8. ICESR 11-14-2012 FINANCIALS - Laserfiche WebLink

Home Browse Search

3. G.O. Tax Abatement under Minnesota Statutes Chapter 469 What is Tax Abatement? Tax abatement is the ability for an individual taxing entity to capture and use all or a portion of the local property tax revenues within a defined geographic area to assist with a public improvement or a new development or retain a business. Property owners do not need to give permission to abate taxes nor does it change the amount of taxes to be collected. It allows each major taxing jurisdiction to choose to contribute its share of the taxes and limit abatement in any manner it determines appropriate. In practice, it is a rebate rather than an exemption from paying taxes. It is governed by Minnesota Statutes 469.1812-469.1815. Tax abatement can be used to finance pubic infrastructure like the recreational facilities, regardless if the benefited development or infrastructure is on or adjacent to the parcel for which the tax is being abated. However, it is often confusing to taxpayers when tax abatement is utilized because the tool leaves the impression that certain parcels will pay more taxes than others. In reality, the taxpayer in an abatement area pays taxes on the abated property in the same manner it would if the taxes were not being abated. The city has flexibility in how it chooses to abate/redirect the taxes and can abate/redirect a specific percent or the taxes or dollar amount, which may include taxes from new development or existing taxes. If more than one taxing entity participates in the abatement, the length of the abatement is not required to be the same for each entity. There are no qualified cost requirements for tax abatement. What is the process for establishing tax abatement? After identifying the details of the abatement, including the amount, term and the parcels for abatement, a public hearing with at least a 10 day published notice must be held by each entity granting the abatement. The entity granting the abatement is then required to adopt a resolution approving the abatement. The adopting resolution must include the following: (I) Term of the abatement; (2) Statement of public benefit expected to result from the abatement; (3) Required findings; and (4)Schedule of repayment of deferred taxes (if applicable). This process must be completed by each entity granting the abatement. What findings must the approving entity make prior to approving tax abatement? The entity granting the abatement must make a finding that the abatement benefits to the political subdivision at least equal the costs of the proposed agreement, and that the abatement is in the public interest for at least one of the following reasons: • Increase or preserve tax base • Provide employment opportunities • Provide or help acquire or construct public facilities • Redevelop or renew blighted areas • Provide access to services for residents • Provide public infrastructure • Phase in a property tax increase, in specific circumstances • Stabilize the tax base