4.0. HRSR 05-06-1996 - Laserfiche WebLink

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DOHERTY 3500 Fifth Street foeers 28170 Minnesota Mirld lrikii.ti enter iai yrrs lurk 3verrto yJ1. 2371)One labor Center 150 South Fifth Street 30 East Seventh Street Suite 1100 1200 Seventeenth Street RL;MBT j Minneapolis,Minnesota 55402-4235 Saint Paul,Minnesota 55101-4999 ltiashington,D.C.20(105 Denver,Colorado 80202-5823 & BUTLER Telephone(612)340-5555 Telephone(612)291-9333 lelephone(202)393-2554 Telephone(303)5'2-6200 R FAX(612)340-5584 FAX(612)291-9313 FAX(202)393-3131 FAX(303)572-6203 0 PROFESSIONAL ASSOCIATION Attorneys at Law Writer's direct dial number: Reply to Minneapolis office MEMORANDUM s;{ 25th TO: Pat Klaers and Lori Johnson, City of Elk River FROM: Dave Sellergren RE: King and Main - Getting to Zero Original Net Tax Capacity DATE: April 24, 1996 The operative statutes are §469.174, subd. 7 and subd. 10, which define original net tax capacity and redevelopment district, respectively. The latter subdivision refers to §469.177, subd. 1(h) in those situations in which the authority acquires a substandard building, demolishes it, and holds it for a period of time before certifying the district, subject to a maximum of three years. My analysis assumes that the area qualifies as a redevelopment district. • After reading these statutes, if the authority wishes to achieve zero original net tax capacity, I believe it can do so through the following steps: 1. Acquire property early in 1996, so that it can be tax exempt as of January 2, 1997. 2. Demolish buildings in 1997. 3. Hold the property for a minimum of 366 days and at least until July 1, 1997. 4. After the 366 days and July 1, 1997, certify the redevelopment tax increment financing • district to the county auditor. 5. Having done so, the auditor, pursuant to §469.177, subd. 1(h) must certify the original net tax capacity using the greater of (1) the current net tax capacity of the parcel - zero or (2) the estimated market value of the parcel for the year in which the building was demolished or removed - zero. This occurs because the property was tax exempt as of January 2, 1997 and that is the same year in which the buildings were demolished. You are able to achieve zero because you held the property for longer than one year, as required by §469.174, subd. 7. Lori and I have discussed this. We think it works. As she has noted, however, you have to balance achieving zero against the carrying costs. If you have any questions or comments, t-jfi)_e______.____ • please call. DCS 117721