The fate of remedial bills for Farmland is now in the hands of the House and Senate leaders negotiating their differences in how to fix the $439 million deficit projected for fiscal years 2002 to 2003.

Saturday, April 06, 2002

The fate of remedial bills for Farmland is now in the hands of the House and Senate leaders negotiating their differences in how to fix the $439 million deficit projected for fiscal years 2002 to 2003.

The Senate budget reconciliation bill, including all of four key Farmland provisions, was turned down in the House. Instead of tax increases as prescribed in the Senate bill, the House Republicans want to address the deficit with spending cuts and the use of the state’s tobacco endowment.

Leaders from both houses are hoping to come up with an agreement soon so they can adjourn the session by the end of this week.

In the House, none of the Farmland provisions have passed the floor.

But Rep. Dan Dorman, R-Albert Lea, believes some of them are likely to be salvaged at the House-Senate bargaining table.

&uot;The TIF designation is among 12 items that both houses put as high priority in the negotiations,&uot; said Dorman. The House leadership is also favorably considering a sales tax exemption for construction materials, Dorman said.

Dorman speculated that the unemployment bill, which would extend benefits to unemployed Farmland workers for up to 26 weeks, also has a good chance to be realized, though it might be downsized because of the federal government’s decision to provide a 13-week extra benefit that is already in place.

Farmland executives and lobbyists have been active in St. Paul to promote the provisions, Dorman said.

Dorman thinks the TIF plan is particularly important for the company since it will generate funds for demolishing the old plant.

If Farmland finalizes its plans to reopen in Albert Lea, the city would take over the cleanup. But the cleanup project is heavily dependent on the TIF designation that will provide about $2 million for the $5 million project. If the legislature does not pass the bill, the city might have to readjust the deal with Farmland.

The course of the sales-tax exemption bill will also play an important role for Farmland’s decision.

The bill would waive the 6.5 percent sales and use tax applied to construction materials, supplies and non-production equipment. The Minnesota Department of Revenue estimates the company would save about $1.5 million by this measure.

A current law already exempts sales taxes to be paid on production machinery and equipment that qualify for the capital equipment exemption.

The bills

TIF: Designating both old and new plant sites as one tax-increment financing (TIF) district. For the next 10 years, the increased property tax revenue as a result of the new plant would be appropriated to a TIF account. In exchange, the city can issue bonds for the amount of the tax revenue. The money would be used to clean up the old plant.

Sales tax exemption: Waiving state sales tax for the purchase of construction materials, supplies and non-production equipment. Effective for sales and purchases made after March 31, 2002 and before January 1, 2005. Estimated impact to the state general fund is a loss of around $1.5 million.

Unemployment benefit extension: Extending the unemployment benefits for displaced Farmland workers, who still do not have a job and are in job training program, for 26 weeks. The plan would cost the state $1.2 million. The federal government already passed a13-week extension.

State aid to District 241: Infusing state money to compensate for the enrollment decline due to the fire. The district would receive $750,000 in extra state aid over four years.