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 Property Current Taxes ($2,000) are “Frozen” Building Blocks of Property Tax Incentives

Base Value = $20,000 Taxes = $2,000 Development Occurs “Capture” a portion of the increased property taxes from new value of the parcel (Increment) Property Tax Incentives

Base Value = $20,000 Old Taxes = $2,000 Increment = Difference Between Old Taxes and New Taxes New Value = $2,000,000 New Taxes = $22,000 Building Blocks of Property Tax Incentives

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 businesses Create/retain jobs Increase commercial/industrial tax base Redevelop blighted areas Construct and finance public infrastructure Write down development/redevelopment costs

North Branch - Tanger Began in 1992 First Outlet North of Twin Cities 1992 Property Tax = $126 Tax Increment Financing Program Tanger 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 $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, Total Property Tax = $70, City Property Tax = $7, City Property Tax = $18, County Property Tax = $10, County Property Tax = $22,505

Employment Impact General Safety Tax Abatement Requirements: Company would need to add new jobs per hour) and a 10,000 sq. ft. addition to the building Currently have 138 $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