City, county and Chamber to collaborate for tax-free zones

Published 12:00 am Saturday, March 1, 2003

As lawmakers in St. Paul shape the tax-free zone proposal, the city, county and Chamber of Commerce are pledging to cultivate partnerships across the community to get one of the tax free zones available to 80 non-metro Minnesota counties.

Representatives from the three organizations gathered at a breakfast meeting Friday organized by the Albert Lea/Freeborn County Chamber of Commerce. It was understood that a tax-free zone would be a very useful development tool for the region.

Though the House Jobs and Economic Development Finance Committee has eliminated housing and commercial developments from the original proposal, Committee Vice Chair Rep. Dan Dorman, R-Albert Lea, stressed that a focus on industrial development is the key to creating well-paying jobs and boosting the economy.

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“At the end of the day, I do think there is very good likelihood something very similar to what we have before us will pass,” Dorman said. “What we really need to do is, in the long run, to cure the [state budget] deficit. The primary cause behind it is [the loss of] good paying jobs, particularly in the manufacturing sector.”

The bill would designate 10 sites up to 5,000 as job opportunity building zones and 5 sites as agricultural processing zones. Businesses starting in the zone will be exempted from property, sales and income taxes up to 12 years.

City and county officials agreed that cooperation would increase the chances of being selected. Some of the eligibility criteria prescribed in the bill uses indicators such as income level and population decrease. Albert Lea alone may not stand up to the competition.

“Working with more players is important to us once that criteria is written down,” Mayor Jean Eaton said.

“Dan has created the environment and opportunity for us to move forward with the collaborative application process,” Chamber President Stephen Waldhoff said. “Dan has really done his job on behalf of us….A real challenge lies in creating the partnership involving key constituents within our area.”

Waldhoff said the Chamber appointed former President Randy Kehr as the point person who would facilitate further discussion.

Despite the excitement of new opportunity, local government officials were also cautious about their tax capacity. They question the trickle-down effect from the tax-free zone would cover the expense the community would bear.

The businesses in the zones will still need to pay property taxes for the land, costs assessed by debt service levies and school referenda that became effective before the tax-free zone designation. Other than that, the local governments need to forego tax revenues from the properties for the designated dozen years before they will gain any tax revenue.

Also, unlike tax increment finance districts, tax-free zones do not provide funds to the local government units to invest in infrastructure improvements.

“We have to sit down and measure the benefits against the cost,” City Manager Paul Sparks said. “You cannot go out and develop a whole industrial park as the tax-free zone and not get paid for the all infrastructure. We cannot afford it.”

County Administrator Ron Gabrielsen said, “I don’t think the county will be a leader in the [tax free-zone application], but an excellent follower.”