Resolution adopting Tax Abatement Policy.

Adoption of the attached resolution.

Staff have received an increase in inquiries over the past year regarding usage of tax abatement. Currently, the City does not have a policy for usage beyond what is set by Minnesota Statute.
 
Minnesota law allows cities, counties, school districts, and towns to use property tax abatement to promote local economic development (Minn. Stat. §§ 469.1812, 469.1813, 469.1814, 469.1815). This tool allows a jurisdiction to use property tax revenue to support development, often through an agreement with a property owner who commits to building or improving property that benefits the local economy. A jurisdiction may only abate the property taxes it imposes, not those from other taxing authorities or the state. A political subdivision must provide notice of the prospective abatement and hold a public hearing. After the hearing, an abatement resolution may be adopted that specifies the terms of the abatement.
 
Tax abatement is more flexible and simpler to establish compared to Tax Increment Financing (TIF). Given the flexibility with tax abatement and increased inquires surrounding usage, staff finds it would be helpful to have a tax abatement policy to guide usage.
 
Abatements generally have shorter durations and fewer statutory restrictions than TIF, but they only capture the taxes of the granting jurisdiction. An abatement can last no longer than 15 years, though Statute allows some exceptions under certain criteria to allow up to 20 years. Historically, Blue Earth County has not participated in tax abatements related to site development and instead has focused abatement on major transportation improvements involving highway interchanges and arterial/collector roadways (i.e. Victory Drive).

Past Tax Abatement usage by City of Mankato

Currently, the City of Mankato / Mankato EDA does not have an adopted policy for usage of tax abatement other than what is provided in the State Statute. In the past, there have been limited instances where tax abatement has been used in Mankato, which include the following:
 
 

 

PROJECT / YEAR	TAX ABATEMENT USAGE
Northeast Redevelopment Plan / 2000	On June 12, 2000, the Mankato Economic Development Authority and City of Mankato established a redevelopment project, which provided assistance in the redevelopment of a commercial/retail area situated in the northeast area of the City. The project was found to result in the prevention of blight, redevelopment of inappropriate land uses and construction of infrastructure improvements that would promote the health, safety and welfare of residents, stimulate economic development, job opportunities, and development/redevelopment of land that is underutilized within the City. Abatement was used to fund infrastructure improvements and road construction.   There were several plan modifications to expand the boundaries and increase the project budget, including the following: June 24, 2002, modification to expand the boundaries to fund Phase I of the Victory Drive extension project. August 14, 2006, modification approved for Victory Drive improvements. December 9, 2013, modification to expand the boundaries and increase the project budget to address the substandard conditions found in Orderly Annexation Area 1 contained in the Joint Resolution for Orderly Annexation with Lime Township. October 9, 2017, modification to expand the boundaries and increase the project budget for the Adams Street extension project.
Hilton Garden Inn / 2004	On November 8, 2004, the Mankato City Council passed a resolution approving tax abatement for the Downtown Hotel Redevelopment project (Hilton Garden Inn). Tax abatement was used because the project didn’t qualify for TIF. The abatement was used for parking improvements, skyway construction, and other public infrastructure improvements in the Downtown Core.

 
Minnesota Cities with Tax Abatement Policies
Staff reviewed tax abatement policies adopted by other Minnesota cities. Some cities have their own criteria to guide usage. Attached is a summary of cities that have tax abatement policies. Some cities have criteria established for the type of project and some set priorities for the type of project or improvements. Some cities may approve the use of tax abatement for projects that don’t qualify for TIF, while other cities list specific types of projects, including providing affordable housing or housing in general, redevelopment of blighted or underutilized or contaminated sites, projects that improve the quality of life in the city, projects that would include completion of transportation and other utility infrastructure improvements in conjunction with the project. Some target specific types of development. Some cities also leave the policy vague to say requests will be reviewed on a case-by-case basis.
 
Attached is a draft tax abatement policy and application.
 
The requested action is adoption of the attached resolution approving the tax abatement policy.