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Legislative Policies-LE-18

LE-18. Economic Development Authorities (GC)

Issue: The 2005 Legislature authorized all counties outside the metropolitan area to establish county economic development authorities (EDAs). Minn. Stat. § 469.1082 provides specificity on certain process and limitations issues. County EDA activity in areas surrounding cities will directly impact the adjacent city in terms of service provision and taxes.

Under Minn. Stat. § 469.107 and § 469.033, EDA levies for economic development activities are capped. These limits can hinder the planning of future development. With the conversion of the market value homestead credit to the new homestead market value exclusion, a number of levy restrictions based on market value related to specific functions such as economic development authorities (Minn. Stat § 469.107), housing and redevelopment authorities (Minn. Stat § 469.033) and port authorities (Minn. Stat § 469.053) may inadvertently experience a reduction in their levy authority. The impacts on these entities will vary significantly 1 from jurisdiction to jurisdiction based on the number and market value of homesteads within the jurisdiction. These levy limits were converted to a percentage of market value to avoid having indirect legislative actions, such as class rate changes, from decreasing or increasing levy authority.

Given the recent economic downturn, development and redevelopment projects have slowed dramatically or have been indefinitely delayed. As a result of these delays, land that is being held by an EDA for development purposes is now running into the statutory time limit which eliminates the tax exempt status for the property after nine years, or 15 years for those 5,000 and under in population that are outside the metropolitan area. The end of a parcel’s tax exempt status severely reduces the ability of an EDA to undertake development activities.

Response: The Legislature should require city approval for proposed county EDA activities within two miles of a city. The Legislature should consider increasing the levying authority for EDA and Housing and Redevelopment Authority (HRA) activities in Minn. Stat. ch. 469. Levy limits based on market value, including those impacting economic development authorities, housing and redevelopment authorities and port authorities should be computed on market value of the jurisdiction before the homestead market value exclusion. Finally, the League of Minnesota Cities supports legislation that would extend the time that land can be held by EDAs for economic development purposes while being exempt from property taxes.

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