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Bill would keep city land held for economic development tax-exempt for up to 15 years.
(Published Apr 12, 2013)
HF 1675 (Rep. Bob Barrett, R-Lindstrom) would extend the time that city-owned property held for economic development purposes remains tax-exempt. The bill was heard in the House Tax Committee on April 8th, and laid over for possible inclusion in the Omnibus Tax Bill. The League of Minnesota Cities supports this policy and testified in favor of the bill.
Many cities acquire vacant, abandoned, or blighted property in order to facilitate development and redevelopment of the property with the ultimate goal of increasing jobs and growing the tax base of the city. When a city holds this type of property for economic development, that use is classified as a “public purpose” and the land is exempt from most taxes. For cities over 5,000 people, the land can be held for up to nine years before it loses its tax exempt status. For cities with less than 5,000 people outside of the metro area, the land remains tax-exempt for 15 years.
The economic downturn has made it difficult for cities to sell or redevelop land, and a number of properties are set to lose their tax-exempt status. This will greatly increase costs for cities that are already struggling to develop the property, and HF 1675 would increase the time period for all cities under 20,000 people to 15 years. The bill was brought on behalf of North Branch, which has property that will soon be subject to taxation without a law change. North Branch is not alone, however, as a number of cities are facing this pending problem.
The League requested that the Tax Committee consider increasing or eliminating the population cap so that other cities can qualify for the same relief. Similar legislation has been brought in past years, and the Legislature granted a one-year extension in 2011.
The Tax Committee laid the bill over for possible inclusion in the Omnibus Tax Bill. Some members expressed concern about permanently extending the time limit to 15 years, and discussed the possibility of granting the extension to properties that were acquired during or prior to the recession. The Senate companion, SF 1554 (Sen. Sean Nienow, R-Cambridge), has not received a hearing.
League staff is compiling a list of cities that would benefit from this relief. If your city has property held for economic development purposes that may lose its tax-exempt status, please contact the League as soon as possible.
Questions? Contact Patrick Hynes at email@example.com or at (651) 281-1260.
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