Resolutions granting property tax abatement for Old Town Riverfront Properties, LLC.

Adoption of the attached resolutions.

On September 14, 2026, the Mankato Economic Development Authority (EDA) made a motion directing staff to prepare materials regarding tax abatement assistance and a business subsidy agreement for Old Town Riverfront Properties, LLC (the “Developer”).

The Developer proposes to construct a 63,000 square foot office and indoor organic production and processing facility for cultivation, processing, packaging and distribution of mushrooms and microgreens at 1961 Energy Drive. The estimated total development cost is approximately $13.56 million. Construction is anticipated to begin in early 2027 and be completed by the end of 2027. It is anticipated 17 jobs will be created within year one, and 75 jobs created in year two.

Requested Tax Abatement
The Developer is requesting tax abatement assistance from the City, which would be provided in the form of a pay-as-you-go (PAYGO) note. The Developer would receive 90% of the City’s portion of the increased property taxes generated by the project during the abatement term.

The City would not provide any upfront funding. Instead, the Developer would receive two payments per year after the property taxes are paid for the term of the abatement.
Updated Tax Abatement Run
Following the September 14, 2026, EDA meeting, staff requested an updated tax abatement run because the anticipated construction schedule had changed from the time the tax abatement application was submitted.

When the application was submitted, construction was anticipated to begin in summer 2026. Under that schedule, a portion of the project’s value would have been reflected in the 2027 assessment for property taxes payable in 2028.

Construction is now anticipated to begin in early 2027, with completion by the end of 2027. As a result, the full project value is expected to be reflected in the 2028 assessment for property taxes payable in 2029. Therefore, the first PAYGO payment would occur in 2029.

The revised construction schedule resulted in an updated abatement calculation and a slightly higher projected assistance amount. Under the revised schedule, the seven-year tax abatement to the developer would be $192,000, compared to $178,700 under the original construction schedule. If 7 years of tax abatement is approved, the duration of the Abatement would begin August 1, 2029, and conclude February 1, 2036. The five-year tax abatement would be $140,750, compared to $122,400 under the original construction schedule. If 5 years of tax abatement is approved, the duration of the Abatement would begin August 1, 2029, and conclude February 1, 2034.

The City’s consultant, Ehlers, found the project requires Abatement in order to proceed. Ehlers determined seven years of abatement would be required if the City accepts the Developer’s proposed land value. Five years of abatement would be required if the City determines that the proposed land value is excessive and instead uses a lower value consistent with the County’s valuation of smaller lots. Staff recommends accepting the Developer’s land value and approving seven years of abatement. The project will result in the creation of high-paying jobs and an increase in the tax base, and diversify the industries and types of employment opportunities available in Mankato.

Tax Abatement Agreement
The proposed Tax Abatement Agreement provides for PAYGO reimbursement. Article III establishes the primary mechanisms governing reimbursement, including the following:

• Developer would receive 90% of the City’s share of the increased property taxes generated by the project during the abatement term.
• Payments are made only after the project generates the anticipated tax revenue and the property taxes have been paid.
• The amount paid to the Developer is limited to the abatement actually generated by the project. If the projected tax revenue is not realized, the City is not responsible for the difference.
• Payments are subject to the project remaining in compliance with the Tax Abatement Agreement. Default provisions are contained in Article IV.

 
The primary difference between the five-year vs the 7-year agreements is that the 7-year option results in more than $150,000 in total assistance, which triggers the requirements under Minnesota Statute applicable to a business subsidy.

Public Benefit
Minnesota Statute Section 469.1813 allows a political subdivision to abate all or a portion of its share of taxes when the abatement serves a public purpose by meeting one or more statutory objectives. This project would meet the following benefits: increasing the tax base and providing employment opportunities in the City. The proposed abatement applies only to the new increased value of the property created by construction of the project.

The requested actions of the Council are adoption of the resolution granting property tax abatement for a term of 7 years.