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Economic development: City of Farmington will consider subsidies

The old saying "put your money where your mouth is" might be part of the key to bringing new businesses to Farmington.

City officials have talked for years about the need to bring new commercial and industrial businesses to town, but no real plan exists to financially entice those businesses to Farmington. That is, until now.

If a new Business Subsidy Plan proposed by city planner Lee Smick and the Farmington Economic Development Authority is approved by the Farmington City Council, the city may have a financial tool available to attract new businesses to the community.

The city council approved a business subsidy program in 2000, but it was loosely worded and seldom used, Smick said. The city nearly lost an industrial park business last year because the owners wanted to expand, but also wanted a financial incentive from the EDA to do so. Since the 2000 policy was basically defunct, the EDA was unable to offer assistance.

The business chose to stay anyway and made its expansion, but the near miss shifted attention to the need for some form of redefined subsidy plan, Smick said.

She's spent several months building a plan that offers financial options, and is based largely off of requirements spelled out in state statute. Smick also looked to Burnsville when she wrote the policy because that city has had success using financial incentives to attract business.

"I like to see what other communities are doing, not just nearby but around the country, because that's where I get my ideas. That's where I see what's trending," Smick said.

In a nutshell, the object of a business subsidy plan is to retain existing jobs, create new jobs, enhance and diversify the tax base, bring development and address blight. The plan aims to do that through two key programs -- a tax abatement program and a business incentive program.

Tax abatement

According to Smick, tax abatement as a program has been set up and is subject to guidelines established by state statute. In order to participate in the proposed tax abatement program, a business owner would need to pay all of the property taxes associated with the respective property for that year, but then come back to request tax abatement on the property. Using tax abatement would act almost like a rebate program because the business would pay county taxes, but the city would reimburse a portion of those taxes. The amount cannot exceed 100 percent of the property's net tax capacity paid that year, or it cannot be more than $200,000.

The tax abatement option would not be available for a period of longer than 20 years.

"This policy is what is in state statute," Smick said. "To incentivize staying or expanding business in Farmington is the biggest thing."

Business Incentive Program

In its current form, the Business Incentive Program offers funds to bring new business into Farmington or move an existing business to town. Eligible businesses would currently be located outside of the community and would be required to build on, buy or lease commercial or industrial space or land in Farmington.

The Business Incentive Program would require businesses to create new jobs or career opportunities, as well as increase the city's tax base.

"Overall, our goal is to assist smaller businesses," Smick said.

Allocations would be made on a case-by-case basis, with a proposed funding range of $1,000 to $7,000. Those amounts are fluid as of now, because the EDA and city council may choose different amounts as they continue to fine-tune the proposed policy.

"The EDA will spend a good chunk of time setting up the program," Smick said. "A lot of the pieces still need to be answered."

The Business Subsidy Policy has been presented to the EDA for consideration. It will be discussed again at the EDA's Feb. 25 meeting, but has to be forwarded to the Farmington City Council for approval before it can go into effect.

Michelle Leonard

Michelle Leonard joined the Woodbury Bulletin staff in November, 2014, after 14 years covering news for the Bulletin's sister publication, the Farmington Rosemount Independent Town Pages.  Michelle earned her Bachelor of Science degree in Mass Communications: News-Editorial from Mankato State University in 1991. She is an active member of the American Legion Auxiliary Clifford Larson Unit 189 of Farmington, and served as the 2014-15 Third District President to the American Legion Auxiliary Department of Minnesota. Michelle is also the volunteer coordinator for the Minnesota Newspaper Museum which is open annually during the Minnesota State Fair. She has earned Minnesota Newspaper Association awards in Investigative Reporting, Local News Coverage, Feature Photography and Column Writing. 

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