HomeMy WebLinkAboutCouncil Information Memorandum 01-20-2000DATE: January 20, 2000
TO: Mayor and City Council
FROM: Dwight D. Johnson, City Manager
SUBJECT: State Auditor's correspondence on TIF districts
Last week, I wrote you a note indicating that the State Auditor's office is questioning the
procedural correctness regarding how the City transferred some Tax Increment Financing
revenues from one TIF district to another in what is known as a "pooling" concept.
Attached is the correspondence between Dale Hahn and the State Auditor's office as well
as correspondence from our bond counsel, John Kirby on the subject. Staff met with Mr.
Kirby and City Attorney Roger Knutson last Wednesday. We continue to believe that
our method of transferring funds meets both the law and sound accounting practices.
Mr. Hahn and Mr. Kirby plan to meet with Mr.James Silen of the State Auditor's office
on January 24th. They will try to arrive at some reasonable arrangement that will settle
the matter at that time. We will let you know the results of that meeting.
01/20/00 THU 13:37 FAX 16123402644 DORSEY WHITNEY
DOR.SEY &. WHITNEY LLP
MINNEAPOLIS
PILLSBURY CENTER SOUTH
BILLINGS
P41WyoRR
220 SOUTH SIXTH STREET
CREAT FALLS
9EATTL$
MINNEAPOLIS, MINNESOTA 554()2-2498
MISSOULA
DEN`/ER
TELEPHONE: (612) 340-2600
BRUSSELS
IWASHINCTON, D.C.
FAX: (612) 340-2868
FARCO
DIIS MOINES
HONG KONG
ANCHORAGE
P QCHESTETL
LONDON
JOHN D. KIRBY
SALT LAKII CITY
COSTA MESA
orcuunsci
VANCCIWKR
(612)340-566.5
Fax (612) 340.7644
kirby.john®dorseylnw.Com
January 20, 2000
Mr. Dale Hahn
Finance Director
City Hall
3400 Plymouth Boulevard
Plymouth, MN 55447
Re: Tax Increment Matters - Office of State Auditor Letters
Dear Dale:
As we have discussed, based upon the recent exchange of correspondence
between the Office of the State Auditor (OSA) and the City, OSA is questioning the propriety of
certain transfers made between the fitnds of various tax increment financing districts within the
City's Development District No. 7 (herein, the Project Area). As set forth in the most recent
letter from OSA, dated January 6, 2000, OSA is apparently taking the position that the transfers,
in themselves, represent an "expenditure" of tax increment funds. Since the transfers are not
specifically set forth as line items in the tax increment plan budgets of the tax increment districts,
OSA questions whether the tax increment funds are being expended in accordance with duly
adopted tax increment plans.
As I noted in our discussions, the City's approach in its tax increment plans
relating to the Project Area, going back to the original adoption of those tax increment financing
plans in 1988 and 1989, has been to concentrate on the ultimate use of the tax increment funds in
determining whether the expenditure was for an authorized purpose, rather than to regard any
inter -district transfer as an expenditure in itself. Each of the tax increment plans adopted for the
tax increment districts in the Project Area contains a listing of authorized improvements within
the particular tax increment district for which the plan was prepared, but also reserves the right to
expend tax increment from the district for improvements within any of the other tax increment
lih 002
01/20/00 THU 13:37 FAX 16123402644 DORSEY WHITNEY Z003
DORSEY & WHITNEY LLP
Mr. Dale Hahn
January 20, 2000
Page two
districts within the Project Area and specifically lists the authorized improvements within the
other tax increment districts. Consequently, if one focuses on the ultimate use of the tax
increment funds transferred from one tax increment district to another, one finds that the funds
transferred were ultimately expended on an improvement listed as an authorized improvement in
the tax increment plan for both the district from which the funds were transferred and the district
to which the funds were transferred. So, the position of the City is that the tax increment has, in
fact, been expended for authorized improvements in accordance with the relevant tax increment
financing plans (and the inter -district transfers are not themselves the "expenditures" which
should really count in malting this determination).
To illustrate the conclusions of the preceding paragraph, one transfer OSA
highlighted involved the transfer of $1,306,997 from TIF District 1-5 to TIF District 7-1 in 1997.
OSA is apparently objecting to the fact that the tax increment financing plan budgets for TIF
District 1-5 and TIF District 7-1 did not contain a line item for the transfer out (in the case of TIF
District 1-5) and for the transfer in (in the case of TIF District 7-1). The City's approach is to
look at the question somewhat differently - i.e. for what was the $1,306,997 actually expended?
In fact, the funds were applied toward the payment of costs of improvements specifically listed in
the TIF District 7-1 budget. Since the TIF District 7-1 improvement budget (along with the
improvement budgets of the other tax increment districts in the Project Area) was incorporated
into the tax increment plan and budget for TIF District 1-5, the City believes the $1,306,997 was
spent for authorized budget items in accordance with the tax increment financing plan adopted
for TIF District 1-5, and the inter -district transfer should be viewed as a bookkeeping step on the
way to the ultimate authorized expenditure.
As I indicated in our discussions, from a legal standpoint I believe the City is on
solid ground in arguing that the tax increment funds have in fact been expended for authorized
purposes in accordance with duly adopted tax increment financing plans as outlined above, and I
am reasonably hopeful the City can work out a solution with OSA which would accommodate .
any administrative problems OSA might have while still recognizing the underlying validity of
the City's tax increment expenditures in the Project Area to date.
rel truly
John D.
JDK/dep
�PIT
OR "w
�P6'1LE DUry� OY.'•�
z;
JUDITH H. DUTCHER
STATE AUDITOR
STATE OF MINNESOTA
OFFICE OF THE STATE AUDITOR
Dale Hahn, Finance Director
City of Plymouth
3400 Plymouth Blvd.
Plymouth, MN 55447
Re: City of Plymouth
Dear Mr. Hahn:
SUITE 400
525 PARK STREET
SAINT PAUL, MN 55103-2139
Please respond to:
Tax Increment Financing Division
505 Spruce Tree Centre
1600 University Ave. W.
St. Paul, MN 55104
January 6, 2000
(651) 296-2551 (Voice)
(651) 296-4755 (Fax)
stateauditor@osa.state.mn.us (E -Mail)
1-800-627-3529 (Relay Service)
TIF Division Phone: (651) 642-0767
TIF Division Fax: (651) 642-0769
Direct Dial: (651) 642-0823
1997-98 Tax Increment Financing (TIF) Reports
The Office of the State Auditor (OSA) has received your letter dated December 22, 1999. Thank
you for your timely response to our inquiry. Your letter was helpful. However, there remain several
concerns which need to be resolved.
As was mentioned several times in the GSA's letter dated November 29, 1999, tax increment must
be used in accordance with the TIF plan. Accordingly, it is important that the TIF -plan budget be
correctly reported. Based on materials and reports which the city has submitted to our office, we
question whether the TIF -plan budget has been correctly reported. We also wish to determine with
greater clarity the authorization in the respective TIF plans for various transfers made between TIF
districts. In this regard, you should realize that transfers, like other expenditures of tax increment,
must be made in accordance with the TIF plan. The question of whether a transfer has been properly
authorized is resolved by application of the Minnesota TIF Act rather than by reference to the
Statements of the Governmental Accounting Standards Board.
In an attempt to better understand the City's position and eventually be able to resolve our concerns,
I would like to schedule a meeting at your office where you can indicate the budget records on which
you relied in preparing the 1997 and 1998 TIF reports. I would appreciate being able to review any
notes and workpapers you used in the preparation of the 1997 and 1998 TIF reports. Please call me
at (651) 642-0823 to schedule a meeting at your convenience.
Recycled paper with a minimum of
15% post -consumer waste "" " An Equal Opportunity Employer
OFFICE OF THE STATE AUDITOR
Dale Hahn, Plymouth Finance Director
January 6, 2000
Page 2
Thank you for your cooperation in this matter.
Sincerely,
��)- th, �\- Q ---
James Silen
Tax Increment Financing Division
December 22, 1999
James Silen
Office of the State Auditor -T I F Division
505 Spruce Tree Center
1600 University Ave. W.
St. Paul, MN 55104
Re: 1997 and 1998 Tax Increment Reports
Dear Mr. Silen:
I am responding to your letters regarding the 1997 and 1998 Tax Increment Financing
Reports. For all TIF Districts, you are looking for the authorization for the transfers out.
I believe that the City has the authorizaton for the transfers out in all cases based upon the
City's Pooling of Tax Increment Districts Plan for Development District No. 7. The TIF
Plan states that the City reserves the right to use tax increment for any project which is
part of the Development Program for Development District No. 7 which includes all of
the City's districts from No. 1-2 through 7-1. Hence, each TIF Plan authorizes the
expenditure of TIF funds from that district not only for activities within that District, but
also for listed activities within the other Districts.
The individual plans do not have budgets for the transfers, because the transfers are
treated as residual equity transfers, which do not have budgets under generally accepted
accounting principles. The Government Accounting Standards Board's Codification,
Section 1800.106 specifically cites that residual equity transfers are "nonrecurring or non
rountine transfers of equity between funds." A specific example cited is "transfers of
residual balances of discontinued funds to the General Fund or Debt Service Fund." In
contrast, operating transfers "reflect ongoing operating subsidies between funds." When
the City establishes a new tax increment project we obviously never can "budget" for
what the final fund balance will be. Over time we have had more successful projects than
unsuccessful projects, as such we have had positive fund balances to transfer out to
support other projects. Transfers of equity receive more visibility with the public and the
City Council than making such transfers a part of the overall City budget. We have
PLYMOUTH A Beautiful Place To Live
3400 PLYMOUTH BOULEVARD • PLYMOUTH, MINNESOTA 55447-1482 • TELEPHONE (612) 509-5000
®,--*, www.d.plymouth.mn.us
Page 2
consistently applied these principles and do not believe it is proper to amend budgets
every time there is excess revenue, or a revenue shortfall in a district. Instead, we have
adopted a TIF Pooling Plan that includes all project expenditures within the pool,
separated only by which district the project expenditures are expected to be made in.
Approving amended budgets each time there is excess revenue or a shortfall in any
particular district, is misleading to the public, and would seem to be a cosmetic cover-up.
We believe that our accounting methods results in a more conservative application of
accounting principles. The City Council has approved all expenditures for all districts.
With regard to the Administrative fees budget for District No 3-3; there is an error in the
budget amount as reported, and this should be changed to reflect the budget amount of
$240,500. In addition, the City will review the Administrative fees to ensure that charges
do not exceed the budgeted amount of $240,500.
For District No. 7-3, we will make the necessary changes in the report this year to reflect
the correct decertification date December 19, 2006 that you have noted.
For District No. 7-4, the TIF Plan states that "the City hereby elects and specifies that the
maximum duration of the TIF District shall be through the year 2001". Based upon this
sentence in the plan, the date of July 1, 2001 was wrong also. We will change the reports
for 1999 to reflect the correct decertification date December 31, 2001.
Lastly, for District No. 7-2; we will review the budget for this District, and look at
amending it to properly reflect expected loan costs.
If you have questions regarding my responses, please feel free to contact me at 612-509-
5301.
Sincerely,
Dale E. Hahn
Finance Director
cc: Dwight D. Johnson, City Manager
John Kirby, Dorsey & Whitney
Cliff Hoffman, Deloitte & Touche
r �ptTOR O
0
... . t `.;ay
JUDITH H. DUTCHER
STATE AUDITOR
STATE OF MINNESOTA
OFFICE OF THE STATE AUDITOR
Dale Hahn, Finance Director
City of Plymouth
3400 Plymouth Blvd.
Plymouth, MN 55447
SUITE 400
525 PARK STREET
SAINT PAUL, MN 55103-2139
Please respond to:
Tax Increment Financing Division
505 Spruce Tree Centre
1600 University Ave. W.
St. Paul, MN 55104
November 29, 1999
Re: 1997 Tax Increment Financing Reports — Decertified Districts
Dear Mr. Hahn:
(651) 296-2551 (Voice)
(651) 296-4755 (Fax)
stateauditor@osa.state.inn.us (E -Mail)
1-800-627-3529 (Relay Service)
TIF Division Phone: (651) 642-0767
TIF Division Fax: (651) 642-0769
Direct Dial: (651) 642-0823
The Office of the State Auditor (OSA) recently reviewed the 1997 tax increment financing (TIF)
reports for the City.of Plymouth's decertified TIF districts. We request that you provide. further
information to address several concerns raised by information the city reported.
TIF District 1-5: 1997 TIF Authorityport
The city reported transfers out on line 43 and lines 50 through52. The city has not reported a
TIF -plan budget amount for the transfers out reported on line 43. The OSA has reviewed a copy
of the district's TIF plan, as amended on April 18, 1988 and December 19, 1988, and was unable
to find authorization in the amended TIF plan for the transfers out. In particular, the OSA was
unable to find authorization for the reported transfer of $100,000 to TIF District 1-2 before
January 1, 1997 or the reported transfer of $1,306,997 to TIF District 7-1 in 1997. A
fundamental provision of the TIF Act is that all revenues derived from tax increment must be
used in accordance with the TIF plan. Minn. Stat. § 469.176, subd. 4. Please explain where the
district's TIF plan authorizes these transfers of the district's tax increment or what other
authorization the city has relied upon to transfer out this district's tax increment.
TIF District 3-2: 1997 TIF Authority Report
The city reported transfers out on line 43 and lines 50 through 52. The city has not reported a
TIF -plan budget amount for the transfers out reported on line 43. The OSA has reviewed a copy
of the district's TIF plan, as amended on December 19, 1988, and was unable to find
authorization in the amended TIF plan for the transfers out. In particular, the OSA was unable
to find authorization for the reported transfer of $536,798 to TIF District 7-1 in 1997. A
Recycled paper with a minimum of
�' 15% post -consumer waste qM An Equal Opportunity Employer
w
, E OFFICE OF THE STATE AUDITOR
Dale Hahn, City of Plymouth
October 29, 1999
Page 2
fundamental provision of the TIF Act is that all revenues derived from tax increment must be
used in accordance with the TIF plan. Minn. Stat. § 469.176, subd. 4. Please explain where the
district's TIF plan authorizes these transfers of the district's tax increment or what other
authorization the city has relied upon to transfer out this district's tax increment.
TIF District 5-1: 1997 TIF Authority Report
The city reported transfers out on line 43 and on lines 50 through52. The city has not reported
a TIF -plan budget amount for the transfers out reported on line 43. The OSA has reviewed a
copy of the district's TIF plan, as amended on December 19, 1988, and was unable to find
authorization in the amended TIF plan for the transfers out. In particular, the OSA was unable
to find authorization for the reported transfer of $155,000 to TIF District 1-2 before January 1,
1997, $5,000 to TIF District 4-1 before January 1, 1997, $748,869 to TIF District 6-1 in 1997,
and $1,118,406 to TIF District 7-1 in 1997. A fundamental provision of the TIF Act is that all
revenues derived from tax increment must be used in accordance with the TIF plan. Minn. Stat.
§ 469.176, subd. 4. Please explain where the district's TIF plan authorizes these transfers of the
district's tax increment or what other authorization the city has relied upon to transfer out this
district's tax increment.
TIF District 6-1: 1997 TIF Authority Report
The city reported transfers out on line 43 and on lines 50 through 52. The city has not reported
a TIF -plan budget amount for the transfers out reported on line 43. The OSA has reviewed a
copy of the district's TIF plan, as amended on December 19, 1988, and was unable to find
authorization in the amended TIF plan for the transfers out. In particular, the OSA was unable
to find authorization for the reported transfer of $100,000 to TIF District 1-2 before January 1,
1997 and the reported transfer of $415,000 to TIF District 4-1 before January 1, 1997. A
fundamental provision of the TIF Act is that all revenues derived from tax increment must be
used in accordance with the TIF plan. Minn. Stat. § 469.176, subd. 4. Please explain where the
district's TIF plan authorizes these transfers of the district's tax increment or what other
authorization the city has relied upon to transfer out this district's tax increment.
If you have any questions, please call me at (651) 642-0823. Your prompt attention to this matter
would be greatly appreciated. Please provide the requested information on or before December 24,
1999.
Sincerely,
a -;A\,—
James Silen
Tax Increment Financing Division
�pITOR:..
t'4'NLL UU ryn+O1:1 '.
JUDITH H. DUTCHER
STATE AUDITOR
STATE OF MINNESOTA
OFFICE OF THE STATE AUDITOR
Dale Hahn, Finance Director
City of Plymouth
3400 Plymouth Blvd.
Plymouth., MN 55447
SUITE 400
525 PARK STREET
SAINT PAUL, MN 55103-2139
Please respond to:
Tax Increment Financing Division
505 Spruce Tree Centre
1600 University Ave. W.
St. Paul, MN 55104
November 29, 1999
Re: 1998 Tax Increment Financing Reports
Dear Mr. Hahn:
(65 l) 296-2551 (Voice)
(651)296-4755 (Fax)
stateauditor@osa.state.mn.us (E -Mail)
1-800-627-3529Relay Service)
TIF Division Phone: ((651) 642-0767
TIF Division Fax: (651) 642-0769
Direct Dial: (651) 642-0823
The Office of the State Auditor (OSA) recently reviewed the 1998 tax increment financing (TIF)
reports for the City of Plymouth's TIF districts. We request that you provide further information to
address several concerns raised by information the city reported.
TIF District 3-3: TIF Authority Report
1. On line 39, the city reported a TIF -plan budget amount of $388,426 for administrative
expenses. The original TIF plan, a copy of which the city has previously sent to the OSA,
provides for administrative expenses in the amount of $240,500. Please explain the
discrepancy between the budget amount provided in the original TIF plan and the budget
amount reported on the TIF Authority Report.
2. On line 41, the city reported transfers out of $3,226,737 before January 1, 1998 and $2,407
in 1998 without indicating any budget amount for these transfers. A fundamental provision
of the TIF Act is that all revenues derived from tax increment must be used in accordance
with the TIF plan. Minn. Stat. § 469.176, subd. 4. Please explain where the district's TIF
plan authorizes these transfers of the district's tax increment or what other authorization the
city has relied upon to transfer out this district's tax increment.
TIF District 7-1: TIF Authority Report
1. On line 41, the city reported transfers out of $1,771,605 before January 1, 1998 and
$493,799 in 1998 without indicating any budget amount for these transfers. A fundamental
provision of the TIF Act is that all revenues derived from tax increment must be used in
?;yRecycled paper with a minimum of
15% post -consumer waste qft An Equal Opportunity Employer
OFFICE OF THE STATE AUDITOR
Dale Hahn, Finance Director
November 29, 1999
Page 2
accordance with the TIF plan. Minn. Stat. § 469.176, subd. 4. Please explain where the
district's TIF plan authorizes these transfers of the district's tax increment or what other
authorization the city has relied upon to transfer out this district's tax increment.
2. Please provide the OSA with a copy of the original TIF plan and any modifications for this
TIF district.
TIF District 7-2: TIF Authority Report
On line 38, the city reported a budget amount of $40,000 for loan/note interest payments while
reporting $102,414 in actual expenditure for this item ($52,371 + $50,043). It appears that the
interest payment relates to a tax increment note reported on line 71. The city may wish to
consider modifying its TIF -plan budget to authorize increased amounts of tax increment to be
spent on loan/note interest payments which occur after the modification. Any modification of
a TIF plan must adhere to the procedures set forth in Minn. Stat. § 469.175, subd. 4. A TIF -plan
modification does not have a retroactive effect. Please indicate what corrective action, if any,
the city proposes.
TIF District 7-3: Municipality Report
The city indicated on line 7 that the date of required decertification will be December 31, 2006.
TIF District 7-3 is a soils condition district, and its certification request date, according to the
city, is February 14, 1995. In the case of a soils condition district with a certification request
date on or after May 2, 1988 and on or before June 30, 1997, the date of required decertification
is 12 years from approval of the tax increment financing plan. The city reported on line 3 that
the original TIF plan was approved on December 19, 1994. Therefore, it appears the date for
required decertification is December 19, 2006, not December 31, 200_6 as the city reported.
Please reexamine the city's records and indicate the correct required decertification date for this
TIF district.
TIF District 7-4: Municipality Report
The city indicated on line 7 that the date of required decertification will be July 1, 2001. TIF
District 7-4 is a redevelopment district, and its certification request date, according to the city,
was August 17, 1995. In the case of a redevelopment district with a certification request date
on or after June 1, 1993, the date of required decertification is 25 years from the date of receipt
by the TIF authority of the first tax increment payment, or 20 years from the date of receipt by
the TIF authority of the first tax increment payment if the authority elected to adhere to the
provisions of Minn. Stat. § 469.175, subd. 1(b). On line 8, the city reported that it first received
tax increment from this TIF district in 1998. The required decertification date of this TIF district
must be later than July 1, 2001, unless the city provided an earlier decertification date in the TIF
OFFICE OF THE STATE AUDITOR
Dale Hahn, Finance Director
November 29, 1999
Page 3
plan. Please reexamine the city's records and indicate the correct date of required decertification
for this TIF district. If the city believes the decertification date is July 1, 2001, please explain
how it made this determination.
If you have any questions, please call me at (651) 642-0823. Your prompt attention to this matter
would be greatly appreciated. Please provide the requested information on or before December 24,
1999.
Sincerely,
James Silen
Tax Increment Financing Division
James Lileks
You can't always count
on ` math geek' numbers
After all, two are letters (i. e., i and e)
and others may pass by as you drive
gack in late 1999, Mr. George wrote
to lament that he'd missed the
point where his car odometer read
.23,456.7. He wished cars would alert
,ou to key odometer moments — birth -
lays, Social Security numbers and
'those math geek numbers" such as pi.
Nell, this one is really going to make
,our head hurt, but it contains an inter -
;sting historical fact. From A Math Geek
> Re. the odometer column, where
someone referred to the three biggest
"math geek" numbers: There are five
big math geek numbers: 1, 0, pi, i (the
square root of negative one) and e.
If I may interject: This is why I am not
n a math -related discipline. I and a are
:tot numbers. They are vowels. Finding
rowels in a math problem always both -
:red me; it looked as though they'd wan-
iered off from a composition textbook I
-ould understand why z ended up in
math problems; he was chronically un-
deremployed, and was just picking up a
few extra dollars. But neither i nor e
need the work. I'm confused already, so
let's just make it worse:
> The square root of two is not partic-
ularly important in and of itself, al-
though it is usually the first irrational
number discussed in beginningalge-
bra. The proof that it is irrational (i.e.,
it cannot be represented as a ratio of
two integers) is a nice, simple one.
Discovering that it was irrational way
back when threw the Pythagoreans
into a tizzy—legend has it that the
fellow who proved it irrational was
drowned so that he couldn't spread
the word.— but there are an infinite
number of irrational numbers, so we
don't count it as one of our "special"
numbers.
Emphasis added. They drowned him?
Good Lord. Those were the days when
math mattered. Imagine if that happened
today. Time magazine would put it on
the cover, of course. THE GROWING
SCOURGE OF MATH VIOLENCE. Graffiti
would spring up around town — strange
algebraic scribbles, taunting messages
(aVagaDro's dayz are ,NUMBERED). Wor-
ried experts would cite the easy avail-
ability of powerful, hand-held calculators
flooding the streets. "In my day," said
Sgt. Hank Fowler, "when two kids had a
beef, they settled it with slide rules.
Nowadays they have high-powered HP
calculators capable of probability calcu-
lus, operator precedence with value sub-
stitution — well, you're going to see
much more dangerous math as a result."
But let's return to the unfortunate
drowning of the mathematician. It re-
minds me of a song we sang at summer
Bible camp, which went as follows: What
do you do with a drunken sailor? What
do you do with a drunken sailor? What
do you do with a drunken sailor ear -lye
in the morning? The answer was always
the same: Lord God, we've got to drown
him. (Repeat.) And the appointed hour
of sailor -drowning, of course, was ear -lye
in the morning.
It was nc
drowning "
for dealing
Nor did am
was the log
souse to Da
wouldn't h(
Sorryabout
really tied c
Eh? Why ar
way? And v
execution c
Bible camp
I don't r(
haps we we
or admitte(
wuz jokin!.
lye in the rr,
lowed by th,
look so ang
no need to
morning. A
broken boa
we've got tc
This son
"Michael, A
know what
sailors. Wel
Any info
be greatly a
back to odc
> 1 too i
Back in
had a ca
miles. H,
few tent)
parking
circle, in
.99. Glac
before 21
Cambridge mismanaged funds, report says
.A. state auditor's
investigation found
that the city
improperly used more
than $1.5 million.
By Richard Meryhew
Star Tribune Staff Writer
The city of Cambridge mis-
managed more than $1.5 million
in funds generated by tax -incre-
ment financing districts from 1980
to 1997, according to a state audi-
tor's report released this week
The 50 -page report stems from
a two-year investigation to deter-
mine whether the city was in com-
pliance with state tax -increment
financing (TIF) laws. It docu-
mented 44 cases in which it said
the city improperly transferred or
spent money from a TIF district.
The investigation was initiated
by a state audit of the city's fi-
nances in 1996 that documented
widespread fiscal mismanage-
ment from 1989 to 1995. That
audit showed that mismanage-
ment had cost Cambridge tax-
payers $8.4 million and contrib-
uted to a long-term debt of about
$28 million.
City officials have since raised
tax and utility rates and cut jobs
and services to reduce the long-
term debt.
"We have a recovery plan, and
we have lived within our budget
here" in recent years, Mayor
Marlys Palmer said Tuesday.
The 1996 audit also contended
that the city illegally transferred
funds from one of its 13 TIF dis-
tricts to another, prompting the
recent TIF audit.
Tax -increment financing is a
subsidy, usually given to develop-
ers, that is repaid from higher
property taxes generated by a de-
velopment. Typically, a city sells
taxable bonds to cover its costs for
baying land or making property
improvements. The development
increases the value of the property
and, consequently, the amount of
taxes paid.
State Auditor Judi Dutcher said
Tuesday that the TIF investigation
was„ the most extensive” of its
kind conducted by her office,
which has had oversight of the
state's 1,900 TIF districts since
1996.
The report was sent to city offs
cials and the Isanti County at
torney for review. In all likelihood
the city will have to repay th
money spent, Dutcher said.
"I do want the citizens to bi
assured that we are taking it ver.
seriously," Palmer said. "We wil
approach this very carefully."
City officials have worked witl
the state on the issue since De
cember 1998, when the audito
sent them a notice of noncompli
ance regarding the TIF districts.
"We did know this was corrin;
out," Palmer said. "We just didn'
know when."
Cambridge, population 5,300
is about 40 miles north of the Twii
Cities.
January 21, 2000 CITY OF
PLYMOUTH+
«Title» «FirstName» ((LastName»
«Address 1»
«City», «State» «PostalCode»
SUBJECT: COUNTY ROAD 101 IMPROVEMENTS
VOLUNTARY PURCHASE OF YOUR PROPERTY
CITY PROJECT NO. 9005
Dear ((Title)) «LastName»:
I am sure you are aware of the proposed project to improve County Road 101 from Highway 55 to
just southerly of County Road 24 to a four lane roadway with medians and the necessary turn lanes.
This project is necessary to safely accommodate the traffic within this traffic corridor. Upgrading
of County Road 101 has been part of the City's plans for over 20 years, and the project is now
proposed for construction in July of this year.
Since the city has known of the need for the improvements to County Road 101, the City has
acquired the anticipated right-of-way as properties along the existing road were converted to
residential developments. Your property along, with a few other properties, existed prior to 1972
when the first planning began. To construct the necessary improvements on County Road 101, the
County has identified the need to purchase a portion of your property adjacent to the road.
The County's purchase of your property will only involve a strip of land parallel with and adjacent
to the roadway. It will not involve the purchase of your home, although there may be impacts from
the wider road and the roadway being closer to your house. During the preliminary -design process
for this improvement project, the City has heard from some of the homeowners that if they have the
opportunity, they may wish to sell their home and move before the construction begins.
At the February 1 City Council meeting, I will be making a recommendation to the City Council
that they provide the opportunity for you to sell your home and land to the City if you so choose.
This sale would be on a voluntary basis. If you do not wish to sell your home to the City, the
county would continue to acquire the necessary right-of-way from you. for the project. My
recommendation to the Council on purchasing your property, if you so request, would be on the
following basis:
1. The property would be purchased at fair market value. To determine fair market
value, the City would obtain a qualified independent appraiser. You would have the
opportunity to have the appraisal report reviewed by a qualified appraiser and make
comments to the City on the appraisal report. The City would allow a cost up to
$300 for your appraisal review.
C\pw `Engineering\PROJECTS\9005\Ltn\9005_Form.doc
PLYMOUTH A Beautifuf Place To Live
3400 PLYMOUTH BOULEVARD • PLYMOU-THi MINNESOTA 55447-1482 • TELEPHONE (612)-509-5000—
www.ci.plymouth.mn.us
«Title» «FirstName» «LastName»
Page 2
2. Taxes payable in 2000 would be prorated between the City and the property owner
as of the date of sale.
3. The property owner would be required to pay any existing special assessments that
are of record on the property.
4. The City, at its cost, would purchase title insurance for your property. Any defects
in the title, which are outlined in the title report, would need to be corrected by the
property owner.
5. The offer by the City to purchase the property would be withdrawn when the county
begins negotiating with you on the right-of-way purchase.
6. The county would need to agree to this process and share the cost with the City.
I am making this recommendation to the City Council so property owners who will have the most
impact from the improvements will have the opportunity to move if they so choose. A full copy of
my staff report to the City Council will be available on Monday, January 31, at City Hall. If you
wish to have any input to the City Council in this matter, you can attend the City Council meeting
or submit a letter prior to the meeting. If you have any questions, please do not hesitate to contact
me at 509-5501.
Sincerely,
Fred G. Moore, P.E.
Director of Public Works
E: Dwight D. Johnson, City Manager
James Grube
Hennepin County Director of Transportation
HENNEPIN COUNTY
TRANSPORTATION DEPT.
1600 Prairie Drive
Medina, MN 55340-5421
I:\pw\Enginecring\PROJECTS\9005\LArs\9005—Formdoc
Cynthia Mills
4020 County Road 101
Plymouth, MN 55446
Robert Hughes
17825 County Road 24
Plymouth, MN 55447
Ken & Ludmilla Phad
17920 — 30th Place North
Plymouth, MN 55447
Becky Schuett Frost Jeff & Linda Vicary
3950 County Road 101 3225 County Road 101
Plymouth, MN 55446 Plymouth, MN 55447
Richard Pickering David Porter
3030 County Road 101 17915 County Road 24
Plymouth, MN 55447 Plymouth, MN 55447