July 31, 2012

Effective July 1, 2012
On July 1, 2012, HF 2460, an act relating to Iowa's Urban Renewal law went into effect.  Several significant changes include:

Urban Renewal Report Due Annually by Dec. 1 - Iowa Code sections 331.403(3) and 384.22(2) now provide that any city or county that had an urban renewal plan and area in effect at any time during the most recently ended fiscal year shall complete an Urban Renewal Report for each such plan and area.  Each report must be approved by a majority of the board of supervisors or city council, and then submitted electronically by December 1 following the previous fiscal year, pursuant to Department of Management instructions.

The Urban Renewal Report is very detailed, providing for 21 paragraphs of information.  Requested information includes, in part:  

  • designation of area ("blight" or "economic development"), submission of ordinances, plans and amendments to all urban renewal plans; maps;

  • list of all UR projects in process and completed;

  • list of each expenditure from the special fund under Iowa Code Section 403.19 and which UR Project the expenditure related to (not required for 12/1/12 report);

  • amount of loans, advances, indebtedness incurred and  unpaid balance of TIF debt;

  • amount of property taxes rebated; list of properties on which taxes were rebated (and names of owners);

  • balance of the special fund;

  • assessed value of urban renewal areas, portion of assessed value used to calculate incremental taxes, and portion "released" to other taxing entities;

  • interest on amounts in special fund and net proceeds from sale of assets purchased by TIF;

  • assistance to non-LMI housing projects (infrastructure costs);  assistance to LMI housing projects;

  • jobs created; and

  • other information.

A full list of the reported TIF information required by statute can be found here for cities and here for counties.

Penalty for Not Following Urban Renewal and Annual Financial Reporting Requirements - Iowa Code sections 331.403(4) and 384.22(3) now provide that if either the Urban Renewal Report or the annual financial report (previously known to cities as the annual report) is not filed pursuant to the reporting requirements in section 331.403 or 384.22, the Department of Management will not certify the taxes of the county or city back to the county auditor after the budget has been certified.  NOTE:  This penalty does NOT apply to the report due 12-1-2012 for FY 11-12.

Amendments to Urban Renewal Plans - Iowa Code section 403.5(5) now provides that authority for each Urban Renewal Project must be included in an adopted Urban Renewal Plan or amendment prior to the approval of any such project.  NOTE:  Once the Amendment is drafted, an amendment usually requires action by two meetings of the municipality about 30 days apart.

Use of TIF for Public Buildings - Iowa Code section 403.5(2) now provides that a municipality that proposes an Urban Renewal Plan or amendment that includes the use of TIF funds for a "public building" must include with the proposed plan notification to affected taxing entities an analysis of alternative development options and funding and reasons such options would be less feasible than the use of TIF for the proposed plan or project.  The analysis must also be included in the annual Urban Renewal Report.  "Public buildings" include police and fire stations, an administration building, swimming pool, hospital, library, recreational building, city hall, and any other public building that is exempt from taxation.

TIF Relocation of a Business Limited - Iowa Code section 403.19 now provides that a municipality may not use special fund moneys for urban renewal projects that include the relocation of a business to the municipality from another part of the same county or a contiguous county, unless:

  • The municipality where the business is currently located and the municipality of the proposed relocation enter into a written agreement regarding  the use of economic incentives; or

  • The municipality where the proposed relocation will occur issues a written finding that the relocation is "in the public interest." This finding must include verification that the business is actively considering moving part or all of its operations out of state and such relocation would result in either significant employment or wage loss in Iowa.

The definition of relocation is critical: 

  • Relocation means "closure or substantial reduction" and initiation of "substantially the same operation in the same county or a contiguous county" in Iowa.

  • Relocation does not mean expansion of operations as long as "existing operations of a similar nature are not closed or substantially reduced."

No Redetermination of Urban Renewal Area - Iowa Code section 403.5 provides that once an Urban Renewal Area is determined to be a blighted, slum, or economic development area, it cannot be redetermined throughout the duration of the urban renewal area.

TIF Process to be Included in Audit - Every year that a city or county is audited, such audit shall include an examination of the municipality's compliance with the urban renewal reporting requirements of section 331.403(3) or 384.22(2).  Additionally, each municipality with an urban renewal area utilizing TIF revenues must annually certify its compliance with Iowa Code section 403.19.  This certification will be audited as part of the municipality's audit.

Instructional Support Program Levy (ISPL) Phased Out - Any TIF debt incurred after April 24, 2012, will not be eligible to receive the benefits of the local school district's ISPL tax revenues, unless the ISPL is necessary to pay principal and interest on the TIF debt and the  school district passes a special resolution approving use of such revenues.  TIF debt incurred on or before April 24, 2012, may receive the benefit of ISPL tax revenues for fiscal years 2013-2014 and following only if the ISPL is necessary to pay principal and interest on the TIF debt and the city or county certifies to the auditor by July 1 of each fiscal year, beginning July 1, 2013. The auditor must then certify to the school district, also by July 1 of each fiscal year, beginning July 1, 2013.  The school district must then pay those amounts during that fiscal year (by Nov. 1 and May 1). This notification process will be similar to that of the TIF revenues generated by physical plant and equipment levies (PPEL). Note: Even though the statute contemplates the city or county certifying only to the auditor, we think it makes sense to certify to BOTH the auditor and the school district, in order to enhance communication. Cities and counties could certify to the school and auditor as part of their December 1 certification process to be sure to meet the July 1 deadline. (Updated 8/30/12)

Surplus Balances in "Inactive Funds" - Current law (Section 24.21 "Transfer of Inactive Funds") states:  "Subject to the provisions of any law relating to municipalities, when the necessity for maintaining any fund of a municipality has ceased to exist, and a balance remains in said fund, the certifying board or levying board, as the case may be, shall so declare by resolution, and upon such declaration, such balance shall forthwith be transferred to the fund or funds of the municipality designated by such board, unless other provisions have been made in creating such fund in which such balance remains."  The following language has been added to the section:  "In the case of a special fund created by a city or a county under section 403.19, such balance remaining in the fund shall be allocated to and paid into the funds for the respective taxing districts as taxes by or for the taxing district into which all other property taxes are paid."

Planning and Zoning involvement is required only for new Plans, and not Amendments.

Community Colleges are no longer defined as an "affected taxing entity" and so they are no longer required to be sent notice of public hearing/consultation.

This is only a summary of some of the changes to Iowa's Urban Renewal and related laws. For a complete review, read HF 2460. If you have any questions or want assistance regarding these changes, or Urban Renewal and TIF laws in general, please contact a member of the Ahlers & Cooney's Public Finance & Law Practice Group.

 

Regards,

Ahlers & Cooney's Public Finance & Law Practice Group

 

Lance A. Coppock

William J. Noth

R. Mark Cory

J. Eric Boehlert

Patricia J. Martin

 
 

About Ahlers and Cooney's Client Alerts

Our Client Alerts are intended to provide occasional general comments on new developments in Federal and State law and regulations which we believe might be of interest to our clients. The Client Alerts should not be considered opinions of Ahlers & Cooney, P.C., and are not intended to provide legal advice as a substitute for seeking professional counsel. Readers should not under any circumstance act upon the information in this publication without seeking specific professional counsel. Ahlers & Cooney will be pleased to provide additional details regarding any article upon request. Additional copies of this Client Alert may be obtained by contacting any attorney in the Firm or by visiting the Firm's website at www.ahlerslaw.com.

 

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Boehlert, J. Eric

Shareholder
Phone:
515-246-0367

Coppock, Lance

Of Counsel
Phone:
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Cory, R. Mark

Shareholder
Phone:
515-246-0378

Martin, Patricia

Of Counsel
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Noth, William

Retired
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