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EDSR MEMORANDUM 02-14-2000 ELK RIVER ECONOMIC DEVELOPMENT AUTHORITY • MEMORANDUM TO: Economic Development Authority r)___FROM: Paul Steinman, Director of Economic Development DATE: February 10, 2000 SUBJECT: Agenda Memo for the February 14, 2000,EDA Meeting 5. Web Site Presentation Staff has been working for some time on an updated and modified economic development web site. The purpose of this presentation will be for the EDA to provide input on the content and organization of the proposed site. Marc Nevinski will present the site in its current draft • form. It is anticipated the web site will be an important piece of implementation of the marketing plan and will play an important role in the discussion of various ways to market the city for economic development purposes. 6. Tax Increment Policy Modification The new state statute regarding business subsidies mandates that cities modify their current incentive and subsidy policies including language regarding the business subsidy law. The law also requires that cities hold a public hearing on such modified policies prior to providing subsidies. Marc Nevinski will present the modified tax increment policy for input and discussion by the EDA. The future process of this issue includes that a public hearing should be scheduled for the next EDA meeting, March 13, 2000, and subsequently, the City Council meeting and HRA meeting, to approve the new tax increment policy. di The primary modification includes the addition of a rating scale for various project applicants. Such rating scale will enable staff and the EDA/City Council to better analyze a given project for its eligibility for 13065 Orono Parkway • P. O. Box 490 •Elk River, MN 55330-1743 • (612) 441-7420• Fax (612)441-7425 Equal Opportunity Housing and Equal Opportunity Employment 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 EDA Agenda Memo February 14, 2000 Meeting Page 3 • gap. Such is the case with the John Weicht proposal in the McChesney Industrial Park. The business subsidy law requires that a public hearing be held prior to approval of a tax abatement policy. The earliest that a tax abatement policy could be brought forward to the EDA would be March 13, 2000. Staff suggests at that time the EDA review the draft policy and provide its input and authorize holding a public hearing to formally adopt such policy. The public hearing and formal policy adoption would likely occur at the regular EDA meeting in April 2000. The business subsidy law is very specific in stating that no tax abatement projects are to be approved by the governing bodies until such tax abatement policy has been formally adopted. Staff suggests that the EDA Finance Committee be used in a process similar to that of the micro loan process, in which tax abatement applicants would be asked to come forward initially to the Finance Committee for a recommendation prior to presenting their request to the full EDA. Recommendation • Staff recommends authorization to proceed with drafting a tax abatement policy for discussion at the next EDA meeting on March 13, 2000.