3.0. HRSR 02-05-2001 - Laserfiche WebLink

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City School ''Covaty —.awn "P" In the 1997 legislative session,Representative Ron Abrams from Minnetonka C .; authored legislation to allow individual political subdivisions (county, city, town, or school district) to return their proportional share of all or a portion of a building's property taxes (see H.F. 2163, Laws of Minnesota, Article 2, Sections 45-48, or Minnesota Statutes, Section 469.1812 to 469.1815). Abatements were designed to give each jurisdiction a voice in Eeconomic and redevelopment efforts,limit the state's financial liability through the school finance system, and enable new business retention efforts. Complications arose in the mechanics of abatements and,more importantly,from the reintroduction of levy gillmor limits for taxes payable in 1998 and 1999. The 1998 Legislature passed legislation to exempt these trt abatements from the levy limits and also allow bonds to be issued as a means to finance the development. w Ile The 1999 and 2000 Legislatures,in an effort to make abatement a more viable economic development tool, has further expanded the scope of abatement authority. NC it< The nuts and bolts of the abatement program are as follows: ❑ The abatement is a tax rebate rather than an exemption from paying taxes. ❑ The taxpayer pays taxes on the abated property in the same manner it would ifthe taxes were not being abated. The county pays the abatement to the general fund of the political subdivision without identifying the amount of the abatement. ❑ The 1999 Legislature expanded the meaning of the term abatement to encompass agreements to defer property taxes without interest or penalties. The city,town, county or school district can levy taxes as usual,defer payments for up to ten years,impose a set repayment schedule,and abate the penalties and interest. ❑ Towns may take action on tax abatement only at their annual meeting.The 1999 Legislature gave the town board the power to approve the abatement resolution at other times,but,unfortunately,the new legislation did not change the definition of"governing body." For towns,the governing body remains the annual meeting, and several key abatement provisions require approval of the governing body. ❑ As of May 26, 1999, a school district may abate its entire tax capacity based levy(previously could only abate 60%to 75%). A school district may not abate market value based levies. School boards, also as of May 26, 1999, may now grant abatements for the entire term of the abatement(previously they could only approve the abatement one year at a time). School districts may levy an additional property tax to pay for their abatements. The school district will not lose net revenue by using the program. ❑ The maximum term of the abatement is ten years if the city (or town), county, and school all participate. If one or more entities decline,the maximum term is 15,under legislation passed in 2000. ❑ The maximum that an entity can abate is the greater of$100,000 per year or 5%of the entity's levy. ❑ Taxes payable from the market value of anew or existing building,and,as of May 26, 1999, the value J of land and any fiscal disparities contributions (for metro and taconite credit areas only) may be ffi, abated. The maximum annual abatement equals the political subdivision's local tax rate multiplied t' by the net tax capacity of the parcel.