Fourth District County Commissioner Len Miller doesn’t think the city of Austin’s downtown Tax Increment Finance District No.

Friday, March 31, 2000

Fourth District County Commissioner Len Miller doesn’t think the city of Austin’s downtown Tax Increment Finance District No. 10 is strictly legal. At the moment, it looks like the state auditor’s office has some questions about that, too.

While tax increment financing is a fairly complicated process, the gist is supposedly simple. Usually, cities offer TIF districts for projects that would not be built except for its use, or in cases of blight. The difference in the before and after (renewal) property tax is given to various companies as incentives to do development or what used to be termed "urban renewal."

No. 10 is a fairly unusual proposal for a TIF district, because the money comes from one source (Hormel Food Corp.’s renovation of the old Kmart building on Main Street North) and goes out to myriad unrelated targeted properties in the heart of downtown Austin.

In the case of TIF No. 10, Hormel wants no part of any rebate or refund of the tax increments. However, the city of Austin – with Hormel’s blessing – has proposed and passed using that increase in property taxes to finance as many separate renovation projects as it can downtown.

However, just when the city was preparing to bond for the TIF district, a letter came from the state.

It was the latest step in a chain reaction that started last July when the Austin City Council passed the TIF district and continued when Miller sent a memo to Mower County Attorney Pat Oman for a legal opinion on that same district. This most recent development was a request for more information from the TIF department of the state auditor’s office.

"My understanding is that we got a letter stating that they (the TIF auditors) need more information," City Administrative Services Director Tom Dankert said Thursday morning. "I believe they need more information on the reasons supporting why the development wouldn’t occur but for the TIF assistance. We’ve highlighted the reasons for them – they are outlined throughout the report – and then we’re expecting them to say this is OK and tell us they won’t get involved in the local politics of the matter."

City Attorney David Hoversten echoed Dankert’s confidence.

"The city’s position is that No. 10 complies with all the statutes concerning TIF districts," Hoversten said. "Our plan is no different from hundreds around the state."

Miller would – and often has in the past – disagree. He said he felt he had to voice his objections to the project as "an elected official, on behalf of my constituents."

"The way I read the state statute, there are two things wrong with TIF district No. 10," Miller said. "First, the city is supposed to have a contract with the entity that’s renovating, in this case Hormel. I don’t know how they could have if Hormel has said it’s putting up all the money for the renovation.

"Second, if it is apparent that the project can be accomplished with private funds, then the city isn’t supposed to be involved or benefit."

The problem appears to lie in interpretation of the state statute. Miller sees the city getting money from the cleanup of a blighted area by a private entity without giving any kind of return to that private party for cleaning up the area. The city sees the return as the help it will give to business owners who help to renovate the targeted buildings downtown.

Walt Hartman, director of Municipal Economic Development Network, is the city’s long-time adviser on TIF districts. He doesn’t think No. 10 is unusual or illegal.

Hartman explained that, according to the law, a city didn’t necessarily need to use the tax increments on the same property.

"You are allowed to use tax increments to clean up blight," Hartman said. "And that’s basically what the city is using the money for. They could have given it back to Hormel, but they didn’t need to, so they are using it to clean up some messes downtown. They are not putting it in their pockets for Park and Rec.

Out of the state’s 1,924 TIF districts to date, Hartman estimated he’d played a role in at least 300. He said questions about TIF districts from the state auditor aren’t unusual, what is unusual is that someone from the area would call in the state auditor’s office.

"Once you do that, they don’t stop at whatever complaint you have, they start going through everything," Hartman said. "You’ve then got your hands full. I don’t understand why anyone would want to cause so many problems for the city, especially when you’ve got such a viable city.

"I’m sure if the county would donate the money to fix up some of those blighted areas, the city would happily cancel the TIF district," Hartman added, proving he does know at least a little about local politics.