SF4872

Purpose

This bill changes how certain tax revenue in Minneapolis is used, with a focus on funding state bond debt service and the Minnesota Sports Facilities Authority (MSFA). It also adjusts the way taxes tied to the MSFA are treated and deposited into the general fund, and directs MSFA funds to stadium-related repairs and improvements.

Main Provisions

• General fund allocations for bond debt service (Section 1)
  • The state must deposit money into the general fund starting in 2021 through 2046 so that, by 2046, the present value of those deposits equals 150 million dollars.
  • The present value is calculated using dates when bonds are sold and using a discount rate (or rates) chosen with the help of the state’s budget office.
  • The annual amounts are to be scheduled and certified by the state budget office and the city’s finance officer.
• Capital improvements for MSFA (Section 2)
  • From 2021 through 2046, the capital improvement reserve for MSFA must receive an aggregate annual amount that matches the state’s payment for this purpose in each respective year (as defined in a related statute).
• Operating expenses for MSFA (Section 3)
  • From 2021 through 2046, MSFA’s operating expenses must receive an aggregate annual amount that matches the state’s payment for this purpose in each year (as defined in a related statute).
• Tax capture related to MSFA (Section 4)
  • To account for increases in taxes under a special law benefiting MSFA (in effect since 2013), a portion of the additional tax revenue must be deposited into the general fund the following year.
  • The amount deposited is limited to the lesser of two calculated options or up to 2.3 million dollars:
  • Option i: 50% of the difference between actual net annual taxes and a baseline, where the baseline is the 2011 net actual taxes inflated by 2% per year since 2011; or 25% of that difference if using a different baseline that includes a 3,000,000 base inflated by 2% since 2011.
  • Option ii: 3% of the net annual taxes for the preceding year.
  • If the MSFA bonds are defeased, redeemed, or paid in full, budget officials must agree to a revised schedule with a zero percent discount rate, while keeping the same overall methodology.
  • MSFA must use the deposited funds for capital repairs, replacements, and improvements to the stadium and its infrastructure.
• Overall funding relationship
  • The bill ties MSFA funding to state payments under the related 473J.13 provisions and adjusts how these funds flow between the general fund and MSFA-related accounts.

Changes to Existing Law

• Amends Minnesota Statutes 2024 section 297A.994, subdivision 4, to add new general fund deposit requirements tied to bond debt service and to set up the present value target.
• Establishes ongoing annual funding for MSFA’s capital improvements and operating expenses through amounts equal to state payments authorized in related sections (473J.13 subdivisions 2 and 4).
• Introduces a formula-based mechanism to capture certain MSFA-related tax increases and direct them to the general fund, with a cap and a potential zero-discount-rate adjustment if bonds are defeased.

How the Funding Is Calculated (Key Mechanics)

• Present value target: 150,000,000 dollars in the general fund by 2046, using specified discount rate methods.
• MSFA capital improvements: annual amounts mirror state payments under 473J.13 subdivision 4 (through 2046).
• MSFA operating expenses: annual amounts mirror state payments under 473J.13 subdivision 2 (through 2046).
• Tax capture formula: deposits to the general fund in the following year equal the lesser of two calculated options (with a cap of 2.3 million), using either a percentage of tax differences from a 2011 baseline inflated over time or a percentage of the prior year’s net taxes.
• Defeasance option: if bonds are defeased, the schedule is revised with a zero discount rate, while keeping the same general methodology.
• Use of deposits: funds deposited under these provisions must be used for MSFA stadium capital repairs, replacements, and improvements.

Context and Scope

• The bill targets local sales tax revenue usage in Minneapolis, including the downtown taxing area, by shaping how revenue supports debt service and MSFA projects.
• It creates cross-agency budgeting interactions between the general fund, the city’s finance office, and the MSFA.

Relevant Terms - general fund - state bond debt service - present value - discount rate - 30-year bond index - Minneapolis - Minneapolis downtown taxing area - Minnesota Sports Facilities Authority (MSFA) - capital improvement reserve - operating expense appropriation - Minnesota Statutes 297A.994 - Minnesota Statutes 473J.13 (subdivision 2 and 4) - net annual taxes - baseline 2011 taxes - inflation (2% per year) - defeasance - stadium - stadium infrastructure - local sales tax revenue - tax capture - aggregate present value - bond sale dates (16A.965) - zero percent discount rate (in defeasance scenario)