State Auditor Blaha Releases 2022 Tax Increment Financing Legislative Report - February 7, 2024

Saint Paul, MN – “TIF districts continue to close early, and that’s good news,” said Auditor Blaha.

“Our office worked with various stakeholders and the Legislature in 2023 to clarify and improve the provisions of TIF law that help ensure that this trend will continue,” Blaha continued.

Tax increment financing is a financing tool for redevelopment, housing, and economic development projects that allows authorities to use the property taxes on the new value generated by a development (i.e. "tax increments"), to help finance the development activities. The 2022 Tax Increment Financing (TIF) Legislative Report covers 2022 activities reported in 2023.

Additionally, The Office of the State Auditor (OSA) provides education and conducts oversight activities that help ensure good stewardship of tax increment financing.

Another positive trend has been the increasing reliance on pay-as-you-go debt instruments rather than general obligation bonds to finance activities. “This shifts the risk from taxpayers to developers and noteholders, should tax increments not end up being sufficient to pay costs,” Blaha added.

Highlights and Trends

• In 2022, almost $232 million of tax increment revenue was generated statewide, which is a decrease of four percent from the $241 million generated in 2021. This is a second consecutive decline from a recent peak in 2020. (Pages 19 - 21)
• In 2022, 380 development authorities submitted reports to the OSA for 1,669 TIF districts. The number of districts since 2016 has largely remained constant at between 1,653 and 1,674 districts. (Pages 11 - 13)
• In 2022, 78 new TIF districts were certified, 26 less than the 104 new districts certified in 2021, and the fewest created over the last five years. In 2022, 100 districts were decertified, up 19 percent from 2021. The number of new certifications each year has fluctuated less over the last ten years than the number of annual decertifications. (Pages 14 - 17)
• In the latest five-year period, 79 percent of redevelopment and 77 percent of housing districts decertified early, compared to 39 percent of economic development districts decertifying early (a still-significant rate given their shorter statutory duration limits). Early decertification is more significant than merely getting value back into the tax base a year or two before reaching maximum limits; it often reduces the duration of value capture by a third or more. (Page 18)
• In 2022, development authorities returned $13,130,679 of tax increment revenue to county auditors for redistribution as property taxes to cities, counties, and school districts. (Page 22)
• In 2022, there was $1.8 billion of outstanding debt associated with TIF districts, an increase of one percent from 2021. Pay-As-You-Go (PAYG) obligations were the predominant type of debt, making up 70 percent of the debt reported. General Obligation (GO) bonds comprised about 14 percent of the total debt. Interfund loans (mostly from non-tax increment accounts) made up 11 percent of total debt. PAYG obligations have steadily made up an increasing share of TIF debt, while reliance on general obligation bonds has declined over the past ten years. (Page 24-25)

The complete report is available on the OSA website.