HF112

Purpose

This bill would change how Minnesota defines and uses economic development tools. It broadens what counts as financial assistance and expands the types of projects eligible to receive these tools, including certain tax increment financing (TIF) and low-income housing credit (LIHC) allocations. It also updates key definitions and who administers these programs.

Main Provisions

• Redefinition of economic development

  • Economic development includes financial assistance provided to a person, a local government, or a nonprofit for activities related to manufacturing or selling goods and services.
  • It excludes:
  • Financial assistance for rehabilitating existing housing.
  • Financial assistance for new housing construction if total assistance at a single project site is less than $100,000.
  • Financial assistance for the new construction of fully detached single-family affordable homeownership units if the assistance covers no more than ten such units.
  • Affordable homeownership is defined as housing targeted to households with incomes at initial occupancy at or below 115% of the state or area median income, as determined by HUD.

• Redefined financial assistance

  • A grant by a state agency or allocating agency for economic development purposes qualifies if a single business receives $200,000 or more of the grant proceeds.
  • A loan, or the guaranty or purchase of a loan, qualifies if a single business receives $500,000 or more of the loan proceeds.
  • A reduction credit or abatement of a tax under chapter 297A qualifies if the tax relief applies to a geographic area smaller than the entire state and is granted for economic development purposes.
  • Tax increment financing (TIF) under chapter 469 or other special law qualifies if:
  • The development includes 25 units or more of multifamily housing, or
  • The TIF provides $100,000 or more of financial assistance to a development.
  • Allocations or awards of LIHC by all allocating agencies qualify if used for multifamily housing projects and the projects consist of more than ten units.
  • Financial assistance does not include payments by the state of aids and credits under chapters 273 or 477A to a political subdivision.

• Project site and related terms

  • Project site means the location where improvements are financed by the financial assistance, or the location of employees who receive employment and training services or customized training from a technical college.

• Agencies and program terminology

  • State agency includes any agency defined in section 16B.01 subdivision 2, plus Enterprise Minnesota Inc. and the Department of Iron Range Resources and Rehabilitation.
  • Allocating agency is defined as in section 462A.221 subdivision 1a.

Significant changes to existing law

• Broader use of financial tools
  • The bill expands the set of activities and financing mechanisms that can be counted as economic development by including TIF and LIHC allocations as forms of financial assistance.
  • It lowers or clarifies thresholds for what counts as substantial financial assistance (e.g., grants, loans, tax incentives) for determining eligibility.
• Expanded project scope
  • It allows larger multifamily housing projects and certain affordable housing arrangements to be included under the financial assistance framework.
• Updated definitions and administration
  • It updates key definitions (economic development, financial assistance, project site, state agency, allocating agency) and identifies specific agencies involved, potentially changing how programs are administered and evaluated.

Practical implications (high level)

• Projects that rely on TIF or LIHC allocations for multifamily housing or for economic development may become eligible for treatment as financial assistance under the statute.
• The criteria for what constitutes substantial financial support from state tools will be applied differently, potentially altering which projects qualify for the programs.
• Agencies involved in administering economic development incentives may have updated roles and definitions to align with the new framework.

Relevant Terms economic development financial assistance grant loan guaranty abatement tax reduction tax credit tax increment financing (TIF) multifamily housing low-income housing credits (LIHC) allocating agency state agency project site affordable homeownership HUD area median income as determined by HUD chapter 469 chapter 297A chapter 273 chapter 477A Enterprise Minnesota Inc. Department of Iron Range Resources and Rehabilitation geographic area economic development related purposes