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