7.2. EDSR 02-16-2021 - Laserfiche WebLink

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Any political subdivision, including statutory cities, home rule charter cities, towns, counties, and school districts, is authorized to abate property taxes on selected parcels or defer the payments of the taxes and abate the interest and penalty that otherwise would apply, if: • The benefits gained equal or exceed the cost to the political subdivision or the abatement phases in a property tax increase, and • The abatement is in the public interest because it will: − increases or preserves the tax base; − provides employment opportunities; − provides or helps acquire or construct public facilities; − helps redevelop or renew blighted areas; − helps provide access to services; − finances or provides for public infrastructure; − phase in a property tax increase on the parcel resulting from an increase of 50% or more in one year on the estimated market value of the parcel, other than an increase due to improvement of the parcel; or − stabilize the tax base through equalization of property tax revenues for a specified time period with respect to a taxpayer whose real and personal property is subject to valuation under Minnesota Rules, chapter 8100. Cities, counties, and school districts as combined jurisdictions may grant an abatement for no longer than 15 years (8 year maximum if no initial duration is specified), or for no longer than 20 years if two or fewer jurisdictions participate. No back-to-back abatements. Eight years must pass before a new abatement can be applied. In any given year, the total amount of property taxes abated by a political subdivision for all parcels may not exceed the greater of (1) 10% of the net tax capacity of the political subdivision for the taxes payable year to which the abatement applies, or (2) $200,000. Property in a tax increment financing district is not eligible for abatement. Project Financing There are generally two ways in which assistance can be provided for most projects, either upfront or on a pay- as-you-go basis. With upfront financing, the City would finance a portion of the applicant’s initial project costs through the issuance of bonds or as an internal loan. Future revenues would be collected by the City and used to pay debt service on the bonds or repayment of the internal loan. With pay-as-you-go financing, the applicant would finance all project costs upfront and would be reimbursed over time for a portion of those costs as revenues are available. Pay-as-you-go-financing is generally more acceptable than upfront financing for the City because it shifts the risk for repayment to the applicant. If revenues are less than originally projected, the applicant receives less and therefore bears the risk of not being reimbursed the full amount of their financing. However, in some cases pay as you go financing may not be financially feasible. With bonds, the City would still need to make debt service payments and 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 project financing would be pay-as-you-go for reimbursement of certain costs. Tax Abatement Revenue Assumptions The County Assessor provided a taxable value estimate for the project. To estimate the amount of available revenues generated by the proposed project, certain assumptions were made based on the value of the project, construction schedule, and anticipated financing terms. • Total existing value o Parcel ID: 75-828-0205 o Base value as of Jan. 1, 2020  Existing building value of $5,384,800  Original net tax capacity (ONTC) of $106,946 o Assuming classification as commercial-industrial (C-I)  C-I classification rate is 1.5% first $150,000 value and 2% value above $150,000