Agenda - Economic Development Authority - 10/14/2002

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ll:54am From-CiTY OF COON RAPIDS ENr,-PLANINSP +?'637678573 T-431 P.OZ/03 F-I]ll In the 1997 legislative session, Repms~tafive Ron Abrams from Minnetonka ~ ~'' authored legislation to allow individual political subdivisions (county, city, town, or school district) to ramm their proportionaI share of all or a portion of a b~ilding's property taxes (sec H.F. 2163, Laws of Minnesota, Article 2, Sections 45-48, or Minnesota Statutes, Section 469.1812 to 469.1815). Abatements were designed ye give each jurisdiction a voice in economic and redevelopment efforts, Iimit thc state's financial liability through the school finance system, and enable new business retc'ntion effort.s. Complications arose in the mechanics of abatements and, mom importantly, from r. he reintroduction of levy limits for taxes payable in 1998 and 1999. The 1998 Legislature passed legislation to exempt these abatea~ents fi-om the tcvy limits and also allow bonds to be issued as a means to finance thc dgvelopmen~ The 1999 and 2000 LegisLatures, in an effort to make abatement a more viabte economic development tool, has further expanded the scope of abatement authority. Thc torts and bolts of the abatement program are as follows: Tile abatement is a tax rebate rather than an exemption from paying taxes: The taxpayer pays taxes on the abamd property in the same manner it would if the taxes were not being aba'red. The coumy pays the abatement to the general fund of the political subdivision without identifying thc amount of the abatement. The 1999 Legislature expanded the meaning of the term abatement to encompass agreements to defer property taxes without interest or penalties. Thc city, town, county or school district can levy taxes as usual, defer payments Ibr up to ten years, impose a set repayment schedule, and abate the penaltie and in~erest. Towns may take action on tax abatemera 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." For towns, the governing body remains thc annual meeting, and several key abatement provisions require approval of thc governing body~ As of May 26, 1999, a school district may abate its entire mx capacity based levy (,previously could only abate 60% to 75%). A school district may not abate matkc~c value based levies. School boards, also as of May 26, 1999, may now grant abatcmenB for the entire term of the abatemen~ (previously they could only.approve the abatemen~ one year at a time). School districts may levy an additional pr~perty tax to pay for their abatements. The school clistdct will not lose net revenue by using the program. The maximum term of the abatement is ~ years if the city (or town), county, and school all participate. If one or more entities decline, the maximum term is 15, under legislation passed in 2000. Tl~e maximum that an entity can abate is the greater orS100,000 per year or 5% of thc enfity's levy. Taxes payable from thc market value cfa ncwv or c'x, isting building, and, as of May 26, 1999, thc value of land and any fiscal disp,'u'ities contributions (for metro and taconite credit areas only) may be abated. The max/mm armual abatement equals the political subdivision's local lax rotc multiplied b~y thc net tax capacity of thc parcel. 8