EDSR MEMORANDUM 02-14-2000 - Laserfiche WebLink

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EDA Agenda Memo February 14,2000 Meeting Page 2 • tax increment. Staff presents this rating scale under the assumption that every project that requests tax increment may not necessarily qualify for tax increment under these guidelines. For applicants that potentially do not qualify based upon the rating method, tax abatement may be a potential financing alternative. Recommendation Staff recommends the EDA provide input or make changes to the attached tax increment policy and rating scale and authorize advertisement of a public hearing to be held at the EDA meeting on March 13, 2000, to formally adopt and approve such modified policy. 7. Tax Abatement Discussion— John Weicht Presentation The purpose of this issue is to review the tax abatement law in anticipation of authorizing staff to draft a tax abatement policy, and also to hear a request from John Weicht for the use of tax abatement on an industrial project. Timing did not allow staff to bring forward a draft tax abatement • policy at this time, so the purpose of this meeting will be to review the tax abatement law and discuss its various applications to the City of Elk River. Attached to this memo is a copy of the tax abatement law and other information about tax abatement. Tax abatement has not been used extensively in the state of Minnesota since the law went into effect in 1998. It appears to be a valuable incentive tool however, and can be used in a variety of conditions and minimal staff time compared to tax increment. With tax abatement the governing body is required to request participation by the county and school district. In most cases, staff feels it is unlikely that the school district will agree to participate in tax abatement projects. Sherburne County may agree to participate on a selective basis, and they are currently going through a review of a draft tax abatement policy in anticipation of future requests. In a worse case scenario, this would leave only the city agreeing to a tax abatement on a specific project. This means only the city's share of new taxes generated on a project would be returned to the developer and/or owner/occupant. This is in contrast to tax increment whereby all the taxes generated on a new project are potentially returned to the developer. In a tax abatement scenario, it might be assumed that only approximately 25 percent (the • city's share) of the tax dollars generated could be returned to the developer over a maximum period of ten years. This tax abatement tool works very well in smaller projects where there is less of a financial