Biomass Feasibility Project Final Report - Xcel Energy

The businesses compensate the cities by paying taxes they normally would have to pay
regardless.
TIF and JOBZ therefore are mutually exclusive. Companies in JOBZ zones do not pay property
taxes that would be captured to pay TIF bonds.
Although TIF is subject to state statute, the project’s home city administers it. The person with
whom to begin a discussion of TIF is the city administrator in the municipality where the project
will be located. A good introduction to the complicated TIF process is online at:
www.fryberger.com/Admin_Gov.
Economic Development Tax Abatement
Minnesota Statutes Sections 469.1812 to 469.1815 created an alternative to TIF. A political
subdivision may “abate” all or a portion of its property tax on one or more parcels of real or
personal property, including machinery, for economic development purposes, subject to a
duration limit and a limit on the amount of abatements. The “abatement” can take a number
of different forms, including:
• A rebate of property taxes to the property owner;
• A reallocation of taxes to pay bondholders;
• A reallocation of taxes to pay for public infrastructure costs; OR
• A deferment of property taxes.
Revision Date: August 23, 2006
Minnesota Small Business Development Loan Program (SMDP)
The Small Business Development Loan Program, administered by the Minnesota Department of
Employment and Economic Development under the federal Revenue Expenditure and Control
Act of 1968, makes fixed-asset, first-lien, fixed-rate loans to aid job growths and manufacturing
expansions. The Minnesota Agricultural and Economic Development Board (MAEDB) funds the
loans by issuing tax-exempt Industrial Development Bonds (IDBs), backed by a state reserve
fund, at the prevailing tax-exempt market rate at the time of issue.
The federal statute authorizing the program limits IDB eligibility to manufacturing industries, but
co-generation projects by manufacturing companies may be eligible, as long as they increase
employment and use some of the electricity in their processes. Bond counsel would determine
eligibility.
Assets financed by IRBs can be real estate, equipment, or a combination of the two. Total
project costs can’t exceed $20 million. Although the program is authorized to lend up to 80% of
project cost, SMBP usually makes loans ranging from $1 million to $5 million with a maximum term
of 20 years. Collateral includes the assets financed and the owners’ personal guarantees.
MAEDB does not charge a fee, but bond issuance costs of 4% are charged against the
advance, and 10% of the bond issue is kept in an escrow account. Funds are disbursed upon
execution of the required loan documents and sale of the bonds. DEED accepts applications
year-round basis, but they must be received by the first of each month to be considered at that
month's MAEDB meeting.
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Identifying Effective Biomass Strategies:
Quantifying Minnesota’s Resources and Evaluating Future Opportunities