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DORSEY & WHITNEY LLP • Mr. Michael Morrison September 21, 1999 Page 2 auditing of the tax increment financing districts. Under the Tax Increment Financing Act tax increment financing districts are subject to different rules and restrictions based on the date of creation or certification of the district and the type of tax increment financing district. In connection with its enforcement activities the State Auditor has taken the position that the Minnesota Tax Increment Financing Act does not permit the expenditure of tax increment revenue derived from a tax increment financing district outside the boundaries of the district if the request for certification of the original value of such tax increment financing district was filed with the County Auditor after July 31, 1979 and before July 1, 1982. Since the request for certification of the Kenzie TIF District was filed on June 29, 1982, it is the position of the State Auditor that "pooling" is not permitted for the Kenzie TIF District. When the State Auditor has identified instances of tax increment revenue from tax increment financing districts for which the request for certification was filed with the County Auditor after July 31, 1979 and before July 1, 1982 being spent by a public body on activities outside the geographic area of the district, it has sought repayment of the expenditure by the public body to the affected taxing jurisdictions. We • have disagreed with this interpretation of the Tax Increment Financing Act by the State Auditor and have taken the position that expenditure of tax increment revenue for activities outside of the boundaries of the district is permitted for districts for which the request for certification was filed with the County Auditor after July 31, 1979 and before July 1, 1982. This issue was clarified by the Minnesota Legislature by the adoption of an amendment to the Tax Increment Financing Act at its 1999 Session. This amendment provides that for districts for which the request for certification was filed with the County Auditor after July 31, 1979 and before July 1, 1982, expenditures of tax increment for such districts may be made on activities located outside of the geographic area of the district if: (i) the expenditures are made before December 31, 1999; or (ii) the expenditures are made to pay bonds to which such tax increment was pledged before April 1, 1999; or (iii) the expenditures are made under binding written agreements secured by increments from the district if the agreement was entered into before May 31, • 1999.