5.2. SR 02-06-2006 - Laserfiche WebLink

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In the 19971egis1ative session, Representative Ron Abrams from Minnetonka authored legislation to allow individual political subdivisions (county, city, ~~JE?"i;ffi'ti 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 to 48, or Minnesota Statutes, Sections 469.1812 to 469.1815). Abatements were.designed to give each jurisdiction a voice in economic 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 oflevy limits for taxes payable in 1998 and 1999. The 1998 Legislature passed legislation to exempt these abatements from the levy limits and also allow bonds to be issued as a means to finance the development. The 1999 through 2003 Legislatures, in an effort to make abatement a more viable economic development tool, has further expanded the scope of abatement authority. The nuts and bolts of the abatement program are as follows: o The abatement is a tax rebate rather than an exemption from paying taxes. o The taxpayer pays taxes on the abated property in the same manner it would if the 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. o 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. o Towns may take action on tax abatement at any meeting, not 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". The 2001 Legislature corrects the defInition of governing body to authorize town boards (rather than the annual meeting) to approve abatement, and is retroactive to the date of the 1999 change (May 26, 1999). o 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.. o 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 for all participating entities, not just the requesting unit of government, under legislation passed in 2001. The 2002 Legislature extended the duration limit for a period of up to 20 years if the abatement is for a "qualifIed business". o The 2003 Legislature doubled the maximum that an entity can abate to the greater of$200,000 per year or 10% of the entity's levy. o Taxes payable from the market value of a new or existing building, and, as of May 26, 1999, the value of land and any fIscal disparities contributions (for metro and taconite credit areas only) may be abated. The maximum annual abatement equals the political subdivision's local tax rate multiplied by the net tax capacity of the parcel. EHLERS & ASSOCIA TES, INC. 3060 Centre Pointe Drive, Rosevil/e, Minnesota 55113 651.697.8500