Rochester City Council — Transcript

Monday, June 22, 2026

Urban 3: Land Use Productivity and Fiscal Analysis

Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

Votes (2)

Urban 3 Presentation on Land Use Productivity and Fiscal Analysis

No formal action taken, presentation and discussion only.

The Urban 3 presentation provided a detailed 'economic MRI' of Rochester, analyzing property value per acre across various land uses. It explained Minnesota's complex tax system and highlighted that compact, dense developments, particularly in the DMC district and multi-family housing, are significantly more productive in generating revenue than sprawling single-family or big-box commercial areas. The analysis identified infrastructure (especially roads) as a major liability and demonstrated how high-productivity areas effectively subsidize the lower-productivity ones. Recommendations focused on infill development, rebalancing the land-use portfolio, and strategic use of surface lots to enhance long-term financial sustainability. Council members discussed the implications for annexation, balancing economic productivity with quality of life, and the public perception of investments in downtown versus residential edges.

Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

No formal action taken, presentation and discussion; council requested further policy recommendations.

The Ehlers Group presented a comprehensive overview of TIF, including its purpose, types, and how it’s calculated. They showcased Rochester's successful track record, noting $1.5 billion in total development costs from $120 million in TIF investment and a healthy percentage of affordable housing units. The core of the discussion revolved around future policy choices for managing TIF districts as they approach decertification. Options included early decertification (returning increment to the general fund), retaining districts for strategic pooling (for city-wide redevelopment or affordable housing, potentially leveraging significantly more funds), and using TIF for administrative costs. Council members debated the merits of these options, expressing concerns about transparency, setting expectations with the public, and the potential creation of a 'slush fund' versus strategic reinvestment to further city goals like transit-oriented development and infill.

Notable Quotes (12)

Minnesota, of the 50 states, Minnesota probably has the most complex tax system in the nation. And so, what takes me seven or eight slides to explain here in Minnesota, it takes me two or three in other states.

Heather Worthington/Urban 3 [0:06:56]
Urban 3 Presentation on Land Use Productivity and Fiscal Analysis

This is 195.3 times higher than the amount of county area it takes up. Again, it's indicating to you how productive your land use regulation is. That's the simplest way to put it. The zoning, the setbacks, all of the limitations and regulations you place result in a certain amount of productivity. And that's what Rochester looks like.

Heather Worthington/Urban 3 [0:23:40]
Urban 3 Presentation on Land Use Productivity and Fiscal Analysis

I think that the the earlier conversation and the point I I heard from you, Ms. Worthington, is that we we are not in a situation where we should be looking to create a trend where we go bankrupt, right? We should create sustainability so that we can provide quality of life through city services and discuss the appropriate level of subsidy, but a more productive city allows us to have a more robust conversation about city services.

Council Member Miller [0:50:50]
Urban 3 Presentation on Land Use Productivity and Fiscal Analysis

So, it's really a philosophical discussion and and it really in my mind does weigh into quality of life and how do you value that? How do you count quality of life in this type of discussion?

Mayor Norton [0:46:16]
Urban 3 Presentation on Land Use Productivity and Fiscal Analysis

The The numbers would suggest that it is the first. The The downtown is The downtown is supporting the city as a whole and the county as a whole. Um single family uses in the United States do not pay their own way.

Heather Worthington/Urban 3 [0:43:08]
Urban 3 Presentation on Land Use Productivity and Fiscal Analysis

It's really the ability...to capture and use most of the increased local property tax revenue from new development within a defined geographical area.

Todd Hagen/Ehlers Group [0:59:04]
Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

We've invested about 120 million in total increment to private projects which have produced in total development cost around 1.5 billion. So, that's development cost. That's not market value.

Josh Johnson/Senior Economic Development Specialist [1:05:07]
Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

You can think of it as a as a uh basket of policy options. You can think of it think of it as do we decertify the districts when the obligation is done? Do we keep the districts open for future pooling and we'll go through some of those examples or do we return increment from the districts strategically in order to leverage those funds for governmental purposes.

Liz Diaz/Ehlers Group [1:06:59]
Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

I mean, the opportunity cost maybe to just be simple about it is you can decertify these districts at about a 50% discount in terms of the impact, right? So, you can decertify it, we'll receive half of those dollars for operational expenses, or you can use this to support at 100% at least in the DMC districts to advance your you know, your and all of your uh existing strategic priorities really fall into the types of eligible uses of funds here.

Mr. Parrish [1:23:47]
Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

I I lack of better word, this sort of new slush fund that we're going to have to be able to work with and it just it doesn't feel right right now.

Council Member Keen [1:27:07]
Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

I think just aligning these investments strategically so that we have productive land as we're already seeing a a very healthy pattern, but maximize that. We've also talked about infill development as a key priority of our our action plan.

Council Member Miller [1:29:43]
Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

My my question is um is is you're asking about should we bring back policy choices, you know, for we're having this discussion. Should we bring back policy concepts? So, since we've just heard that we have done this on a case-by-case basis already, I guess my question is will a policy decision that then gets put in writing limit us rather than give us more options than a case-by-case recommendation based on what's happening in a community?

Mayor Norton [1:32:02]
Tax Increment Financing (TIF) Portfolio Analysis and Policy Opportunities

Ordinances & Resolutions (7)

Minneapolis 2040 planPlan

Long-range planning document led by Heather Worthington in her previous role.

riverfront small area planPlan

Rochester plan for activating riverfront areas; mentioned as an opportunity for development projections.

unified development codeOther

A city tool for guiding development, mentioned in context of TIF.

Maxwell studyOther

A study cited by Council Member Palmer regarding housing growth and ownership needs.

TIF planPlan

A document estimating TIF generation and outlining eligible expenses.

development agreementOther

Contract between the city and a developer outlining TIF assistance.

comprehensive planPlan

Rochester's plan for primary transportation networks, discussed in context of aligning investments.

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