2000-08-23 Packet - Laserfiche WebLink

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MEMO DATE : August 17, 2000 TO : Honorable Mayor and Council FROM: Jim March RE : Northern Forest Products Included in your packet is information on tax abatement, a timeline for a proposed tax abatement, a resolution calling for a public hearing on a proposed tax abatement and a cash flow analysis that was prepared by Sid Inman at Ehlers and Associates. As we have previously discussed, the City of Centerville assisted Northern Forest Products with the use of tax increment financing. The tax increment district was formally created on June 28, 1995. Due to a variety of reasons beyond the City's control, (i.e. compressed tax rate class changes and a higher base rate inflation factor) the two notes originally issued to the developer (Northern Forest Products) and the landowner (Glen and Myrna Rehbein) would not have been fully repaid. This would cause ill feelings between the developer, landowner and City. The only remaining course of action would be litigation. Northern Forest Products has indicated that they have plans for a building expansion, possibly as early as next spring. The proposed expansion would create approximately an increase of $550,000 in taxable value. If the addition is built, prior to the expiration of the tax increment district, both limited revenue notes are repaid. If the addition is not built, the limited revenue note to Northern Forest Products is not completely repaid. I am proposing that the City of Centerville offer to abate one year of the City's portion of the taxes on the Northern Forest Products property without any strings attached. If no addition is built, the note is simply repaid through the tax abatement. If the abatement is granted and the addition is built, then the developer would derive a benefit for one year to a maximum of $25,000. The size of the abatement is determined by the amount of taxable value. The granting of an abatement allows both limited revenue notes to be repaid. A positive environment remains for the previous landowner, developer and City. The City has to only rebate the taxes for one year in an abatement versus nine years in a tax increment district. Tax abatement is a relatively new tool for stimulating economic development. I believe this abatement could entice a building expansion sooner rather than later and then also solve the problem of the shortfall in the developer's limited revenue note.