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Many Cities in Minnesota need an Economic Development Authority (EDA) or a Housing and Redevelopment Authority (HRA) and this presentation discusses some of the reasons why this is important.
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Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.
— Sun Tzu
How or Why to Create an How or Why to Create an EDA or HRAEDA or HRA
History
Housing & Redevelopment Authorities (HRA's)Federal housing and urban renewal
programs grew out of the depressionInitial assumptions were that federal
government would implement programs directly
Early case law held that these were matters involving local health and welfare and states rights
History
Housing & Redevelopment Authorities (HRA's)There was need for a local receptacle for
receipt of federal funds and implementation of federal policies
New York was the first to pass an HRA-type statute and it be the model for states across the country
Minnesota enacted its HRA statute in 1947 at the urging of then Minneapolis Mayor Hubert Humphrey.Who's lawyer is who’s
History
Municipal Development DistrictsIn the late 1960's Charles Stenvig, a former
Minneapolis cop and political independent was elected Mayor of Minneapolis
The Minneapolis City Council was heavily DFL and was constantly at war with Mayor Stenvig
The Minneapolis HRA had 500 employees but only three Commissioners because the Council wouldn't confirm any of Strenvig's appointments
History
Municipal Development DistrictsConversely, the HRA Board refused to carry out any of
the Council's favorite programs
In 1969, the Council convinced the heavily DFL legislature to enact a special municipal development district law that authorized the CITY COUNCIL to carry out housing and redevelopment activities without the HRA
Robbinsdale and South St. Paul tagged on to the 1969 special law, but the next year it was enacted on a state-wide
History
Port AuthoritiesPort authorities were established as early as the turn
of the century in New York and other ocean port centers
Later the concept spread to river and inland ports, St. Paul establishing its port authority in 1932, followed by Minneapolis, Duluth, Red Wing and Winona
St. Paul used its port authority as a redevelopment tool, having its statute amended regularly to add new powers and financing mechanisms
History
Port AuthoritiesThe St. Paul Port Authority's ability to own and
lease facilities and its power to pool projects for financing purposes resulted in a rush to the legislature by cities asking for port authority powers
Anyone ever visited the seaway shipping in and out of Roseville, Fergus Falls, Granite Falls, Plymouth, Ortonville or Wadena
History Economic Development Authorities (EDA)
About this time (the 80's"), the City of Red Wing, which had both an HRA and a Port Authority, but also a City Council that could agree on nothing, hired a brilliant young lawyer to mediate their differences
The result was the drafting of special legislation for Red Wing that provided newfound governance flexibility and incorporated many of the powers existing in the HRA, Municipal Development Districts and Port Authorities
The legislature, in 1987, tiring of the parade of dry-as-a-bone cities asking for Port Authority powers, took the Red Wing bill, restricted it somewhat and enacted it state wide
What Are the Differences
Tax IncrementThe tax increment law is a method of financing that
overlays the various development lawsThe tax increment law generally does not empower
cities or authorities to act, only to finance action otherwise authorized
Therefore, tax increment works exactly the same no matter which development statute is utilized. About this time (the 80's"), the City of Red Wing, which had both an HRA and a Port Authority, but also a City Council that could agree on nothing, hired a brilliant young lawyer to mediate their differences
Governance
Municipal Development DistrictsAs mentioned above, the Municipal Development
District law is a city council law and can be used without the establishment of a separate authority
This is attractive to cities that do only occasional projects and don't want to establish a separate agency
Disadvantage include:• It is that it is a very general statute and offers little
implementation guidance
• Because it is a city tool, it is at least theoretically possible that the city may incur liabilities against which it might be protected if the actions giving rise to the liability were conducted by a separate municipal corporation
HRA’s
HRA’sAs much as Municipal Development Districts are solely
a city tool, HRA's were intended to be a separate, quasi-independent public corporation
The reasons they were set up this way include:• Provide the City liability protection
• Insulate its activities from politics...they were dealing with such "popular" programs as urban renewal and code enforcement, after all
• Until the 1980's it was considered a conflict of interest for a any public official to serve as a HRA commissioner
HRA’s
HRA’sThe popularity of city council members serving as
HRA commissioners was directly proportional to the increasing popularity of HRFA programs
Today:• Up to 7 members appointed by Mayor and confirmed by
Council
• 5-year terms
• Must be residents
• Council members may be appointed and term MAY be co-terminus with Council term
EDA’s
EDA’sOriginally intended to offer the maximum in
governance flexibility
Options include:• 3 members, including 1 Council member
• 5 members, including 2 Council members
• 7-members, including 2 Council members
• 3, 5 or 7 members with all being Council members
• No residency requirement
Powers
In materials is a charter comparing statutory powers of HRA's and EDA's
Powers
PowersBroadest coverage is in EDA statute in that it
authorizes cities to grant to its EDA all of the powers and duties of an HRA or a city operating a Municipal Development District
Most cities create an EDA and then mix and match powers of all three statutes
Powers
One caveat: All entities generally derive their powers to act through the
establishment of an empowering area. e.g. municipal development districts, HRA redevelopment project areas, etc.
EDA statute says that the empowering area that may be created is an "economic development districts," defined as a "redevelopment district" under the tax increment statute
A tax increment "redevelopment district" is one that meets all of the difficult physical substandard tests
Most agencies avoided this by creating a municipal development district or, if blighted, a HRA redevelopment project, but then used EDA powers of implementation
Powers
One caveat: In 2000, the Minnesota Court of Appeals decided
Lino Lakes Economic Development Authority v. George J. Reiling, 610 N.W.2d 355
Anomaly is that an EDA can create an "economic development district," as defined in the tax increment statute, but can't use tax increment to finance it
Housing powers are generally found in the HRA statute, not the EDA statute
Exotic powers in EDA statute, such as limited partnerships
Levies
Levies HRA levy is levied by HRA with concurrence of City,
so is outside levy limitsHRA maximum annual levy .0144 percent of city
taxable market valueEDA levy is levied by city, so subject to levy limitsEDA maximum annual levy .01813 percent of city
taxable valueEDA levy may be increased, subject to reverse
referendumEDA with HRA powers may levy both
Bonds
Bonds Apart from tax increment bonds, HRA's may issue its
revenue bonds or bonds secured by its full faith and credit
An EDA may issue bonds secured by the general obligation of the city, on a limited basis, for qualified housing and with the consent of the city
An EDA may issue its revenue bonds or bonds secured by its full faith and credit
An EDA may issue bonds secured by the full faith and credit of the city upon approval by two-thirds of the city council members
Choosing An Option
Why do cities choose one option over another?History of city development activityPolitics of the city
– control versus responsibility
Transition of city goalsElected officials work loadType of development “deals”Financing needs
Different Solutions Cities Use
City as the Authority
HRA as the Authority
EDA as the Authority
Both HRA and an EDA
Only a Port Authority
EDA or HRA but the city final authority
EDA and county HRA-CDA
Issues You May Encounter
Real life problems cities have hadThe authority does not approve
The city refuses to pay the authority
The authority refuses to pay the city
The authority changes the deal
Who has the money
Issues You May Encounter
Real life problems cities have hadLaw suit - city versus authority
Who's lawyer is who’s
Who’s staff person is who’s
How does the authority’s financing impact the city
The authority won’t go away
Financing Needs of HRA/EDA
• How to pay for Staff– Offsetting the General Fund Budget
• Levy Amount• TIF• Others