--- title: 4d Policy 6.9.26 ## author: John Stark date: D:20260602153500Z --- ## RC125-1-1098703.v2 ## City of Richfield ## Richfield Housing and Redevelopment Authority ## Richfield Economic Development Authority ## 4d (1) Tax Classification Policy The City of Richfield, Richfield Housing and Redevelopment Authority, and Richfield Economic Development Authority (“the City”) are committed to maintaining Richfield as an affordable place to live and supporting the creation and preservation of housing affordable to a range of income levels. One of the tools the community can use to create and preserve affordable housing for those with lower incomes is the tax classification available under Minnesota Statutes, section 273.13, subd. 25 4d (1). The 4d (1) tax classification provides a reduced property tax class rate for qualifying rental housing that meets income and affordability criteria as established in Minnesota Statutes, section 273.128. Because the property tax benefit realized by qualified properties comes at a cost to the City’s tax capacity and that cost may be shifted to other taxpayers, when there is discretion available, City participation in establishing the statutory criteria for 4d (1) will be considered as a last resort financing tool in instances where other private, City, County, and State resources have been exhausted, and it furthers the City’s highest housing priorities. The percentage of Richfield’s net tax capacity subject to 4d (1) does not currently exceed two percent of the City’s total net tax capacity and, therefore, property owners seeking 4d (1) classification are not required to obtain written approval from the Richfield city council before making applications to the Minnesota Housing Finance Agency. Accordingly, the City’s “approval” of 4d (1) will take the form of participation or cooperation in creating the statutory conditions for qualification of a project rather than the direct written approval required in cities exceeding the two percent net tax capacity threshold. ## 1. Naturally Occurring Affordable Rental Housing (NOAH) The 4d (1) tax classification may be considered to preserve and improve NOAH housing under the following conditions: A. The property contains at least 40 units; B. The property is at risk of significantly increased rents and displacement of low-income households; C. Significant rehabilitation is being undertaken (i.e., a minimum of $20,000/unit); D. At least two of these high priority housing needs are/will be provided: ▪ units with accessibility improvements; ▪ units with two or more bedrooms; or ▪ housing for residents receiving Section 8, Bring It Home, or Kids@Home rental assistance; and E. At least two of these “next” priority housing needs are/will be provided: ▪ rents affordable to households earning no more than 50% of the Area Median Income ## (“AMI”); ▪ housing for families with children in a Richfield school; ▪ improved energy-efficiency (must provide an independent energy audit and a plan for improved energy-efficiency based on items identified in the audit); or ## RC125-1-1098703.v2 ▪ housing with supportive services Proposals that meet all three of the highest priorities but just one of the “next” priorities may also be considered. ## 2. New Construction of Affordable Housing 4d (1) will generally not be considered for new housing development unless it makes financial sense for the City and under the following conditions: A. The project is 80 units or fewer, and fewer than 50 units is preferred; B. The use of the land for housing is consistent with the Comprehensive Plan and meets Zoning Ordinance requirements; C. The project complies with the City’s Inclusionary Housing Policy (“IHP”) and provides: ▪ more Accessible units than those required by the IHP; ▪ units with three and four bedrooms; and ▪ subsidized units affordable at 30% of the AMI or less; D. Other City financing is not being used (e.g., tax increment financing, tax abatement, Affordable Housing Trust Fund), except that a land write-down for City-owned property may be considered along with 4d (1) if the proposed project is the highest and best use for the site, and the land write-down is necessary to secure additional financing; E. The project has maximized funding from other public funding sources (e.g., Metropolitan ## Council, Hennepin County, Minnesota Housing); and F. The site is challenging (e.g., small, difficult access), and the proposed project is the highest and best use for the site. ## Additional Conditions and Requirements 1. All projects that receive the 4d (1) tax classification must meet the following requirements: • Agree to provide 90 days’ advanced notice of any sale or transfer of the property; • Agree to not discriminate against households utilizing Housing Choice Vouchers (Section 8) or other forms of rental assistance; • In cases of NOAH rehabilitation, submit a rehabilitation plan and provide an annual reporting of the progress on the plan; and • Agree to a minimum assessed market value (i.e., cannot contest the apartment’s assessed market value below the agreed upon minimum value); 2. All projects will be evaluated for the need for financial assistance, the impact to City and other levies, and the resulting shift in tax burden to other taxpayers; ## RC125-1-1098703.v2 3. The Council reserves the right to limit the number of units within a project that are qualified for the 4d (1) tax classification; and 4. The length of time approved for the 4d (1) classification will be based on a variety of factors including demonstrated need, total value of the reduced tax rate, cost per unit, the overall impact on the City’s tax capacity, and the number and priority of housing needs met by the rate reduction. City participation in any plan or program which enables an applicant to qualify for 4d (1) tax classification is discretionary. This policy expresses the priorities and purposes of the City’s efforts to encourage the construction and maintenance of affordable housing. Like any policy, it cannot anticipate all circumstances or unique situations and is thus subject to adjustment and modification. The City Council or Board of Commissioners of the Housing and Redevelopment Authority or Economic Development Authority may vary the application of this policy as circumstances warrant with the adoption of findings of the reasons for doing so. The City Council must provide final approval of all 4d (1) applications and any exceptions to this policy. Adopted as revised: This __ day of ___________, 2026, by the Richfield City Council. ______________________ _______________________ ## Mayor City Manager This ___ day of _________, 2026, by the Richfield Housing and Redevelopment Authority. ______________________ _______________________ ## Chair Secretary This ___ day of _____________, 2026, by the Richfield Economic Development Authority. ______________________ _______________________ ## President Secretary