by Joni Astrup
The Elk River City Council has amended a business subsidy agreement for The Bank of Elk River, reducing the amount of property tax abatement that the bank may receive.
The amendment came after the bank was unable to fully meet job creation goals set out in the original agreement, as the economy struggled through the Great Recession.
The original Tax Abatement and Business Subsidy Agreement was approved by the city in 2006. It provided for reimbursement of up to $300,000 of the bank’s project costs associated with a major construction project at the downtown bank, through tax abatements over 12 years, according to city officials.
The agreement required the bank to create 20 full-time jobs at a wage of $15 or higher within two years. An extension to reach the job goals was granted through November 2013, but no further extensions were allowed under law.
The maximum number of new jobs added at the bank’s downtown location was 13 in December 2010. Since that was 65 percent of the job goals, the City Council voted to amend the city’s agreement with the bank to allow tax abatement payments to continue up to a maximum of $195,000, which is 65 percent of the original $300,000. The bank has received about $130,000 in abatement so far.
Under the new agreement, abatement payments will continue as they have in the past until a maximum of $195,000 has been reached or the 12-year abatement period ends, whichever comes first, according to Elk River Economic Development Director Brian Beeman.
The amendment “reflects the impact of the downturn in the economy, but retains the job-to-subsidy ratio originally proposed for the project,” according to a memo from Beeman and Jeremy Barnhart, Elk River’s deputy director of community operations and development.
The City Council approved the amended agreement in a 4-0 vote Jan. 21. Council Member Stewart Wilson abstained from voting because of his affiliation with the bank. He is the bank’s senior vice president.