05.01 - Req for Tax Abatement-Oppidan, Public Hearing

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O I To: 2 1 From: W Date: Subject: Overview: EHLERS LEADERS IN PUBLIC FINANCE Mayor and City Council Stacie Kvilvang — Ehlers and Associates September 30, 2009 Oppidan Development - Business Subsidy Agreement for Tax Abatement Oppidan is proposing to redevelop the Bradmore Motel site and a portion of adjacent land into a 30,000 sq /ft grocery store with 3,000 sq /ft ancillary retail space, potential gas island and associated parking. They are requesting assistance in the form of tax abatement from the City to offset some of the costs related to redeveloping the site. Issues to Consider: 1. Why has the developer's request for assistance changed from TIF to abatement? The developer's initial request was for $800,000 and was decreased to $500,000 before review of their development proforma. TIF was originally considered as the form of assistance because abatement would not generate either of those amounts over the longest term available (20 years). Based upon review of the developer's proforma and qualified costs, it has been determined that the amount of assistance should be $350,000. Since this amount can be generated by the City through abatement, it was discussed and determined that this was the best form of public assistance to pursue since development of the grocery store is a local issue. 2. How does abatement work? Minnesota Statutes 469.1812 - 469.1815 allow political subdivisions such as cities, counties, towns, and school districts to abate their share of all or a portion of a parcel's property taxes. Unlike TIF, abatement can utilize both the existing taxes as well as the increase in taxes due to development. For purposes of this development proposal, the City would only be abating its portion of the increased taxes due to redevelopment of the site (just like in TIF). Neither a lengthy plan, "but/for" finding, or qualified cost requirement is required by a governing body (like in TIF). However there are requirements that the resolution approving the abatement contain a costibenefit analysis and must make general statements of finding for any of the following: increase in tax base; preservation of tax base; provision of employment opportunities; redevelop blighted areas; provide access to services; and construction of public infrastructure. The taxpayer pays taxes on the abated property in the same manner it would if the taxes were not being abated. The County pays the abatement to the general fund of the City like any other budgeted item. When the City receives the abatement from the County, they then make payment to the developer (just like in TIF pay -as- you -go). I,.—, LEADERS IN PUBLIC FINANCE 3o6o Centre Pointe Drive Roseville, MN 55113 -1105 Phone: 65i- 697 -8506 Fax: 65i -697 -8555 skvilvang@ehlers-inc.com