The Free Press, Mankato, MN

November 12, 2013

As first TIF district expires council to decide $527,000 Question

Planned ethanol plant didn't happen but a lot did

By Mark Fischenich mfischenich@mankatofreepress.com
The Mankato Free Press

---- — Mankato’s oldest tax-increment financing district is finally going to die at the end of this year, leaving the City Council with the decision of what to do with a $527,000 cash balance in the district.

Tax Increment Financing District No. 1 was established in 1979 to cover costs of improving infrastructure in an industrial area on the north side of Mankato between Third Avenue and Riverfront Drive, starting just south of Highway 14 and extending well north of the highway.

Created in conjunction with Blue Earth County, the project was originally implemented partly in hopes of attracting an ethanol production facility.

“The ethanol plant never happened,” said Mankato City Manager Pat Hentges, but plenty of other development did. “... There’s been a variety of things, including a number of distribution operations.”

The extra taxes generated by the warehouses and manufacturers was captured by the TIF district and more than covered the drainage, sewer and other improvements. The district’s boundaries were later expanded to jump-start downtown redevelopment, allowing the north-side tax revenue to be directed to parking ramp construction in the city center.

The most recent was the construction of the parking ramp at the renovated and expanded Public Safety Center, but the TIF revenue also helped cover the cost of switching Warren and Cherry streets from one-way to two-way, Hentges said.

Still, with the district required to expire at the end of this year under state law, there’s the $527,000 surplus to deal with.

“The district has to be decertified, and the question is: Should any of what’s left in there go toward other redevelopment activities?” Hentges said.

City staff is recommending that the money be applied to another planned ramp — the one that the city and state are financing as part of the Tailwind Group redevelopment of South Front Street.

That project involves a privately funded seven-story office tower on the Warren Street side of the block and a four-story mixed-use building on the Front Street side, totaling more than $15 million in private investment. The ramp makes up the vast majority of $4.9 million in parking improvements, most of which is publicly financed.

The original plan was to cover part of that ramp financing with $1.6 million from a bond sale. Using the excess TIF revenue will reduce that to $1.1 million, allowing the bonds to be repaid in 12 years rather than as many as 17 years.

And that would mean a lot less interest costs.

“The value of that is about $700,000 in principal and interest,” Hentges said of the plan to pay more cash. “My father the small businessman would have said, ‘I think it’s better to pay for something in cash than borrow for it.’”

If the council doesn’t authorize the transfer at its Dec. 9 meeting, the $527,000 will go back to the three jurisdictions that share local property taxes — 40 percent to the city, 40 percent to Blue Earth County and 20 percent to the school district.

Most council members at a recent work session didn’t reveal how they’d vote, although Councilor Tamra Rovney indicated she’d support reducing the ramp borrowing.

“It just makes sense for us to utilize that money,” Rovney said.