Local Tax Incentives
Compatible tax programs
The City of Northfield has an array of tax assistance programs to support a business considering an expansion, relocation, or startup.
These programs are compatible with financial assistance and incentive programs available from other sources including Rice County, the Department of Employment and Economic Development (DEED), and the federal government
Tax increment financing (TIF)
Administered by the City of Northfield, TIF is a public financing method that is used as a subsidy for redevelopment, infrastructure, and other community-improvement projects. TIF can only capture “new” or an “increase” in taxes, thereby capturing the value of the new development.
Terms range from 8 to 26 years, depending on the type of district the financing applies to. The need for public assistance must be quantified for all TIF district types. TIF does not require approval from all taxing jurisdictions, but does require a public hearing to take place in order to gain approval.
TIF uses can be limited because they are governed by a complex set of statutes. TIF may be used for:
- Extension of public utilities
- Site preparation costs
- Soil correction (where determined to be necessary)
- Property acquisition for qualified industrial, manufacturing, and warehouse businesses which are expanding or locating in the community
Economic development district
TIF can be used for warehousing and manufacturing research and development. Financing cannot exceed the 8-year maximum.
Financing cannot exceed the 26-year maximum. 100% of the increment must be used for housing.
Financing cannot exceed the 26-year maximum. TIF cannot be used for “greenfields,” and more than 50% of buildings must be structurally substandard for consideration.
TIF can be used for demolition and clearance, site improvements, and public utilities. Financing cannot exceed the 16-year maximum. For consideration, 20% of buildings must be structurally substandard and 30% of buildings must require substantial renovation/clearance.
Tax abatement is another tool used to encourage private development projects by allowing the rebate of property taxes to the owner, reallocating the taxes to pay for public infrastructure costs, or deferring the property taxes and rebating the interest penalty. Governed by Minnesota Statutes 469.1812-1815, tax abatement allows for the capture and use of all or a portion of property tax revenue within a defined area. Each taxing jurisdiction must elect to participate in the abatement, and a public hearing is required for approval. The city may limit the abatement.
Although 15 years is generally the maximum, tax abatement terms range from 15 to 20 years. The term can extend to 20 if one jurisdiction declines, and if no term is specified, the term is 8 years.
Tax abatement uses
Tax abatement must be used for projects that serve the public interest. For example:
- Providing employment
- Redeveloping a blighted area
- Financing public infrastructure
The need for abatement must be quantified with a developer's pro forma.
State property tax and/or market value tax is not abated. One cannot abate taxes on a parcel within a TIF District – but one can abate taxes once the parcel is removed from the TIF District.