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14 <br />parks and recreation programs or an internship program for students coordinated through the <br />City that benefits the City and business community. <br />A. Northwestern Will Provide a PILOT to the City for the Tax Revenue the <br />Property Would Otherwise Generate. <br />To hold the City harmless for the redevelopment of the Property for a tax-free use, Northwestern <br />plans to make a PILOT to the City for the value of the otherwise lost revenue. As a university, <br />Northwestern is constitutionally exempt from paying property taxes. Minn. Const., art. X, § 1. <br />Because Northwestern wants to be an equal partner with the City, however, the University is <br />prepared to make the City whole for this lost revenue. <br />Normally, to hold the City harmless, a tax-exempt institution would reimburse the City for the <br />direct cost to the City for servicing the Property. Northwestern estimates that the expense of City <br />services attributable to the Property equals around $9,200 annually.1 <br />Because of Northwestern’s commitment to the City, Northwestern wants to go a step further, <br />making a PILOT to the City for Arden Hills’ total lost revenue. Therefore, Northwestern is <br />offering the City a PILOT for the entire value of the revenue the Property would generate for the <br />City were Northwestern not tax-exempt. In short, each year the PILOT will be calculated by <br />multiplying the actual assessed value of the property by the then-current property tax rate. The <br />result of this calculation would then be multiplied by the City’s share of state and local property <br />taxes. <br />As discussed in Section II.E., the real estate market has shifted. Based on market conditions, <br />Northwestern anticipates the assessed value of the Property—no matter the owner or use—has <br />decreased. Northwestern estimates the Property’s future assessed-value will be approximately <br />$5,600,000. Applying the PILOT formula to this assessed value would yield a current estimated <br />annual PILOT payment of $19,165. <br />These values are used only for illustrative purposes; the assessed value and tax rate will change <br />yearly. To facilitate the PILOT, Northwestern has included a draft PILOT agreement <br />Northwestern could execute with the City. See Exhibit E. <br /> <br />1 Northwestern calculated this amount by determining the proportion of the City’s budget <br />dedicated to health and safety expenses, such as fire protection and street maintenance. <br />Northwestern then multiplied the health and safety expenses by the proportion of annual taxes <br />paid by the Property.