Taking the Mystery out of Economic

Development Tools

Chris Eng, Chisago County HRA-EDA

Property Tax Incentives Capture and use a portion of the new property

tax revenues generated from new development

These incentives are not an exemption from paying taxes, rather they are a rebate or “redirected investment” from the new property taxes generated

Property tax incentives do not raise the property taxes on anyone else

Base Value = $20,000

Vacant Vacant PropertyProperty

Current Taxes ($2,000) are Current Taxes ($2,000) are “Frozen”“Frozen”

Building Blocks of Property Tax Incentives

Base Value = $20,000Taxes = $2,000

Development Development OccursOccurs

““Capture”Capture” a portion of the a portion of the increased property taxes increased property taxes from new value of the from new value of the parcel (Increment)parcel (Increment)

Property Tax Incentives

Base Value = $20,000Old Taxes = $2,000

Increment = Increment = Difference Difference

Between Old Between Old Taxes and Taxes and New TaxesNew Taxes

New Value = $2,000,000New Value = $2,000,000New Taxes = $22,000New Taxes = $22,000

Building Blocks of Property Tax Incentives

Tax Increment Financing

Tax Increment Financing

• Uses New Taxes (Increment) from New Development to “Write Down” the Development Costs (ie. land cost, water, sewer, streets, storm water, etc.)

• 9 Years Economic Development District

• 25 Years Redevelopment District

Tax Abatement

• Not an Abatement (should be called a “Redirected Investment”)

• Most Often Redirected for Infrastructure– Expansions, Contamination Clean-up, Business Park

Development, Public Improvements– Can go up to 15 Years– Each Taxing Jurisdiction Chooses to Participate and

Amount of Participation

Tax Abatement Examples

• Chisago City Industrial Park - Infrastructure• Stacy Industrial Park - Infrastructure• Rush City Industrial Park - Infrastructure• Rush City Airport - Taxiway• North Branch - Contamination Clean-up, Road

Improvements• Wyoming - Storm Water Improvements,

Business Expansion

Who “Captures” and Approves Tax Incentives

Cities, Counties, Schools, Townships

Approval by governing boards only

Cannot “capture” or “redirect” the State portion of the property tax

Why Use Property Tax Incentives?

• Encourage development or redevelopment that would not occur without assistance

Compete for businessesCreate/retain jobs Increase commercial/industrial tax baseRedevelop blighted areasConstruct and finance public infrastructureWrite down development/redevelopment costs

North Branch - TangerBegan in 1992First Outlet North of Twin Cities1992 Property Tax = $126

Tax Increment Financing ProgramTanger an “Economic Engine”2007 Property Tax = $787,000 (+)

General Safety

Project Specifics

General Safety, Inc. has been located in Chisago County since 1929

Company manufactures custom built fire trucks

60 Employees @ $17 per hour

Competition from Other States

• General Safety has manufacturing facilities in South Dakota and Nebraska

• Looking to expand in Chisago County, but couldn’t financially justify the development.

• Property taxes are approximately 1/2 in South Dakota compared to MN

Chisago County/City of Wyoming

• Tax Abatement “Rebate” was used to balance the playing field with South Dakota and keep the company in Wyoming and Chisago County

• $6,000 per year for 10 years County• $4,000 per year for 10 years City

• Company currently pays over $70,000 in taxes annually

General Safety Tax Impact

• 2003 “Base” Property Tax = $33,642• 2007 Total Property Tax = $70,246

• 2003 City Property Tax = $7,732• 2007 City Property Tax = $18,915

• 2003 County Property Tax = $10,640• 2007 County Property Tax = $22,505

Employment Impact

• General Safety Tax Abatement Requirements:

• Company would need to add 10-12 new jobs (@$17 per hour) and a 10,000 sq. ft. addition to the building

• Currently have 138 employees @ $17 per hour

Polaris Industries

City of Wyoming

• Polaris Industries looking for 400 – 600 acres for a new R&D Facility

• City of Wyoming Wastewater Treatment site was considered first choice for Minnesota location (also looking at Wisconsin sites)

Wyoming Waste Water Treatment Project

• Total cost to decommission ponds, prepare site for development, construct sanitary sewer pipeline to Chisago Lakes Joint Wastewater Treatment Facility and expand treatment facility to add capacity approximately $14 million

Project Financing

• Polaris paid approximately $7 million for land

• City received $1.5 million from DEED (MIF and Business Development Infrastructure Grant)

• City received $1.5 million from US Dept. of Commerce

Project Financing

• Chisago City contributed approximately $500,000 towards cost of the sanitary sewer pipeline

• MN PFA Bond approximately $3.8 million

• No School, County or City Property Tax Dollars given to Polaris

Project Financing

• Polaris received JOBZ benefits on building, but still pays taxes on land (previously tax exempt)

• 2008 estimates approximately $150,000 in property taxes (Increment = $150,000)

• Tax Abatement Agreement between City and County

Tax Abatement to City of Wyoming

• County and City will escrow the property taxes paid by Polaris and use for shortfalls in the wastewater project if needed

• If revenues are adequate to cover expenses, funds will be kept by County and City. Current Estimates = $364,700 (positive balance)

• 226 High Wage Paying Full Time Employees in Community (@ $60,000 +)

• $47 million in New Private Investment• Water & Waste Water Improvements• Increase in Commercial/Industrial Market

Values• Increase in Tax Revenue

Community Benefits

Business Loan Funds

• Minnesota Investment Fund• Chisago County Business Enterprise Fund• Initiative Foundation• Minnesota Community Capital Fund• Small Cities Development Program (DEED)• City Revolving Loan Funds