6.2. SR 12-18-2006 - Laserfiche WebLink

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Consider Tax Abatement for United HealthCare Services, Inc. Technology Center Project December II, 2006 EDA Meeting Page 2 00 The proposed project includes the acquisition of approximately 21 acres (a 3.88 privately owned parcel and a 16.88 acre portion of the county owned parcel) located at the southeast intersection of Business Center Drive and Waco Street. The company proposes to construct approximately 189,000-square foot technology center, as indicated on the attached preliminary site plan. In addition, the site plan indicates an area for future building expanslOn. Tax Abatement Request At is March 6, 2006 special meeting the EDA discussed the issue of potentially offering a financial incentive for the data technology center project based on the preliminary information that was available at the time. Based on the significant tax base to be generated as a result of the project, the EDA unanimously approved a motion directing staff to offer the company pay-as-you-go tax abatement from the city of up to 5% of the assessed market value with a $l-million cap. Pursuant to EDA direction, staff negotiated a proposal that included the offer of tax abatement. In August 2006 the company notified staff of their selection of the City of Elk River as the location for the technology center project. United HealthCare Services, Inc. has requested Tax Abatement from the City in an amount up to $850,000, with an understanding that the maximum amount would be based on 5% of the assessed market value (upon completion). Staff recommends that the tax abatement be provided on a pay-as-you-go basis, which means that upon receipt of the company's annual real estate taxes by the city, the company would receive reimbursement of 100% of the city portion of real estate taxes derived from the property for up to 10-years or until the maximum amount is reached (estimated to be 7-years). As discussed at the EDA meeting in March, the market value for this type of project has not yet been established. Therefore the actual amount of assistance is dependant on a percentage of the assessed market value upon completion a anuary 2009 assessment, payable 2010). The following table indicates the level of tax base generated for the city and level of tax abatement to the company depending on the final market value determination: Estimated Market Value $11.3 million $14 million $17 million $20 million ($60/sf) ($75/Sf) ($90/sf) ($111/sf) Maximum Abatement $567,000 $708,750 $850,000 $850,000 Allowed at 5% of MV Total Annual Tax Payable $399,000 $499,000 $599,000 $738,000 (City, County, School, State, etc) Annual City Portion $94,000 $118,000 $141,000 $174,000 Est. Abatement Term 7 years 7 years 7 years 6 years * Estimates based on 2006 Proposed Tax Rates and 189,000-square foot building.