Taking the Mystery out of Economic Development Tools Chris Eng, Chisago County HRA-EDA

1. Taking the Mystery out of Economic Development Tools Chris Eng, Chisago County HRA-EDA

2. 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

3. Base Value = $20,000 Building Blocks of Property Tax Incentives Current Taxes ($2,000) are “Frozen” Vacant Property

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

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

6. Tax Increment Financing

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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 (+)

13. General Safety

14. Project Specifics General Safety, Inc. has been located in Chisago County since 1929 Company manufactures custom built fire trucks 60 Employees @ $17 per hour

15. 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

16. 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

17. 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

18. 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

19. Polaris Industries

20. 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)

21. 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

22. 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

23. 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

24. 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

25. 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)

26. Community Benefits • 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

27. 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