The Park Rapids Economic Development Authority (EDA) on Tuesday, April 27 agreed to explore options for offering a tax abatement incentive for a local business remodel.
City Administrator Angel Weasner gave the EDA board copies of the Minnesota Statute regarding government bodies’ abatement authority. The board is composed of Mayor Ryan Leckner and members of the city council.
Weasner said the city was approached by business owner Kasey Krautkremer with Beds Plus about his interest in revitalizing a long vacant building, the old J&B Foods store on U.S. Hwy. 71 South.
“They’re looking for a possible incentive, and I thought a tax abatement would be the most ideal one,” she said, adding that Krautkremer needed an incentive for the upgrades before purchasing the building.
Weasner explained that an abatement could take several forms, including either a partial or full rebate of the city taxes paid on the property for a year, or a freeze on their tax rate with any increases during the specified period being rebated.
“We can set a maximum limit, or we can set a maximum number of years,” she said. “There’s a variety of options.”
She said Krautkremer may also seek a similar tax abatement from Hubbard County.
Keeps local control
Questioned by council members about the unfamiliar concept, Weasner said tax abatements are a potential tool to stimulate economic development, long established under state law. She acknowledged that neither the city nor the county has any history of granting them, but she is familiar with tax abatements from her work with the city of Crookston.
Compared to tax increment financing (TIF), Weasner said, an abatement is less work and keeps more local control. She added that Mary Thompson with the Heartland Lakes Development Commission will work with the county board on changing their policies about tax abatements.
Weasner said state law allows the city to abate up to $250,000 or 10 percent of its tax capacity, whichever is less, in any one year. However, the city taxes paid on the J&B building for 2020 totaled $7,951.
Asked how many years the abatement would run, Weasner said it depends on the amount of incentive the city wants to give.
“I don’t know the council’s appetite for incentives on … an old building being revitalized,” she said. “We would go through the process. We would determine what the potential value would be, and then we could determine if we want to freeze it, if we want to rebate the whole thing. … I need to know if you’re willing for me to explore this.”
She added that citizens would have an opportunity to comment at a public hearing before the council would make its final decision.
Leckner said abatements could give the city a tool to encourage businesses to make use of existing, vacant buildings in the community.
Randall asked whether requests for tax abatements would be handled case by case. Weasner replied that it would not be a “blanket for everyone” policy.
“I think we need to do whatever we need to do to fill that J&B building,” said Council member Tom Conway. “It’s right on the main corridor coming into town. It’s terrible to have a building that size sitting vacant.”
Given a proposal to put the right type of business in the building, Conway said, “I do think we ought to investigate any opportunity to incentivize somebody to take that building.”
Weasner said Krautkremer wants to move Beds Plus to the building and convert part of the interior into heated storage units. Without knowing the dollar amounts involved, Weasner estimated that the incentive would run 2-5 years.
“I think it’s worth exploring,” said Randall, but again urged it to be a case-by-case issue and not become something the city is expected to offer to every revitalization project.
“I would be curious,” Conway said, “if the city decided to do it and the county wouldn’t participate, would (Krautkremer) still be interested in the building?”
Weasner said she told Krautkremer that she can only discuss the city portion of the property taxes, and if the county participates, that would be an added benefit.
“I believe he would move forward as long as the city is willing to do this,” she said.
Council members agreed that the concept is worth investigating.
In other business, the EDA board also agreed to submit an updated draft of the city’s Revolving Loan Fund policy for city council approval in May, incorporating revisions suggested at their March 29 meeting.