7.4. SR 05-18-2015 - Laserfiche WebLink

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City of Elk River, Minnesota GATR request for Tax Abatement April 24, 2015 Page 4 would have to use other sources to fill any shortfall of revenues. With internal financing, the City reimburses the loan with future revenue collections and may risk not repaying itself in full if revenues are not sufficient. The form of financial assistance proposed in this case is pay-as-you-go financing. Developer Proforma “But For” Analysis In approving an abatement project, the Elk River EDA has requested that a finding be made that the proposed project would not reasonably be expected to occur solely through private investment within the reasonably foreseeable future. The developer has provided a “but-for” argument stating that the financial assistance from the City is necessary to provide sufficient project cash flow and market returns to investors that will achieve project feasibility. The developer has stated the assistance is necessary due to the costs of developing the site and inability of the project to fully support those costs upon completion. The current estimated project costs are in excess of the estimated future value of the building upon development as provided by the County. Based on this analysis, the EDA could be justified in determining that the project meets the “but for” test and would not proceed without assistance. As stated 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: o increase or preserve tax base; o provide employment opportunities in the political subdivision; o provide or help acquire or construct public facilities; o help redevelop or renew blighted areas; o help provide access to services for residents of the political subdivision; o finance or provide public infrastructure; o 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 o 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 developer has indicated that the abatement revenues are necessary to ensure business sustainability and support projected annual debt service. The implication being that “but for” abatement assistance the project will not proceed.