The Free Press, Mankato, MN

January 12, 2013

Mankato weighs tax subsidy for plastics plant

By Dan Linehan
Free Press Staff Writer

MANKATO — A plastics manufacturer proposing a Mankato plant is seeking $900,000 in tax subsidies and a $300,000 loan.

Imperial Plastics’ proposal will go before the City Council during its Monday economic development authority meeting.

The subsidy, called tax-increment financing, would allow the company’s property taxes to be put into site development costs, not government coffers, for up to nine years.

In this case, that means about $632,797 in taxes paid can be reimbursed to the company, which has to prove with receipts that the money was spent on utility and site work. The company also would get interest payments totaling about $234,980, a rate of 5 percent.

The interest is applied because the company makes its payments upfront but is only reimbursed over nine years, said Ed Tschida, an economic development consultant working on the project.

The bottom line: Imperial Plastics would get reimbursed all the property tax money it pays to the city, county and schools until the total reaches $905,420 or nine years elapses, whichever comes first. That total could be reached faster if the property’s value increases and the company has to pay out more in taxes each year.

It would also mean the local governments cannot lose money on the deal; they only pay out what the company pays in taxes.

Imperial Plastics is a Lakeville-based custom molder that designs and fabricates components for their customers. Their products include fasteners, electrical connectors and fittings for use in machines such as ATVs.

In August, the company purchased Rolco, Inc., a Kasota-based injection-molding company with 85 employees, according to the Minneapolis/St.Paul Business Journal.

Tschida said the company’s promised Mankato jobs are truly new and will not merely be shifted from the Kasota operation.

The subsidy is justified, according to a city memo, for a few reasons.

First, it is expected to bring 58 full-time jobs at first, ramping up to more than 100 jobs. The company also is expected to invest $4.7 million in the factory, though that’s a conservative estimate. The finished project is valued at $5.04 million for tax purposes.

The site’s soil isn’t suited to construction, and an estimated 16,000 cubic yards have to be removed and replaced.

According to the memo, “The area has ‘lenses’ of challenging soil for construction and the council has been willing to provide assistance to offset these extraordinary site development costs for primary economy businesses.”

The $300,000 loan, for equipment, would be paid back at seven years at an interest rate of 3 percent.

The council’s economic development authority meeting begins at 6 p.m. Monday in the Intergovernmental Center.