The primary focus of the meeting was a comprehensive presentation by the community development director, Bill Nondorf, and the public finance team from Ellers, aimed at clarifying the complexities of TIF and its impact on school district funding. Representatives from the Edina, Hopkins, and Richfield school districts attended to discuss how TIF affects their revenues and tax rates.

The presentation provided an in-depth overview of school district financing, emphasizing that school funding is predominantly linked to student enrollment rather than property tax base fluctuations. The largest source of revenue for school districts comes from state aid, specifically the general education formula allowance, currently set at $7,295 per student for the upcoming fiscal year. Property taxes contribute to local revenue, but federal aid and other sources are minimal. The misconception that increased property values automatically result in higher school funding was addressed, clarifying that this is not the case.

The discussion also covered the two different tax bases used in Minnesota for school finance: the referenda market value tax base and the net tax capacity. The referenda market value tax base excludes certain property types, whereas the net tax capacity includes a broader range of properties. The tax base composition for Edina was discussed, revealing that residential properties make up 70% of the overall market value, while commercial and industrial properties account for about 12%.

A point of discussion was the impact of creating TIF districts on school funding. It was explained that while TIF districts can lead to an increase in the tax base, they do not necessarily alter student enrollment. The creation of a TIF district can result in either an adjustment in state aid or a reduction in tax rates for existing taxpayers. The concept of “excess tax increment” or surplus funds was also highlighted, explaining that if the HRA returns unused tax increments, the county redistributes these funds according to local net tax capacity shares. However, a statutory limit restricts school districts to retain a maximum of $25,000 of these funds in any calendar year.

The presentation included examples of TIF’s functionality within Edina’s redevelopment efforts, specifically referencing a recent TIF district aimed at revitalizing a site once occupied by a Perkins restaurant. The redevelopment increased the site’s value significantly.

The session also delved into the broader implications of TIF for community redevelopment, discussing its role in promoting private investment in public improvements and transforming vacant or declining properties. The challenges of financing larger projects in a built-out community like Edina were emphasized, particularly given rising construction costs and changes in the lending landscape.

A significant portion of the meeting was devoted to discussing a proposal for the project on France Avenue. The staff highlighted the need for TIF to finance the project, mentioning the extensive site preparation required due to the area’s history as a sand and gravel pit. Rising construction costs and the reduced lending percentages from banks were discussed as additional financial pressures necessitating TIF support.

The meeting included discussions on revisions made to the term sheets for the project, aimed at ensuring better understanding and compliance with fair labor and design standards. The potential public benefits of the project, such as increased tax revenue and the inclusion of affordable housing, were debated. Concerns were raised about the long-term affordability of housing units and the potential risks associated with TIF financing.

The role of public input and the notification process for new TIF districts were also discussed. The importance of transparency and community engagement in the redevelopment process was emphasized, with calls for a clearer framework for decision-making and more open discussions about the valuation of developments.