By Starrla Cray
DELANO, MN In an atmosphere where jobs are scarce, the City of Delano is implementing a change in its tax increment financing (TIF) to spur employment in the construction industry.
A public hearing regarding the new TIF district rules, as well as information about a TIF district under the previous rules for industrial park, will take place Tuesday, July 20 at 7 p.m. at Delano City Hall.
Under the new rules, construction must begin no later than July 1, 2011. The authority to spend tax increments under this authorization expires at the end of 2011.
The modified TIF law gives cities the authority to spend tax increments in an effort to increase job growth in the community.
“This was the state law that got changed,” said Delano’s finance director, Brian Block.
TIF districts are utilized in many areas as a way to make improvements that will generate private-sector development. To do this, the tax base is frozen at the predevelopment level. As property taxes are collected in excess of that amount, the money is deposited into a special TIF district fund.
Under the previous rules, the money was split among the county, city, and school district.
“Now, the restrictions have been eased,” Block said.
The city has the authority to take control of those funds, and can divide them up in a variety of ways. Provisions include compact development districts, economic development districts, and temporary authority to stimulate construction.
For a compact development district, the planned development or redevelopment must increase the total square footage of the commercial and industrial buildings by three times or more, relative to the square footage of similar buildings within the district.
The economic development provision allows tax increments to provide improvements, loan subsidies, grants, interest rate subsidies, or other assistance to certain developments that will create or retain jobs in Minnesota.
The third provision allows for increments to be spent to make an equity or similar investment in a company that is necessary for the construction of the development.
“Hopefully, we can take the excess increments we’ve collected and spend these to encourage home builders,” Block said. “It looks like we will have $150,000 to spend.”
So far, the city is planning to give a $5,000 incentive to each new home.
“It would be subtracted from the permitting costs,” Block said. “That will reduce the upfront costs that the builder incurs.”
The money will most likely be given on a “first-come, first-serve” basis,
“It looks like there’s some interest in it,” Block said.
Nothing will be finalized, however, until after the public hearing in July.
The hearing will also include discussion about a TIF district for Delano’s industrial park. The industrial park TIF district will most likely operate under the previous rule, because it allows for a five-year term to spend the increments.