Minneapolis TIF Application Process
Overview and Requirements
Tax increment financing (TIF) is a development/redevelopment "tool" that is available to various authorities within the State of Minnesota. These authorities include housing and redevelopment authorities (HRAs), economic development authorities (EDAs), port authorities, and cities. Use of this tool is authorized under Minnesota Statutes Sections 469.174-469.1799, which is commonly referred to as the "TIF Act". The provisions of the TIF Act are rather complicated, and developers unfamiliar with TIF are advised to seek professional advice and assistance when considering whether or not to apply for TIF assistance from the City of Minneapolis.
The Minneapolis Tax Increment Policy provides a list of objectives and guidelines for the use of TIF in the City of Minneapolis. One of the basic provisions of this policy is that any development receiving TIF assistance must satisfy the "but-for" test contained in the TIF Act. This test can only be satisfied if the City Council adopts findings that (1) the proposed development would not occur without TIF assistance, and (2) no other significant development is expected on the site, in the reasonably foreseeable future if TIF assistance is not provided. Based on these requirements, the Minneapolis City Council views TIF as a "tool of last resort". Developers are therefore required to seek financial assistance for their proposed developments from all other available private and public sources before applying for TIF assistance from the City. The City's use of this tool is at the discretion of the Minneapolis City Council.
A developer planning to apply for TIF assistance should first consider whether their proposed project can meet the "but-for" test. It is recommended that a developer meet with staff from the City's Department of Community Planning and Economic Development (CPED) to fully discuss a proposed project before submitting a formal written application for TIF assistance. CPED staff may involve other staff from the City's Finance and Property Services Department and Attorney's Office in these early discussions.
The actual process of applying for TIF assistance begins with the developer completing a TIF application (entitled "Application for Public Financial Assistance"). The completed application is submitted to an assigned CPED staff member (usually a project coordinator), and must be accompanied by a $3,000 check payable to the "City of Minneapolis". This application fee is nonrefundable and helps pay for City staff time necessary to review the application and provide a preliminary analysis of project feasibility and the appropriateness of utilizing TIF. Applications will not be accepted if they are in draft form, are incomplete, or are submitted without the required $3,000 application fee. The payment and acceptance of the application fee does not signify a commitment on the part of the City to undertake any specific actions or to grant approval of the requested TIF assistance.
Preliminary Review and Analysis
City staff will first conduct a preliminary review and analysis of the TIF application, addressing a number of items and issues including, but not limited to, the following:
- Does the proposed project meet the "but-for" test?
- What public purpose would be served?
- Is the project consistent with City goals, priorities and applicable plans?
- Does the project appear to be financially feasible?
- Have significant efforts been made to obtain other financing/funding?
- Can the project and/or site qualify for TIF assistance under the TIF Act?
- Are there sufficient TIF-eligible costs in the project?
- Is the proposed TIF financing mechanism (bonds, pay-as-you-go, etc.) appropriate?
- Does the developer have adequate financial capacity and experience?
This preliminary review and analysis may be completed in as little as two or three weeks, but often takes considerably longer depending on the information provided in the TIF application, the complexity of the project, the status of other funding sources, and many other factors. Upon completion, CPED staff will determine whether or not to proceed to the next step, which is referred to as Project Analysis Authorization (PAA).
Project Analysis Authorization (PAA)
If it is determined that a full financial analysis of the project is warranted, then staff will seek PAA from the City Council. The PAA report is drafted by CPED staff and presented to the Housing Policy & Development (HPD) or Economic Development & Regulatory Services (EDRS) Committee before being forwarded to the full City Council. The report describes the proposed project in detail, including the amount of TIF assistance requested, and also specifies a project analysis fee that the developer must pay if PAA is approved.
The project analysis fee is nonrefundable and is based on the estimated cost of staff time and other expenses up to the point in time when the request for TIF assistance is either approved or denied by the City Council. The fee is usually in the $10,000 to $15,000 range, and covers the cost of staff activities in the areas of project coordination, financial analysis, legal review, document preparation, engineering, real estate and administration. The fee may be higher if additional costs are incurred to prepare or conduct appraisals, market feasibility studies, environmental assessments, etc. The payment and acceptance of the project analysis fee does not signify a commitment on the part of the City to undertake any specific actions or to grant approval of the requested TIF assistance.
Approval or Denial of TIF Assistance
If PAA is approved and the project analysis fee is paid by the developer, staff will undertake a number of activities including conducting a full financial analysis of the project, preparing or modifying redevelopment and TIF plans, negotiating business terms, and preparing various legal documents. A full financial analysis may be completed in as little as three or four weeks, but often takes considerably longer.
Once the financial analysis is complete, staff will begin the process of preparing a TIF Plan and establishing a new TIF district. This process takes approximately 80 days to complete and includes all of the actions required by the TIF Act and various City policies. Actions include, but are not limited to, notifying Hennepin County and the Minneapolis School District, notifying affected neighborhood groups, obtaining the City Planning Commission's opinion regarding the TIF Plan's conformance with the City's comprehensive plan, conducting a public hearing, and review by either the HPD or EDRS Committee and the Ways & Means Committee of the City Council.
A complete schedule of all the necessary steps, actions, and approvals is given to the developer shortly after PAA is approved. Ultimately, the City Council approves or denies the request for TIF assistance at the end of this process.
Last updated Sep 20, 2018