HF5058

Purpose

• This bill seeks to discourage cities from using moratoriums on new residential development by changing how state funds are distributed when a moratorium is in place. Specifically, it targets Local Government Aid (LGA) payments to cities that impose such moratoriums.

Main provisions

• Penalty on moratoria: The commissioner of revenue may not pay Local Government Aid to a city that imposes a moratorium on new residential developments.
• Timing of withholding: The city will stop receiving LGA payments in the year after it adopts the moratorium.
• Resumption of aid: LGA payments to the city will resume in the year after the moratorium expires or after a city resolves to end the moratorium.
• Redirected funds: While the city is not receiving LGA due to the moratorium, the amount that would have been paid to the city is instead paid to the county or counties that contain that city.
• Reporting requirement: Tier I cities must certify in their annual report whether they have a moratorium on new residential developments.
• Statutory change: Adds a new subdivision (5b) to Minnesota Statutes, section 477A.35, detailing the penalty and process.

Significant changes to existing law

• Creates a new penalty mechanism under Local Government Aid by withholding payments to cities that impose residential construction moratoria and directing those funds to counties instead.
• Establishes a defined sequence for payment timing (adoption → temporary withholding → expiration/end of moratorium → resume payments).
• Introduces annual certification of moratorium status for Tier I cities, integrating compliance into annual reporting.

Potential implications

• For cities: Possible financial strain or planning impact while a moratorium is in place, due to loss of LGA and redirected funds.
• For counties: Increased LGA receipts during periods when cities suspend residential development.
• For housing policy: The bill uses financial leverage to influence city decisions about allowing new residential construction.

Terminology included

• Local Government Aid (LGA)
• moratorium on new residential developments
• residential development / new residential developments
• commissioner of revenue
• Minnesota Statutes 477A.35
• Subdivision 5b
• tier I city
• annual report

Relevant Terms - Local Government Aid (LGA) - moratorium - new residential developments - commissioner of revenue - Minnesota Statutes 477A.35 - Subdivision 5b - tier I city - annual report - counties