7.0. EDSR 02-14-2000 - Laserfiche WebLink

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1,0 CAPITOL WATCH UPDATE: 997 LEGISLATURE APPROVES TAX ABATEMENT PROGRAM Ilipr Coyle Buried amidst the hundreds In order to take advantage of the Abatement county,although such entities can agree to partici- of pages of the 1997 Program,a governmental entity must adopt a pate in the Abatement Program at their discretion. .. Omnibus Tax Bill is an resolution incorporating findings satisfying a ..,004:2„, - important new Tax two-part statutory test: The only apparent limitations on the Abatement Abatement Program which Program are that it may not be used to(1)abate can be used by private 1. Benefits to the governmental entity must equal taxes on raw land or to offset fiscal disparities con- developers and public economic development or exceed the costs of providing abatement tributions;and(2)abate projects within an existing specialists to help support new real estate develop- assistance to the proposed development;and Tax increment Financing(TIF)District. ment projects. In comparison to the attention paid to property tax reform,this significant new tax 2. The public interest must be served through A governmental entity may issue bonds to fund an assistance program clearly reigns as the'sleeper'of the availability of abatement assistance,as 'up front'abatement,similar to what is done for TIF the 1997 Legislature. indicated below: projects. Bonds can be underwritten to reflect taxes •increase/preserve tax base; otherwise allocable to counties and school districts,if New Tax •Provide jobs; such governmental entities agree in advance. Abatement Opportunity •Provide or help construct public facilities; The Abatement Program has remarkably few limits- •Redevelop or renew blighted areas;and The Tax Abatement Program is a potentially signifi- tions on its use by a governmental entity in the •Provide access to services for residents. cant development tool,without the restrictions course of considering a development proposal. In typically found in a TIF transaction. We encourage general,the Abatement Program can be used to spur In addition,the resolution must place a limit on the all development clients to investigate the availability development through the refund of taxes attribut- duration of abatement assistance(10 years or less)to of abatements in connection with developments able to such development. The abatement proceeds the specific development,along with a cap on the you may be considering. Please call me at can be used by the developer as equity for financing amount of such assistance. The total annual abate- (612)896-3214 if you have any questions. abatement cover development costs ment available for use by a governmental entity is limited to the greater of 5 percent(5%)of the Program can be used by the entity's current levy,or$100,000. Finally,the res Peter Coyle is a member of olution must include specific provision for capturing *der. the Governmental Relations following governmental entities: anyincreases in taxes attributable to theproposed • and Land Use practice groups Cities; development to cover the cost of the Abatement •Towns; ! ' at Larkin Hoffman. Peter •School Districts;and Program. In this regard,one important distinction 1, �» A specializes in representation between the Abatement Program and Tax Increment t" �A of private developers and •Counties. Financing(TIF)is that the governmental entity may ! landowners before State not unilaterally obligate the taxes allocable to agencies,the Metropolitan another governmental entity,e.g.school district, Council,County Boards and City Councils. FROM THE DESK OF J01IN LUNDQUISI. CONTINUED FROM COVER such as the Minnesota VIC Program and private financial devices such as environ- able to attract traditional buyers and lenders. Often these parties are given addi- mental insurance,developers and lenders are becoming increasingly more willing to tional security in the form of environmental insurance. participate in environmental redevelopment projects. There is good economic sense to this because the low land prices and the sophistication necessary to con- This issue of RE:VIEW focuses on the redevelopment of contaminated land,or duct a successful redevelopment offer the opportunity for high rates of return. Brownfields. This is a topic which has gained recent public and legislative awareness. If you have any questions concerning Brownfield development, Several development and investment groups around the country have been please feel free to contact me at(612)835-3800. We hope you enjoy formed to take advantage of these redevelopment opportunities. Typically they this issue! have the technical ability to evaluate the costs and risks in cleaning up and rede- veloping contaminated lands together with a pool of equity funds sufficient to John Lundquist is a shareholder,practicing in the area of commercial real IRand redevelop environmental properties with low or very low requirements estate and finance law, with significant emphasis on environmental law and t financing. Some operate by partnering with local owners or developersinsurance. John regularly negotiates environmental risk allocation provisions in acquisition,financing,and leasing documentation. He has been exten- When the redevelopment project is up and running these groups are much more sively involved in the evaluation and development of environmental insurance coverages now available to protect real estate owners, tenants, and lenders. 2 • Larkin, Hoffman, Daly a Lindgren, Ltd.