The objective of the development finance policies is to provide guidance for public assistance to community development efforts in a manner that balances costs against benefits. City staff shall identify sufficient public and private resources at the time a project is approved to ensure feasible completion and operation of the project. All development financing proposals shall be reviewed to ensure that the proposed finance plan is reasonable, balanced, and the best means by which to achieve City objectives, while adequately protecting citywide financial interests.
The Tax Increment Policy guides the City’s use of the tax increment financing (TIF) tool. It identifies the purposes and conditions under which TIF may be used, and the factors to be considered when evaluating a developer’s application for TIF assistance. The policy states that TIF will only be used when the City has the financial capacity to provide the needed public assistance and the developer can clearly demonstrate that the development will be able to meet its financial and public purpose commitments. The City seeks to recapture this public investment to the maximum extent feasible after allowing the developer a reasonable rate of return on their equity. Pay-as-you-go TIF financing is preferable to tax increment bond financing since repayment risk is assumed by the developer instead of the City. The City will only issue general obligation (G.O.) tax increment bonds under certain strict situations that are specified in the policy. Only those public improvements and public redevelopment costs directly associated with a proposed development project can be financed using TIF. The City’s current Tax Increment Policy, as approved by the City Council, is available at: https://www2.minneapolismn.gov/government/programs-initiatives/tif/policy/.
The Policy for the Use of Tax Abatement for Historic Properties identifies the circumstances under which the City will consider the use of tax abatement to support the substantial rehabilitation of designated historic preservation properties. Proposed uses of tax abatements must achieve one or more identified objectives, and the expected benefits to the City must at least equal the City’s costs.
State statute requires that tax increment (TI) revenues must be segregated from all other revenues of the City and maintained in separate TI (special revenue) funds established for each TIF district. A new TI fund is established whenever a new TIF district is approved. Qualifying expenses are charged to these individual TI funds as they are incurred. If expenses are incurred before the TIF district has generated any TI revenue, then the TI fund will experience a negative fund balance
When a TI fund experiences a negative fund balance, this is considered an “interfund loan” by the Office of the State Auditor. State statutes require that specific actions must be taken by the City to authorize these types of loans. As part of the budget process, and for purpose of covering any temporary negative fund balances in TI funds, the City authorizes interfund loans (also referred to as “capital advances”) from other TI funds in the amount needed to offset any negative fund balances.
These loans do not result in the actual transfer of revenue between TI funds, but rather the collective positive fund balance of all the City’s TI funds offsets any negative fund balances that may exist in a small number of TI funds. As TI revenue is collected and deposited in a TI fund that has a negative balance, the interfund loan for that TI fund is reduced and eventually paid off.
The City’s Housing Improvement Area (HIA) Policy establishes the conditions under which HIAs may be approved by the City Council and provides a framework within which requests for the establishment of HIAs will be considered. This Policy briefly describes the statutory requirements of HIAs, and includes a list of the City’s goals and objectives, guidelines, and minimum criteria associated with the use of this financing tool. The City’s current Housing Improvement Area Policy, as approved by the City Council, is available at HIA Policy.
Any appropriation for a CPED development program or project that hasn’t spent at least 75% of this appropriation on tangible project activities within a four-year period (including the appropriation year) may be subject to expiration. This test began with 2014 appropriations, which were subject to expiration at the end of 2017 unless the above test was met.
The mechanism for tracking these appropriations shall be an annual “CPED Development Program and Project Status Report” that is presented to the relevant City Council committee at the request of the chair. This report shall contain the following information by individual program or project:
Brief program or project description; Year of original appropriation;Total appropriation for the most recently completed fiscal year (including any appropriation amounts rolled-over from prior years);
Annual expenditures for the most recently completed fiscal year;Total outstanding encumbrances and Council commitments as of the most recently completed fiscal year; and