5.2. SR 03-13-2006
City of Elk River
REQUEST FOR COUNCIL ACTION
Agenda Section Meeting Date
Worksession March 13,2006
Item Description
Sherburne Coun Utili
Administrator
Introduction
Sherburne County Administrator Brian Bensen and Sherburne County Attorney Kathy Heaney will be
present to give the Council a brief update on proposed utility legislation for tax abatement.
Discussion
Financial Impact
Attachments
Draft of legislation.
Action Requested
None.
Council Action
Motion by _
Second by _
Vote
Follow Up
S:\Council\Lori\2006\County Utility Legislation.doc
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469.~8~3 Abatement authority.
Subdivision 1. Authority. The governing body of a
political subdivision may grant a current or prospective abatement, Qy
contract or otherwise, of the taxes imposed by the political subdivision on a
parcel of property, which may include personal property and machinery, or
defer the payments, of the taxes and abate the interest and penalty that
otherwise would apply, if:
(a) it expects the benefits to the political subdivision of the proposed
abatement agreement to at least equal the costs to the political subdivision
of the proposed agreement or intends the abatement to phase in a property tax
increase, as provided in clause (b) (7); and
(b) it finds that doing so is in the public interest because it will:
(1) increase or preserve tax base;
(2) provide employment opportunities in the political subdivision;
(3) provide or help acquire or construct public facilities;
(4) help redevelop or renew blighted areas;
(5) help provide access to services for residents of the political
subdivision;
(6) finance or provide public infrastructure; or
(7) phase in a property tax increase on the parcel resulting from an
increase of 50 percent or more in one year on the estimated market value of
the parcel, other than increase attributable to improvement of the parcel.
(8) Stabilize the tax base throuqh equalization of property tax revenues
for a specified period of time with respect to a taxpayer whose real and
personal property is sublect to valuation under or pursuant to Chapter 8100
of the Minnesota Rules.
Subd. 1a. Use of term. As used in this section and sections 469.1814
and 469.1815, "abatement" includes a deferral of taxes with abatement of
interest and penalties unless the context indicates otherwise.
Subd. 2. Abatement resolution. (a) The governing body of a political
subdivision may grant an abatement only by adopting an abatement resolution,
specifying the terms of the abatement. In the case of a town, the board of
supervisors may approve the abatement resolution. The resolution must also
include a specific statement as to the nature and extent of the public
benefits which the governing body expects to result from the agreement. The
resolution may provide that the political subdivision will retain or transfer
to another political subdivision the abatement to pay for all or part of the
coste of acquisition or improvement of public infrastructure, whether or not
located on or adjacent to the parcel for which the tax is abated. The
abatement may reduce all or part of the property tax amount for the political
subdivision on the parcel. A political subdivision's maximum annual amount
for a parcel equals its total local tax rate multiplied by the total net tax
capacity of the parcel.
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(b) The political subdivision may "limit the abatement:
(1) to a specific dollar amount per year or in total;
(2) to the increase in property taxes resulting from improvement of the
property;
(3) to the increases in property taxes resulting from increases in the
market value or tax capacity of the propertYi
(4) in any other manner the governing body of the subdivision determines
is appropriate; or
(5) to the interest and penalty that would otherwise be due on taxes that
are deferred.
(c) The political subdivision may not abate tax attributable to the
areawide tax under Chapter 276A or 473F, except as provided in this
subdivision.
Subd. 3. School district abatements. An abatement granted under this
section is not an abatement for purposes of state aid or local levy under
sections 127A.40 to 127A.51.
Subd. 4. Property located in tax increment financing districts. The
governing body of a political subdivision may not enter into a property tax
abatement agreement under sections 469.1812 to 469.1815 that provides for
abatement of taxes on a parcel, if the abatement will occur while the parcel
is located in a tax increment financing district.
Subd. 5. Notice and public hearing. (a) The governing body of the
political subdivision may approve an abatement under sections 469.1812 to
469.1815 only after holding a public hearing on the abatement.
(b) Notice of the hearing must be published in a newspaper of general
circulation in the political subdivision at least once more than ten days but
less than 30 days before the hearing. The newspaper must be one of general
interest and readership in the community, and not one of limited subject
matter. The newspaper must be published at least once per week. The notice
must indicate that the governing body will consider granting a property tax
abatement, identify the. property or properties for which an abatement is
under consideration, and the total estimated amount of the abatement.
Subd. 6. Duration limit. (a) A political subdivision may grant an
abatement for a period no longer than ten years, except as provided under
paragraph (b). The abatement period will commence in the first year in which
the abatement qranted is either paid or retained in accordance with Minn.
Stat. Sec. 469~1815, Subd. 2. The subdivision may specify in the abatement
resolution a shorter duration. If the resolution does not specify a period
of time, the abatement is for eight years. If an abatement has been granted
to a parcel of property and "the period of the abatement has expired, the
political subdivision that granted the abatement may not grant another
abatement for eight years after the expiration of the first abatement. This
prohibition does not apply to improvements added after and not subject to the
first abatement. Economic abatement aqreements for real and personal property
sublect to valuation under or pursuant to Chapter 8100 of the Minnesota Rules
are not sublect to this prohibition and may be qranted successively.
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(b) A political subdivision proposing to abate taxes for a parcel may
request, in writing, that the other political subdivisions in which the
parcel is located grant an abatement for the property. If one of the other
political subdivisions declines, in writing, to grant an abatement or if 90
days pass after receipt of the request to grant an abatement without a
written response from one of the political subdivisions, the duration limit
for an abatement for the parcel by the requesting political subdivision and
any other participating political subdivision is increased to 15 years. If
the political subdivision which declined to grant an abatement later grants
an abatement for the parcel, the 15-year duration limit is reduced by one
year for each year that the declining political subdivision grants an
abatement for the parcel during the period of the abatement granted by the
requesting political subdivision. The duration limit may not be reduced
below the limit under paragraph (a).
Subd. 6a. Deferment payment schedule. When the tax is deferred and
the interest and penalty abated, the political subdivision must set a
schedule for repayments. The deferred payment must be included with the
current taxes due and payable in the years the deferred payments are due and
payable and must be levied accordingly.
Subd. 6b. Extended duration limit. (a) Notwithstanding the provisions
of subdivision 6, a political subdivision may grant an abatement for a period
of up to 20 years, if the abatement is for a qualified business.
(b) To be a qualified business for purposes of this subdivision, at least
50 percent of the payroll of the operations of the business that qualify for
the abatement must be for employees engaged in one of the following lines of
business or any combination of them:
(1) manufacturingj
(2) agricultural processing;
(3) miningj
(4) research and developmentj
(5) warehousingj
(6) qualified high technology; or
(7) a taxpayer whose real and personal property is sublect to valuation
under or pursuant to Chapter 8100 of the Minnesota Rules.
(c) (1) "Manufacturing" means the material staging and production of
tangible personal property by procedures commonly regarded as manufacturing,
processing, fabrication, or assembling which changes some existing material
into new shapes, new qualities, or new combinations.
(2) "Mining" has the meaning given in section 613(c) of the Internal
Revenue Code of 1986.
(3) "Agricultural processing" means transforming, packaging, sorting, or
grading livestock or livestock products, agricultural commodities, or plants
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or plant products into goods that are used for intermediate or final
consumption including goods for nonfood use.
(4) "Research and development" means qualified research as defined in
section 41(d) of the Internal Revenue Code of 1986.
(5) "Qualified high technology" means one or more of the following
activities:
(i) advanced computing, which is any technology used in the design and
development of any of the following:
(A) computer hardware and software;
(B) data communications; and
(C) information technologies;
(ii) advanced materials, which are materials with engineered properties
created through the development of specialized process and synthesis
technology;
(iii) biotechnology, which is any technology that uses living organisms,
cells, macromolecules, microorganisms, or substances from living organisms to
make or modify a product, improve plants or animals, or develop
microorganisms for useful purposes;
(iv) electronic device technology, which is any technology that involves
microelectronics, semiconductors, electronic equipment, and instrumentation,
radio frequency, microwave, and millimeter electronics, and optical and
optic-electrical devices, or data and digital communications and imaging
devices;
(v) engineering or laboratory testing related to the development of a
product;
(vi) technology that assists in the assessment or prevention of threats
or damage to human health or the environment, including, but not limited to,
environmental cleanup technology, pollution prevention technology, or
development of alternative energy sources;
(vii) medical device technology, which is any technology that involves
medical equipment or products other than a pharmaceutical product that has
therapeutic or diagnostic value and is regulated; or
(viii) advanced vehicles technology which is any technology that involves
electric vehicles, hybrid vehicles, or alternative fuel vehicles, or
components used in the construction of electric vehicles, hybrid vehicles, or
alternative fuel vehicles. An electric vehicle is a road vehicle that draws
propulsion energy only from an on-board source of electrical energy. A
hybrid vehicle is a road vehicle that can draw propulsion energy from both a
consumable fuel and a rechargeable energy storage system.
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(d) The authority to grant new abatements under this subdivision expires
on July 1, 2004, except for aqreements with a taxpayer whose' real and
personal property is subiect to valuation under or pursuant to Chapter 8100
of the Minnesota Rules, which may be effective for any period up to twenty
years in lenqth.
Subd. 7. Review and modification of abatements. The political
subdivision may provide in the abatement resolution that the abatement may
not be modified or changed during its term. If the abatement resolution does
not provide that the abatement may not be modified or changed, the governing
body of the political subdivision may review and modify the abatement every
second year after it was approved.
Subd. 8. Limitation on abatements. In any year, the total amount of
property taxes abated by a political subdivision under this section may not
exceed (1) ten percent of the current levy, or (2) $200,000, whichever is
greater. The limit under this subdivision does not apply to~
J1l an uncollected abatement from a prior year that is added to the abatement
levy;_.or
(2) a taxpayer whose real and personal property is subiect to valuation under
or pursuant to Chapter 8100 of the Minnesota Rules.
Subd. 9. Consent of property owner not required. A political
subdivision may abate the taxes on a parcel under sections 469.1812 to
469.1815 without obtaining the consent of the property owner. This
subdivision does not apply to abatements qranted to a taxpayer whose real and
personal property is valued under or pursuant to Chapter 8100 of the
Minnesota Rules.
Subd. 10. [APPLICABILITY TO CERTAIN TAXPAYERS] When this statute is
applied or utilized with respect to a taxpayer whose real and personal
property is subiect to valuation under or pursuant to Chapter 8100 of the
Minnesota Rules; the provisions of sections 469.1813, 469.1814 and 469.1815
shall have applicability only to property specified and/or described in the
abatement contract or aqreement.
HIST: 1997 c 231 art 2 s 46; 1998 c 397 art 11 s 3; 1999 c 243 art 10 s
8-14; 1999 c 248 s 19; 2000 c 490 art 11 s 33-35; lSp2001 c 5 art 15 s 26;
2002 c 377 art 7 s 5; 2003 c 127 art 10 s 26; art 12 s 19; lSp2003 c 21 art
10 s 11