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TIF Projects in Limbo Pending Tax Reform

ST. PAUL, MN-As cities and developers wait to see what the Minnesota Legislature proposes for commercial and investment property tax reform, two of the largest projects in St. Paul history are on hold.

By Jim McCartney | Updated on June 08, 2001

ST. PAUL, MN-Two of the largest commercial development projects to come to St. Paul in years — the West Side Flats and Upper Landing “urban villages” — are in limbo as developers and city officials wait for the Minnesota Legislature to pass a tax bill that includes major property tax reform. St. Paul isn’t the only one waiting breathlessly.

Other older Minnesota cities, including Minneapolis and its Minneapolis Community Development Agency, are finding there’s a downside to slashing commercial-industrial real estate taxes: specifically, what happens to tax increment financing?

Tax increment bonds — a public tool to help cities finance development by issuing bonds that are repaid through higher property taxes on the development — are a very popular tool in Minnesota, given the state’s historically high property taxes. If you slash property taxes, all of a sudden there isn’t enough “increment” coming in to pay off those bonds, says Brian Sweeney, director of the planning and economic development department for the city of St. Paul.

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