5.1. SR 06-24-2002 - Laserfiche WebLink

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Tax Rebate Financing Policy Amendment Issues June 24, 2002 Page 2 of ~' TRF Policy Amendment Issues for Discussion A recent TRF application for a proposed office development has led to the need for clarification on the City's intent and policy relating to public assistance for office, namely, speculative developments. Staff has proposed the following issues for consideration and as a foundation of discussion by the EDA and Council. Legal Requirements of Tax Abatement Public Purpose The first issue for consideration is whether or not public assistance in the form of TRF should be provided for office development, without regard to blight, brownfields, soil corrections or redevelopment. Office development located on "greenfield" is not eligible under the TIF Law. Again, State Law provides the flexibility for the City to establish priorities for the use of tax abatement. Statutorily, the City must make a finding of public purpose for providing the abatement (e.g. tax base, employment, removal of blight). Page two of the attached Tax Abatement Statutes hsts the required findings a governing body must make prior to awarding tax abatement. Business Subsidy TRF is still a business subsidy, which requires any project with $25,000 or more in assistance to meet specific minimum criteria established by the grantor in order to be eligible to receive business subsidies. The 2000 Business Subsidy Law amendment requires grantors to establish minimum criteria by May 1, 2003. The criteria may not be adopted on a case-by- case basis. The criteria must include a specific wage floor for the wages to be paid for the jobs created. The wage floor may be stated as a specific dollar amount or as a formula that will generate a specific dollar amount. For example, the St. Cloud HRA established a "Threshold Minimum Average Wage" to be applied to economic development projects that receive public assistance, not including redevelopment. The policy was developed to encourage employers to pay employees a wage that would allow them to be able to afford housing in the area based on their wages. The threshold is annually based upon the standard definition for local incomes and rents (3- bedroom apartment) established by the US Department of Housing and Urban Development (HUD). Based on the formula adopted by St. Cloud, the City of Elk River would have the following result: Hourly Wage: $22.42 Annual Wage: $46,640 % allocated to shelter costs: 30% Annual Shelter costs $13,992 Monthly Shelter costs $ 1,166 * *Formula: Using the 2002 Fair Market Value Rent for a 3-bedroom apartment in Sherburne County as included in the Minneapolis-St. Paul MSA. S:~EDA¥1'AXABATE~Elk River Policy ltistory~6-24-02.doc