LGA Penalty loss to the City, and as part of the negotiations the amount of TIF assistance provided to Ste. Marie Company was increased to cover such contribution. In reality what occurred was tax increment money was used to make the contribution to the City and was to be applied to reimburse the City for the LGA Penalty. Given the clear and unambiguous language of Section 3.3 of the Agreement that the contribution may be applied by the City in any manner it shall determine, together with the circumstances surrounding such contribution, I do not believe that Ste. Marie Company has any basis to claim.that with the elimination of LGA Penalty the City must retu.--q the contribution to Ste. Marie Company or otherwise apply it in a manner which it specifies. In addition, under the provisions of the TIF Act it is clear that such contribution does not constitute tax increment revenue under the TIF Act. Consequently; I do not believe there are any restrictions imposed by the Agreement or TIF Act on the manner in which the contribution may be expended by the City. It should be kept in mind by the City that while LGA Penalty has now been eliminated it is theoretically possible that if in the future the Legislature were to change school funding back to the prior system, the LGA Penalty could be reinstated in the future similar to what has occurred from time to time with levy limits. At this time I am unaware of any discussions or proposals to reinstate LGA Penalty. However, if school funding were to change in the future and the LGA Penalty is reinstated during the term of the Apache Plaza TIF District, it is possible that • the existence of such TIF District could result in a reduction in LGA received by the City.