The Cambridge - Isanti School Board has approved property tax abatements to assist in financing a hotel proposed in the city of Isanti.
The approval came during the regular School Board meeting on July 20 following a public hearing held earlier in the evening on the issue.
Finance Director Kris Crocker explained the tax abatement is for nine years and is not to exceed $81,161 over the nine-year span.
Crocker explained a comprehensive analysis on the proposed tax abatement was done by the district’s financial adviser, Ehlers. The analysis projected the impact of the district’s current levy certification versus the impact of the addition of this tax abatement for future years. She said the difference of this tax abatement showed either no impact ($0 change) or a decrease of $1 to $2 to district taxpayers of different types of property at different values.
“Benefits of this tax abatement to our taxpayers is an increase to the tax base, which means increase in our property market value and therefore spreads the taxes over a larger base, and is tax neutral and revenue neutral to the district’s budget,” wrote Crocker in her staff report.
The abatement will be for varying percentages of the district’s share of the property taxes generated by the project. It would be for 50 percent for the first five years, 2019 to 2023, and then 40 percent in 2024, 30 percent in 2025, 20 percent in 2026 and 10 percent in 2027.
“This project would be adding commercial property into the community and increase the market value and spreading the levy over more market value, which is a benefit to taxpayers, and will bring new jobs into the area as well,” Crocker said.
Isanti Mayor George Wimmer explained the abatement is a “pay as you go” abatement, meaning the hotel pays the full amount of property taxes and only after that is paid is a “refund” issued back to them for half of what was paid. He said only hotel tax dollars will be used for the abatement.
Wimmer explained taxes for the lot and hotel for the first year would be $21,927; with the 50 percent abatement, the school tax base keeps $10,963. Wimmer explained 2017 taxes paid to the school district by the proposed hotel site lot was $684.
Wimmer explained if there is no hotel on the lot, the total taxes collected by the school district would be $8,346 during the next nine years.
With the hotel, the total school district taxes collected would be $219,941, of which they keep $136,780 and the hotel would receive $83,161 refunded back to them.
“Nobody’s taxes would go up because of this project,” Wimmer said. “An independent study done by the cities of Cambridge and Isanti showed that 70 to 80 more hotel rooms are needed. This would be a 50 to 51 room project, so it is actually less than what was indicated as needed for the area.”
Wimmer reminded the board members the school district approved an abatement for Isanti Retail Meats in 2008. He informed the board that without the tax abatements by the school district and Isanti County, the hotel project most likely will not happen.
“The tax abatement does put dollars in right away and after five years it starts accumulating in our favor and the school district’s favor,” Wimmer said.
Board Members Lynn Wedlund and Jenni Caulk voted against the motion.
Wedlund said she admired the city of Isanti for bringing new business into the city, but didn’t feel it’s something the school district should get involved with.
“I’ve had a very unsettling feeling since this whole thing came about,” Caulk said. “This is something unusual and it doesn’t feel right right now.”
Board Member Carri Levitski said she supported the tax abatement because it doesn’t affect the school district taxpayers or the students.
“Economic development is vital to the school district and the county and to each of the cities and townships within our district,” Levitski said. “It spurs other development. If a hotel comes in, usually restaurants and retail follow.”
Superintendent Ray Queener explained he would not recommend approval of the abatement if it would negatively affect the school district.
“I would not put something in front of the board that will increase taxes,” Queener said. “We are a player because the state law says we are a player. We’re not out in the economic development world, but the law says to do the tax abatement we have to be a player. This project spreads the levy across all taxpayers and decreases taxes across all tax bases. This project has no impact to the revenue the school district receives. We only get increased revenue when new students come into the district.”
Board Member Nate Reibel was in favor of the abatement and noted if hotel employees move into the district and have children attending Cambridge-Isanti Schools, it could mean additional revenue to the district.
Board Member Gary Hawkins said he feels better about supporting the abatement after receiving more information.
“I feel better after listening to Mayor Wimmer and Kris (Crocker) talk about this,” Hawkins said. “If more people move into the area for jobs, that will hopefully lead to more families and students moving into the district.”
Crocker reiterated there wouldn’t be any financial impact to the district.
“This has no effect financially to the district,” Crocker said. “This doesn’t change the amount of levy the school district receives or revenue coming in.”
Board Chair Tim Hitchings supported the abatement.
“It looks like this is a benefit to our students by growing the commercial tax base and making a positive impact on the community,” Hitchings said. “It’s an opportunity to increase business and contributions to our school district.”