City Council Meeting Date: November 12, 2024
To: Mayor and City Council
City Administrator
Rice County Commissioners
County Administrator
From: Nate Carlson, Economic Development Coordinator
Title
Northfield City Council Resolution Approving Tax Abatement on 115 5th Street (Northfield News Building).
Rice County Commissioner Resolution Approving Tax Abatement on 115 5th Street (Northfield News Building).
Body
Action Requested:
The Northfield City Council shall make a motion to approve a resolution authorizing the use of tax abatement.
Rice County Commissioners shall make a motion to approve a resolution authorizing the use of tax abatement.
Summary Report:
The Northfield City Council approved the sale of 115 5th Street on April 23, 2024, to Loon Liquors, LLC. The Council sold the property for the market appraised value of $960,000 with the understanding that the remaining out of pocket cost investment by the City would be recovered through recovery of new taxes generated from the property (using tax abatement as one use of the tool utilized for economic development/redevelopment authorized by state statutes).
City staff has worked with Rice County staff to coordinate the tax abatement process throughout the due diligence period of the Purchase Agreement. Project needs will be vetted as a determination is made on the tax abatement needed to recover the City’s investment.
A Public Hearing on the tax abatement of 115 5th Street W. Northfield, MN is required in state statute to enable each taxing authority to use the tool. For efficiency’s sake, the Northfield City Council and Rice County Commissioners will hold a joint public hearing. City staff and Ehlers Senior Municipal Advisor Nick Anhut will provide a presentation on the Tax Abatement process.
Subsequent and separate resolutions are prepared for the Council and Rice County Commissioners to consider. A draft Tax Abatement agreement for each action is included as an attachment to the resolutions.
Background
The City of Northfield acquired the former Northfield News building in Downtown Northfield with the idea of safeguarding the sites for future redevelopment. The property had been minimally active for many years despite being one of the largest spaces on the downtown with very low vacancy rates.
The sale of the Northfield News site to Loon Liquors is emblematic of the City’s commitment to working with the local business community to create winning scenarios for all involved. Loon Liquors has achieved extraordinary success and is looking to expand its impact by moving to a higher profile setting that creates a win for its customers, a win for downtown Northfield and a win for Loon Liquors.
Loon Liquors is a destination distillery that draws people to Northfield for a unique educational experience featuring distillery tours, high-quality alcoholic and non-alcoholic craft beverages, and an expanded food menu that captures farm-to-table dining with 90% of its food and beverage program coming from farms within 10 miles of its establishment.
Alternative Options:
No alternatives recommended as this was the intended approach developed between the City and County as a strategy to retain and expand Loon Liquors in Northfield/Rice County. The recovery of taxes generated to facilitate this project is short term recovery on the acquisition cost. The immediate and sustained benefits into the future is retention and expansion of jobs, additional draw of tourism to help the economic vibrancy of downtown and local amenity for those who live in Northfield and surrounding area.
Financial Impacts:
The City and County is considering the use of Tax Abatement to recover the initial investment of acquisition and holding costs related to the ownership of 115 5th Street. With the assistance of Rice County, the investment could be recovered within a 15-year time frame. There is roughly a $290,000 “gap” between the initial investment and the sale price of the property which the tax abatement tool would cover. This is a common approach that cities, EDAs, HRAs and Port Authorities use in related facilitation of redevelopment of property to meet broader community goals.
Annual Northfield City tax abatement is estimated at $15,712.
Annual Rice County tax abatement is estimated at $8,870.
Tax Abatement may not take effect until 2026 following the improvements made by Loon Liquor.
Tentative Timelines:
Council Public Hearing on property sale - April 23, 2024
Council Resolution to approve the Purchase Agreement for sale - April 23, 2024
Council and Rice County Joint Public Hearing on Tax Abatement - November 12, 2024
Council and Rice County resolutions of approval for use of Tax Abatement - November 12, 2024
Closing on property - On or before December 20, 2024