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Council OKs tax forfeiture plan, aid to new ag lab

November 8, 2012
By Josh Moniz - Staff Writer , The Journal

NEW ULM - The New Ulm City Council approved Tuesday plans to work with Brown County to recapture all of the special assessments pending on two New Ulm subdivision properties that are entering tax forfeiture proceedings.

City Manager Brian Gramentz said the properties of Dacotah West Addition and Minnesota Valley Subdivision were constructed during the housing boom prior to the 2008 start of the recession, and they were unable to survive in the down-turned economy. He explained that the City's special assessments on the properties must be paid, so the City took up the bill when the owners failed to pay. He said that the City has been picking up the tab for the last five years, making it one of the major sources contributing to the City's debt service. He said that getting the parcels dealt with and the special assessments paid off would help lower the tax levy for the debt.

The Council approved pursuing the plan where the full amount of the special assessment owed on the property will be paid off to the City. The other option involved Brown County paying out an amount less than the special assessments owed, then having the County recoup the amount by selling it for itself.

Instead, the Council's approved plan will have the County sell the lots and have the repayment of the special assessments prioritized in the auction. If the final bid on a lot is less than the special assessment amount, the City will be given the proceeds and it will specially assess the remaining amount against the property over a 10-year term. If the sale price exceeds the special assessment amount, the City will be paid out and the remaining funds will be split among the taxing authorities of the City, the County and the schools.

In other business, the Council also approved assisting local resident Brad Finstad in establishing an agricultural laboratory with Frontier Labs at 6 Somsen Street by granting a Conditional Use Permit and allowing plans to be drawn up for a potential tax abatement plan for the site.

The tax abatement plan is similar to tax increment financing where portions of the property tax on a property is rebated back the owner to assist in something, though tax abatement has more freedom in how the money can be used. The proposal would assist the Frontier Labs in gaining $50,000 to $55,000 over several years from all the tax sources to pay for improvements to the site, with the City only accounting for up to half of the amount. The principal behind the program is that it will bring in new jobs and a future tax source while technically not costing the taxing sources because they would not have had the rebated taxes to begin with if the business did not exist. Frontier Labs proposes to bring in new jobs, including four full-time positions and five to 10 part-time positions.

The consulting fee for determining the program will be paid for by Frontier Labs. If they approve of the results, the business will send it the Council for a public hearing.

Minnesota Valley Testing Labs CEO Tom Berg spoke at the Council's hearing and objected to the proposal. He said it was wrong for the Council to do what he considers subsidizing a new business so that it can come into town and compete with an existing business that supplies a large number of jobs and taxes for New Ulm. He said that a program like tax abatement is only acceptable if it is used to bring a new business that does not already exist in New Ulm.

Finstad responded at the meeting by saying Berg was mistaken in thinking they would be direct competitors. He said that he would talk with Berg after the meeting to work out the misunderstanding.

(Josh Moniz can be e-mailed at jmoniz@nujournal.com)

 
 

 

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