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Richfield City Council Agenda
February 17, 2026 -- 6:00 PM
Richfield Municipal Center
Bartholomew Conference Room
6700 Portland Avenue South
1. Call to Order
2. Item Discussion
a. Discuss 4d(1) tax classification impacts and possible policy.
3. Adjournment
Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the
City Clerk at 612-861-9739.
Includes Materials - Materials relating to these agenda items can be found in the Council Chambers Agenda Packet book located by
the entrance. The complete Council Agenda Packet is available electronically on the City of Richfield website.
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City Council Meeting 2/17/2026
Agenda Section: Item Discussion
Agenda Item: 2.a.
Report Prepared By:
Julie Urban, Assistant Community Development Director
Melissa Poehlman, Community Development Director
Department Director:
Melissa Poehlman, Community Development Director
Item for Consideration:
Discuss 4d(1) tax classification impacts and possible policy.
EXECUTIVE SUMMARY
In January 2025, the City Council and Housing and Redevelopment Authority (HRA)
considered a request from Hempel Companies to approve the 4d(1) tax classification for
three apartment complexes in order to preserve affordability and rehabilitate the
buildings. The Low-Income Rental Classification (LIRC or 4d(1)) provides a reduction in
the tax class rate from 1.25% to 0.25%. While the classification offers a cost savings to
owners of affordable housing, the savings require the City to either collect fewer taxes
or shift the tax burden to other property taxpayers in the community.
The City Council asked that staff conduct further study into the costs and benefits of the
4d(1) tax classification and bring a potential policy back to policymakers for
consideration. Given the significant and complex issues raised by this topic, staff will
present information at this work session, answer any immediate questions, and then ask
policymakers to consider several questions and bring feedback to a second work
session on April 20.
RECOMMENDED ACTION
L isten to the presentation from staff and ask questions.
HISTORICAL CONTEXT
The 4d(1) tax classification provides a reduced tax rate for affordable housing
properties. A specific request from Hempel Companies in January 2025 led the Council
to request additional information and study on the issues raised and to bring additional
information to policymakers in a work session. A summary of the 4d(1) tax classification
and its use in Richfield is provided in Attachment A.
EQUITABLE OR STRATEGIC CONSIDERATIONS OR IMPACTS
• There are two desired outcomes in the Strategic Plan that are impacted by the
4d(1) tax classification including maintaining Richfield as an affordable place to
live and creating a diversified tax base.
• Creating and preserving affordable housing can also support the desired
outcome of reducing racial inequities and barriers for traditionally excluded
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[PAGE 3]
groups.
POLICIES (RESOLUTIONS, ORDINANCES, REGULATIONS, STATUTES, ETC.)
More detailed information on the 4d(1) tax classification is provided in Attachment A.
CRITICAL TIMING ISSUES
A second work session is scheduled for April 20. Staff is asking that you take time to
consider the information and the questions posed and be prepared for further
discussion and to offer feedback on April 20.
FINANCIAL IMPACT
Information on financial impacts is provided in the attached presentation.
LEGAL CONSIDERATIONS
The 4d(1) tax classification is automatic for properties that receive State and/or Federal
funding that requires affordability. Owners may also qualify for the classification if a city
provides financial assistance in exchange for a commitment to affordability (at least
20% of units at 60% of the Area Median Income). In cases where a property owner
requests financial assistance from the City and/or the HRA, policymakers have the
discretion to deny the funding and/or decide not to tie financial assistance to a
commitment of affordability. Funding from the Affordable Housing Trust Fund can only
be provided if the recipient commits to affordability. Additional information on the legal
considerations is provided in the presentation and in Attachment A.
ALTERNATIVE RECOMMENDATION(S)
NA
ATTACHMENTS
1. Attachment A 4d Summary
2. CC-HRA 4d Presentation 2.17.26
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Low-Income Rental Classification Program – “4d”
Summary
Minnesota Statutes 273.128 provides a property tax break for affordable rental properties under the
Low Income Rental Classification Program (LIRC), commonly referred to as the “4d” program. 4d is one
of several tax classifications the State of Minnesota applies to rental property. During the 2023
Legislative Session, the State lowered the Class 4d property class rate from 0.75% to 0.25%. The typical
classification for rental housing is 1.25%.
Affordable rental properties are eligible for the 4d tax classification when a property meets two
conditions:
1. The property owner agrees to rent and income restrictions serving households at 60% of the
Area Median Income (AMI) or below.
2. The property receives financial assistance from federal, state or local government requiring rent
and income restrictions.
At least 20% of the units must meet the income requirements. The 4d tax status applies only to the
rent/income-qualifying units. The application deadline to Minnesota Housing is March 31 of each year
for taxes payable the following year.
To maintain the class 4d classification, the property owner must annually reapply and certify to the
Housing Finance Agency that the property tax savings were used for one or more of the following
eligible uses: property maintenance, property security, improvements to the property, rent stabilization,
or increases to the property's replacement reserve account.
Savings to Property Owners/Cost to Other Taxpayers
The 4d tax classification provides a benefit to property owners, which lowers the total taxes collected by
a municipality. For a municipality to collect the same amount of total taxes, the tax burden is shifted to
other taxpayers.
Example:
42-units valued at $4,729,000 in Pay 2025
Non-4d property taxes payable in 2025: 4d property taxes (all units):
$4,729,000 x 0.125 = $59,113 tax capacity $4,729,000 x .0025 = $11,823 tax capacity
2025 City Tax Rate = 54.57% Estimated City Tax Rate = 54.9%
City Taxes = $32,258 City Taxes = $6,491
TOTAL SAVINGS/COST = $25,767 ($613/unit)
1 January 2026
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2 January 2026
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Current 4d Properties in the City
Several properties in the City are classified as 4d because they receive federal subsidies in exchange for
income/rent restrictions:
Richfield Towers (7717 Chicago Ave S) (150 units)
Sheridan Court (2500 66th St W) (30 units)
Robert Will (6345 Pleasant Ave S) (11 units)
Lyndale Plaza (20%) (6401 Lyndale Ave S) (19 units)
As of taxes payable 2025, the City had approved 4d for one property:
Seasons Park (420 units)
▪ The HRA approved $150,000 in assistance to Seasons Park and as a condition requires all
units to be affordable at 60% AMI. The affordability is required for 40 years. At the time
assistance was provided, the 4d tax rate was 0.75%.
The total savings in City taxes to these properties classified as 4d was $343,376 (Pay 2025).
The City approved 4d for three additional properties in 2025 that will take effect in Pay 2027:
New Orleans Court, Richland Court, Winton House (236 units)
▪ The HRA approved $1.77 million in assistance for the acquisition and rehabilitation of these
properties in exchange for affordability at 60% AMI for 212 of the units for 15 years.
Rent Limits
---- Maximum Gross Rents by Bedroom Size (4/1/25) ----
0 1 2 3 4
50% AMI 1158 1241 1490 1721 1920
60% AMI 1390 1490 1788 2065 2304
70% AMI 1622 1738 2086 2409 2688
*actual rents must be adjusted to accommodate average utility costs.
3 January 2026
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[PAGE 7]
4d(1) Tax Classification
Joint Work Session
City Council – Housing & Redevelopment Authority
February 17, 2026
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Background
• 4d(1) Tax Classification
– Definition
– Eligibility/Requirements
– City Discretion
– Use as a Tool
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Background: MN Property Taxes
Taxable Market Value x Tax Class = Tax Capacity
Tax Capacity x Tax Rate = Taxes Paid
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Background: MN Property Taxes
City taxes paid on an 11-unit apartment building:
$1,000,000 x 1.25% = $12, 500
$12,500 x 54.734% = $7,000
City taxes paid at 4d tax class:
$1,000,000 x 0.25% = $2,500
$2,575 x 54.734% = $1,400
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Background: NOAH Preservation
• Hempel Request = $1.77M + 4d tax class
– NOAH Preservation
– Three complexes – 236 units
• 60/70% AMI
• 3-bedroom units
• 48 rental assistance clients
• Risk of displacement
• $7.2 million rehab investment
• Increase in tax capacity from TIF Districts
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Impacts of 4d in Richfield
Units City Discretion
Richfield Towers 150 N
Sheridan Court 30 N
Robert Will 11 N
Lyndale Plaza 19 Y/N
Seasons Park 420 Y
New Orleans Court 80 Y
Richland Court 90 Y
Winton House 42 Y
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Impacts of 4d in Richfield
 $477,000 tax savings/cost
 0.5% of total tax capacity
 Cost to median-valued home = $28
 Cost to 11-unit apartment building = $176
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Policies and Priorities
Strategic Plan
•Maintain Affordability
•Diversify the Tax Base
Inclusionary Housing Policy/Trust Fund Priorities
•Larger Bedroom Sizes
•Deeper Affordability
•Supportive Housing
•Accessible Housing
•Housing Options for Voucher Holders
•Preservation of NOAH Properties
•Rehab of NOAH Properties
•Energy-Efficiency
“Unofficial” Priorities:
•Properties with high numbers of school children
•Properties where all-affordable is “highest and best use”
•Richfield-sized
•Challenging apartment properties
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Preservation
Inquiries from five owners (875 units)
Potential Impacts
• 14 NOAH properties (2,100 units)
• If all 4d:
• $1.48 million tax savings/cost
• $100 shift to a median-valued home
• $600 shift to an 11-unit apartment building
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Existing Rental Housing Stock
Rental Housing by Affordability Levels
2023 ACS Data, US Census
9000
Cost-burdened
8000
Renters = 44%
1,303
7000
6000
1,485
5000
Age of Housing Stock
4000
2,310 4,000 units > 55 years
3000
2000
2,519
1000
201
0
≤ 30% AMI 31-50% AMI 51-60% AMI 61-80% AMI > 80% AMI
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Questions
 What are your preservation priorities?
 What do you want to achieve?
 What’s a desirable/reasonable length of time
for an affordability period
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New Development: TIF vs. 4d
Building A: All-affordable Tax Credit Building
4d tax classification
42 affordable units, large bedroom sizes, 30/50/60% AMI
Annual taxes = $13,000
Building B: Market-rate Building with TIF
84 units: 67 market-rate; 17 affordable (50% or 60% AMI)
Base annual taxes = $7,000
At expiration of TIF District taxes = $129,000
Difference
25 more affordable units with Building A
During TIF: $6,000* more taxes with Building A
Expiration of TIF: $116,000 more taxes with Building B
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Recently-Constructed Apartments
New/Under Construction Rental Units by BR Size
600
500
28
400
42
32
300
460
200
357
332
100
8
34
- 4-
Studio 1BR 2BR 3BR 4BR
Market Rate Affordable
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Recently-Constructed Apartments
Rental Affordable Units New/Under Construction
by Affordability and Bedroom Size
45
42
40
35
30
25
20
20
15
12 12
10 8 8
4 4
5
2 2
0 0 0 0 0
0
30% AMI 50% AMI 60% AMI
Studio 1BR 2BR 3BR 4BR
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Questions
 Is a mix of market-rate and affordable housing
units the preference?
 When is all-affordable acceptable? Preferred?
i.e., under what conditions?
 Is there a number of affordable units we should
aim for?
 Do we focus on preserving existing affordable
housing and creating it through filtering?
 What’s the best way to create accessible units?
Large bedroom sizes? Deeply affordable units?
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General Observations and Questions
Many factors out of our control impact tax capacity and affect people’s
tax bills.
TIF districts coming offline softened the impact of the Hempel
decision.
City has a significant number of tax-exempt properties that add value
to the community. How much can the City afford?
What value does the community place on new affordable housing
options?
Layering of TIF and 4d should be considered at the beginning as
part of the deal.
Should we be advocating for a higher 4d tax rate instead of asking for
financial assistance?
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Homework
 Review the information presented
 Reach out to staff with questions
 Rank the housing priorities (slide 8)
 Provide priorities to staff by April 10
 Bring feedback to April work session
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