Cameron Winton 4837 France Avenue South Minneapolis, MN 55410 camwinton@gmail.com Mark V.

Chapin County Auditor Hennepin County, Minnesota A-600 Government Center 300 South 6th Street Minneapolis, MN 55487-0060 TaxInfo@co.hennepin.mn.us June 19, 2013 Dear Mr. Chapin: I am a resident and homeowner in Hennepin County. As you may know, the City of Minneapolis will shortly be asking you to certify a value-capture district to finance certain costs of a proposed streetcar line. As you certify the original net tax capacity of the district under rules related to certifying new tax increment financing district, I urge you to give full valuation to the extensive real estate development that already exists on the parcels within the proposed valuecapture district. In contrast, the City would like you to certify the original net tax capacity to be as low as possible – since its goal is to capture the maximum possible amount of tax-revenue growth to spend on the proposed streetcar line. To achieve that goal, the City will likely ask you to ignore the plain meaning of the relevant tax increment financing statutes and instead pretend that the real-estate development already underway in the absence of the streetcar line has no bearing on your calculation of original net tax capacity. Please do not accept their invitation to do so. I. The City cannot pick and choose which sections of the TIF statute it wants to obey.

The City will be making its request for certification of the value-capture district under the authority of enabling legislation from the State of Minnesota. The first key part of that enabling legislation reads as follows: For purposes of calculating the tax revenues of the district, the county auditor shall treat the district as if it were a request for certification of a tax increment financing district under the provisions of Minnesota Statutes, section 469.177, subdivision 1i….

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That referenced Minnesota Statute 469.177 is a portion of the TIF statute. It has a number of subdivisions. The relevant part of Section 469.177 – Subdivision 1 – reads as follows (ellipses for clarity); please note that it incorporates Subdivision 4 by reference: [T]he auditor . . . shall . . . certify the original net tax capacity of the tax increment financing district . . . and shall certify in each year thereafter the amount by which the original net tax capacity has increased or decreased as a result of . . . changes pursuant to subdivision 4.ii The referenced Subdivision 4 requires a given county auditor to include existing and pending development in the calculation of original net tax capacity. In turn, Subdivision 4 incorporates Subdivision 1 by reference: The City “ shall, after diligent search, accompany its request for certification to the county auditor pursuant to subdivision 1 . . . with a listing of all properties within the tax increment financing district or area of enlargement for which building permits have been issued during the 18 months immediately preceding approval of the tax increment financing plan by the municipality . . . . The county auditor shall increase the original net tax capacity of the district by the net tax capacity of each improvement for which a building permit was issued.”iii Since Subdivision 1 refers to Subdivision 4 and Subdivision 4 refers to Subdivision 1, the subdivisions of the statute comprise an integrated whole. Therefore, when “ treat[ing] the district as if it were a request for certification of a tax increment financing district under the provisions of Minnesota Statutes, section 469.177, subdivision 1” as required by the enabling legislation, the County must count existing and pending development as part of the original net tax capacity as required by Subdivision 4. Specifically, the City must provide to the County a listing of all properties within the value-capture district for which building permits have been issued in the past 18 months. The retroactive 18-month window ends on the date of the City’s request for certification under Subdivision 3(b) of the enabling legislation. The County Auditor must then factor the value of those permitted improvements over the immediately preceding 18 months into the original net tax capacity of the value-capture district. In contrast to its likely request to the County to ignore the provisions of Subdivision 4 of the TIF statute, t he City’s own actions so far demonstrate that it is willing to draw upon the TIF statute when it would benefit from doing so. Specifically, the relevant City staff has recommended to the City that it should request County certification of the value-capture district 2

by June 30, 2013, to “ensure that the base value of the district would be recorded at its lowest value, and result in the maximum amount of annual tax revenue.” iv The City staff is making that recommendation because under the TIF statute, if the City submits the certification request by June 30, the County will value the property within the district at the value assigned in the previous assessment year v If the City submits the certification after the June 30 cut-off, though, the County will determine the original net tax capacity using the property value as of the current assessment year – which would result in the City capturing less value for the proposed streetcar line. The City may not arbitrarily pick and choose which sections of the TIF statute apply to the value-capture district. If the City may use the June 30 cut-off date provision of the TIF statute in an effort to keep the original net tax capacity as low as possible, it must also be subject to the Subdivision 4 provision of the TIF statute that would make that original net tax capacity higher. II. The City’s possible counter-arguments – all of which would be wrong

The City may argue that Subdivision 4 does not apply to the present circumstances and that therefore, the County does not have to include in the original net tax capacity the substantial value of development already underway. Please be on guard for any such arguments. First, the City could say, “this is value-capture, not TIF.” That’s a distinction without a difference: the enabling legislation dictates the use of Subdivision 1 of the TIF statute which in turn incorporates Subdivision 4 of the TIF statute – and Subdivision 4 requires the County to factor all permitted development into the original net tax capacity of the district. Second, in an effort to avoid the impact of Subdivision 4, the City will likely direct your attention to the following provision of the State’ s enabling legislation and the fact that it lists Subdivisions 1, 2, and 3, but not Subdivision 4: [T]he county auditor . . . shall calculate the tax revenues of the district for each year of its duration . . . as equaling the amount of tax increment that would be computed by applying the provisions of Minnesota Statutes, section 469.177, subdivisions 1, 2, and 3, to determine captured tax capacity….” vi The absence of a reference to Subdivision 4 there is irrelevant to the calculation of original net tax capacity. As you know, when calculating “the tax revenues of the district for each year of its duration”, a given county auditor applies “subdivisions 1, 2, and 3 to determine captured tax capacity….”, not original tax capacity. vii A previously noted, the interwoven provisions of Subdivisions 1 and 4 govern calculation of original net tax capacity.

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And third, if all else fails, the City might note that I am a candidate for mayor of Minneapolis and an opponent of the streetcar line on policy grounds. All true – but irrelevant. I am writing as a resident and homeowner of Minneapolis and Hennepin County and making a purely legal argument. In short, under applicable law, the County must give full weight and valuation to all development already underway for which building permits have been issued during the preceding 18 months in calculating the original net tax capacity of the value-capture streetcarfinancing district regardless of how much the City may insist otherwise. III. Development already exists on the proposed value-capture district parcels

For your reference, at the endnotes below are listings of the parcels in questionviii and the development already underway and/or pending on each.ix I appreciate your attention to this matter. I note that I reserve all rights in law and in equity (including those under Minn. Stat. 469.1771)x to further address these and related matters as necessary. Sincerely,

CC:      

The Honorable Rebecca Otto, State Auditor, state.auditor@auditor.state.mn.us Hennepin County Commissioners Chair, Transportation & Public Works Committee, Minneapolis City Council Chair, Ways & Means/Budget Committee, Minneapolis City Council Minneapolis City Attorney Media outlets

i

Streetcar financing legislation, Section 20, Subdivision 3(b), available via http://www.ci.minneapolis.mn.us/www/groups/public/@clerk/documents/webcontent/wcms1p109846.pdf
ii

Minn. Stat. 469.177, Subdivision 1, available at https://www.revisor.mn.gov/statutes/?id=469.177
iii

Minn. Stat. 469.177, Subdivision 4, available at https://www.revisor.mn.gov/statutes/?id=469.177 4

iv

Request for City Council Committee Action from the Departments of Finance and Property Services and Public Works, June 18, 2013, available at http://www.minneapolismn.gov/www/groups/public/@clerk/documents/webcontent/wcms1p109845.pdf
v vi

Minnesota Statutes, Sections 469.174, Subdivision 7 and 469.177, Subdivision 6

Streetcar financing legislation, Section 20, Subdivision 3(b), available via http://www.ci.minneapolis.mn.us/www/groups/public/@clerk/documents/webcontent/wcms1p109846.pdf
vii

Id. (Emphasis added.)

viii

Parcel map available at http://www.minneapolismn.gov/www/groups/public/@clerk/documents/webcontent/wcms1p109844.pdf
ix

Listing of development underway available at http://www.minneapolismn.gov/www/groups/public/@clerk/documents/webcontent/wcms1p109845.pdf, bottom of page 3.
x

Minn. Stat. 469.1771: “ The owner of taxable property located in the city, town, school district, or county in which the tax increment financing district is located may bring suit for equitable relief or for damages . . . arising out of a failure of a municipality or authority to comply with the provisions of sections 469.174 to 469.1798, or related provisions of this chapter. The prevailing party in a suit filed under the preceding sentence is entitled to costs, including reasonable attorney fees.”

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