Committee Considers Housing Tax Increment Financing Proposals

Lawmakers heard two bills related to statewide TIF proposals aimed at supporting affordable and workforce housing.

On March 31, the House Taxes Committee heard a full agenda of tax increment finance (TIF) bills. While most focused on local TIF adjustments, two proposals have statewide implications. Both were laid over for possible inclusion in an omnibus tax bill.

Expanding unobligated TIF proceeds (HF 1159)

HF 1159, sponsored by Rep. Cheryl Youakim (DFL-Hopkins), would expand how cities can use  unobligated TIF proceeds outside of their districts. Specifically, the bill would allow those funds to be directed to local housing trust funds, provided the funds benefit households that meet certain income requirements.

In a letter of support, the League of Cities highlighted that this change would help more cities establish and fund local housing trust funds — unlocking unused TIF dollars for grants, loans, matching funds, and other direct city assistance.

The bill was amended to allow for income averaging in affordable housing projects and was laid over for possible inclusion in an omnibus tax bill.

TIF timeframes (HF 338)

The committee also considered HF 338, sponsored by Rep. Roger Skraba (R-Ely). This bill would allow TIF districts outside the metropolitan area to quality as housing districts without income restrictions, enabling them to fund both market-rate and workforce housing.

Additionally, the bill would extend two key TIF timeframes:

• The five-year rule, which requires that debt for the in-district portion of tax increment financing activity be undertaken within five years, would be extended to 10 years.
• The six-year rule, which requires the authority to begin using a certain percentage of increment on paying off development debt by the sixth year, would be extended to 11 years.

The bill was also laid over for possible inclusion in an omnibus tax bill.

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