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Council okays TIF plan at hearing

The Park Rapids Council approved a tax increment financing (TIF) district following a public hearing Tuesday night. Approval will not only allow J&B Foods' plans to build a new store to go forward but will help offset the cost of downtown imp...

The Park Rapids Council approved a tax increment financing (TIF) district following a public hearing Tuesday night.

Approval will not only allow J&B Foods' plans to build a new store to go forward but will help offset the cost of downtown improvements and other future projects.

Dave Callister, financial advisor for Ehlers & Associates, described the plan to about 50 people attending the hearing.

TIF is about geography and money. Callister talked about geography first.

The proposed district covers 92 parcels in a broad area that includes downtown. The district is being considered not just because of a single project (the J&B store), but also in plans to revitalize the downtown area and other parts of the city, Callister said.

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The cost of replacing old infrastructure on Main street would be assessed to abutting property owners and the general tax levy. By establishing a TIF district, the tax increment can be used to offset some of the costs.

If there is other development in any part of the district during the life of the TIF plan, the city can negotiate with the developer to pay for eligible costs, Callister explained. Qualified development would add to the amount of the increment the city would receive as well.

State law governs eligible costs. Because it's a redevelopment district, eligible costs include demolition, public utilities, streets and sidewalks.

The budget for the proposed plan anticipates costs of $4 million with $1.6 million going to streets and sidewalks on the first flour blocks of Main after the underground utilities are replaced in 2010.

The city won't receive the first tax increment until 2010. At this time the increment is estimated to be less than $130,000 per year.

The money comes from the taxes J&B will pay on the new store. It is only the increase in value that can be captured for use, Callister explained.

For example, if a parcel is worth $100,000 today, and after improvements it's worth $1 million, the city only captures the new tax revenue. The taxes are paid and the city can choose to reimburse the developer, Callister said, but only for the developer's eligible costs.

"This is a planning document," Callister said of the proposal the city later approved. "The city retains authority to administer the tax increment going forward and can negotiate individual developer agreements."

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The developer agreement with Jeff and Bob Hensel of J&B Foods will be on the council agenda next week.

Public comment elicited some further explanation, a challenge to the city from a competitor and support for the plan. Most of those attending said they just wanted to learn more.

Pete McEwen, business owner who has been involved in downtown revitalization planning, said with cuts to programs that used to provide grants for such projects, TIF is one tool communities have to make improvements affordable.

"I'm on the side of thinking this is something valuable for the city... It's an equitable way to help pay for the downtown plan," McEwen said.

Callister pointed out TIF is often used in downtown areas because the state wants to see reinvestment and discourage sprawl.

"It is cheaper and easier to build on the outskirts of town. This is a way to level the playing field and encourage development downtown," he said. Costs are "naturally higher" because property is worth more, sometimes there are demolition costs and spaces are confined. "There are a lot of constraints," said Callister. "Incentives can help offset such costs."

Dave Neisen, building inspector for Park Rapids and Perham, said while this will be the ninth TIF district in Park Rapids, Perham is finishing its 32nd TIF district. Perham is No. 1 in the state in using the Job Opportunities Building Zone program with 14 or 15 JOBZ programs there, he added.

Steve Gottwalt, who identified himself as director of consumer affairs for Coborn's, and Bob Seifert, manager of Coborn's supermarket in Park Rapids attended the hearing.

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Gottwalt, who is from St. Cloud, is a state representative for Dist. 15A.

Gottwalt told the council Coborn's concern is about "fairness." "As public officials, you have some choices," he said.

Gottwalt spoke about the store in Park Rapids that was purchased and improved without any tax benefit.

"Is the development (J&B's new store) going to happen without that help or is it going to happen anyway?" he asked.

One of the legal tests for establishing a TIF district is a "but for" clause that requires the applicant to establish the development would not happen but for the assistance. Bob Hensel has publicly stated that is the case.

"We don't object to TIF. It is a good idea for downtown, but it's what the city uses the money for," Gottwalt continued. In some cities, he said councils set parameters such as number of jobs created. "So you're making a choice about where the money would go," he told the council. "Does it meet the 'but for' test?"

Seifert added the local Coborn's is only looking for an even playing field. "We have 69 employees and we just want to have our fair shake," he said.

Several other business owners spoke in support of the TIF district. Among them were Bob Gack, president of Citizens National Bank; Cynthia Jones, downtown business owner; Kathy Grell, who is part owner of a development that is in a housing TIF district; Rod Nordberg, a retiree and volunteer in several community organizations; and David Collins, executive director of the Hubbard County Regional Economic Development Commission.

Also speaking in support was Sheila Rognstad, who simply said the community should look at the downtown plan as the future. "Without it we won't have growth," she said.

Bob Hensel also spoke and earned applause.

"We have had the privilege of serving this community for 26 years and employ 162 people here," he said.

Hensel commented that Coborn's has used TIF in the past in other communities. "We look at it as a tool that would not only benefit our business, but the city and downtown development as well. We looked at other sites and all of them would have taken business away from the downtown area," Hensel said.

Building near downtown "doesn't come without costs that are much higher than if we developed in a green space on the edge of the community," he continued. "We thought it would be better for our business, but detrimental to the downtown district to do that."

A week from now, he added, the council will discuss specifically how TIF will work for their project.

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