7.1 SR 07-01-2013 - Laserfiche WebLink

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City of Elk River, Minnesota Preferred Powder Coating request for Tax Abatement June 20,2013 Page 6 project meets the"but for" test and would not proceed without assistance. The lender has indicated it is not likely to increase the amount of debt available for the project, the business is not able to attract additional equity, and there are significant site development costs necessary to develop on the project site. As a result,financial assistance would be necessary to fill the financial gap. Again, It is important to note that tax abatement does not statutorily require a"but for" analysis to determine if the project would proceed without assistance. A city, county or school district may grant a tax abatement, by contract or otherwise, of the taxes imposed by the city on a parcel of property,which may include personal property and machinery,or defer the payments of the taxes and abate the interest and penalty that otherwise would apply, if: • it expects the benefits to the city of the proposed abatement agreement to at least equal the costs to the city of the proposed agreement or intends the abatement to phase-in a property tax increase, as provided in clause(2)(vii); and • it finds that doing so is in the public interest because it will: • increase or preserve tax base; • provide employment opportunities in the political subdivision; • provide or help acquire or construct public facilities; • help redevelop or renew blighted areas; • help provide access to services for residents of the political subdivision; • finance or provide public infrastructure; • phase-in a property tax increase on the parcel resulting from an increase of 50 percent or more in one year on the estimated market value of the parcel, other than increase attributable to improvement of the parcel; or • stabilize the tax base through equalization of property tax revenues for a specified period of time with respect to a taxpayer whose real and personal property is subject to valuation under Minnesota Rules, chapter 8100. The provided "but for" argument states the development requires improvements the developer could not economically provide to construct the manufacturing facility without the use of Tax Abatement. The developer states the assistance is necessary to facilitate construction of the building due to extraordinary site development costs associated with wetlands mitigation and the meeting of requirements set by the TEP board. The developer has also stated that additional private financing options are not viable with the current debt outline. The developer has indicated that without abatement revenues that a move from its current location to Elk River would not be feasible given the increased cost of developing the land and increased debt load that the company would incur to achieve the relocation. The implication being that "but for" abatement assistance the project will not proceed. It is a worthwhile exercise for the City to consider the likelihood that another project of equal benefit could be generated privately on the parcel in question. We have reviewed financial information provided by the developer and their lending institution. The Developer's lender has indicated that Preferred Powder Coating is being offered the maximum amount of new debt that it can support and that some kind of public assistance is necessary to fill the equity gap. In reviewing Preferred Powder