by Joni Astrup
City financial incentives to businesses in Elk River have resulted in increased property values, tax revenue and jobs, according to a report from the Elk River Economic Development Authority (EDA).
Tax abatement is one of the programs offered by the city to stimulate business development. Thirteen tax abatement projects have been undertaken in Elk River.
The Minnesota Legislature enacted the abatement law in 1997. It authorizes political subdivisions to grant property tax abatements for economic development such as encouraging a business to locate or expand or to redevelop an area, according to House Research.
The 13 tax abatement projects in Elk River have generated more than $47 million in added property value, according to Elk River Assistant Director of Economic Development Clay Wilfahrt. The original value of those properties was $3.5 million.
Annual property tax revenue for those same properties went from $101,347 to $1.9 million.
The EDA’s investment for the 13 tax abatement projects was $2.7 million, Wilfahrt said. “The tax revenue increase alone equals the total investment by the EDA in shortly over one year,” he said.
The 13 businesses receiving tax abatement also created jobs, going from 354 full-time equivalent positions prior to the EDA’s investment to 675 FTEs after investment, or an 86 percent increase, he said.
Other city incentive programs include tax increment financing (TIF) and microloans.
Microloans are low-interest loans.
TIF allows cities to capture new property taxes from development and use the money for specific purposes, such as to write down the cost of land and/or site improvements.
The four most recent TIF projects were certified between 1997 and 2004. Together, their original taxable market value was about $3.6 million, compared to $47.2 million today, Wilfahrt said. Total EDA investment in those projects was $7.9 million.
Every dollar invested by the EDA in TIF projects induced more than $5 of private investment, he said.
The city tracks property taxes, property value and employment figures for each business receiving a city subsidy of $75,000 or greater.
Wilfahrt said the city maintains those records to make sure the programs are a good investment for the EDA and for constituents’ tax dollars.
During a discussion of the matter at an EDA meeting last month, EDA Commissioner Pat Dwyer noted that tax abatement and TIF aren’t funds that come directly from the city’s treasury.
Rather, he said the city is giving up its property taxes on the project for a number of years.
“It’s added a lot of taxable value in the city,” he said of the programs.
EDA President Dan Tveite agreed, adding: “It’s foregoing taxes that if the project didn’t proceed, those tax dollars wouldn’t have been received anyway.”