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April 21, 2021

3/5/2021 10:37:00 AM
State TIF report says North Branch unlawful use of funds resolved

In the 2020 State Auditor’s Tax Increment Financing (TIF) Annual Legislative Report one city was listed as having an issue of non-compliance with TIF law,  and that was North Branch.  

Assistant State Auditor Jason Nord told the Press  there may be four or five non-compliant TIF districts in some years that are highlighted in the TIF reviews  and other years there have been zero.  

In most cases, he added,  an audit matter is resolved informally at staff level. In North Branch’s case the sum of money involved needed to be made whole, and the city council needed to take formal action to authorize using $178,000 to fill the TIF payments excess.    

This is the amount of payments that continued to be made to a developer of an apartment complex, Kelly Apartments on Ash Street, well after the TIF project debt was to halt.  City Finance Director Joseph Starks, who was not on staff when the TIF compliance issue happened,  tells the Press he has been unsucessful in reaching the developer for repayment.

Chisago County missed those TIF revenues tied to subsidizing the apartment complex built in 2003,  and the $178,000 was remitted to the county under council approval last October.  Starks said the funds came from pooled TIF accounts elsewhere and various balances.

The developer of the “Kelly Housing Project’ was slated to receive the equivalent of half-a-million dollars in TIF aid to help make the project happen. According to Starks even though the payments exceeded the contract, there was not more than $500,000 actually paid outover the years of the TIF. Bonding is usually sold to finance a TIF designated project and the “increment” or increase in property tax, that the new housing brings in over and above the old site’s valuation, would be directed to pay off the project.  In North Branch’s compliance issue the payments did not end whenn they should have.

Chisago County Auditor/Treasurer Bridgitte Konrad  confirms the payment was received and had been redistributed to the three taxing jurisdictions as of December 2020.  North Branch netted $58,194. The school district got $41,587. The county retained $78,418.

North Branch’s fiscal condition is in good shape, according to  Starks who presented a Moody’s Services rating upgrade to city council members last week.  The city went up to A2 from its A3 rating, with what Moody describes as a “positive outlook.”
North Branch hasn’t gotten its full year end audit for 2020; but the Moody’s analysis reports the general fund surplus is estimated by the city to come in around $400,000.  

Moody’s did highlight North Branch’s situation with inter-fund loans and the need to “pay back” transfers that have been relied on over the years.  The city had a balance owed from the General Fund - Capital Fund of $973,000 as of the end of 2019.  Moody’s noted however, North Branch has improved operating cash significantly with steady repayments of its interfund loans and this close-to $1 million is expected to be made whole by 2023.


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