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.

1. Strategy without tactics is the slowest route to victory.
Tactics without strategy is the noise before defeat.
— Sun Tzu
How or Why to Create anHow or Why to Create an
EDA or HRAEDA or HRA

2. History
Housing & Redevelopment
Authorities (HRA's)
Federal housing and urban renewal
programs grew out of the depression
Initial 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

3. 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

4. History
Municipal Development Districts
In 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

5. History
Municipal Development Districts
Conversely, 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

6. History
Port Authorities
Port 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

7. History
Port Authorities
The 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

8. 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

9. What Are the Differences
 Tax Increment
The tax increment law is a method of financing that
overlays the various development laws
The 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

10. Governance
 Municipal Development Districts
As 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

11. HRA’s
 HRA’s
As 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

12. HRA’s
 HRA’s
The 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

13. EDA’s
EDA’s
Originally 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

14. Powers
In materials is a charter comparing
statutory powers of HRA's and EDA's

15. Powers
Powers
Broadest 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

16. 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

17. 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

18. Levies
Levies
HRA levy is levied by HRA with concurrence of City,
so is outside levy limits
HRA maximum annual levy .0144 percent of city
taxable market value
EDA levy is levied by city, so subject to levy limits
EDA maximum annual levy .01813 percent of city
taxable value
EDA levy may be increased, subject to reverse
referendum
EDA with HRA powers may levy both

19. 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

20. Choosing An Option
Why do cities choose one option over
another?
History of city development activity
Politics of the city
– control versus responsibility
Transition of city goals
Elected officials work load
Type of development “deals”
Financing needs

21. 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

22. Issues You May Encounter
Real life problems cities have had
The 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

23. Issues You May Encounter
Real life problems cities have had
Law 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

24. Financing Needs of HRA/EDA
• How to pay for Staff
– Offsetting the General Fund Budget
• Levy Amount
• TIF
• Others