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Marshall passes tax abatement program for new housing

MARSHALL — It’s a problem local businesses have talked about, Marshall City Council members said. Businesses need workers, but the workers aren’t moving in.

“To keep Marshall growing, we need to get the people into town,” said council member James Lozinski.

On Tuesday night, council members decided an incentive was needed to try and encourage more housing to be built in Marshall. They approved a new tax abatement program for residential construction. Between now and the end of 2022, applicants can receive a two-year abatement on the city’s portion of real estate taxes on a new house, duplex or apartment building.

Economic Development Authority Director Tara Onken told the council the tax abatement was something the EDA had discussed last fall as a residential building incentive. However, with similar discussions going on in Lyon County, the EDA waited to see what county commissioners would do.

In June, Lyon County passed its own policy creating a tax abatement program for new owner-occupied or rental housing. The county abatement program offers applicants a four-year abatement on the county’s share of increased property taxes created by new housing construction.

In discussing a potential Marshall tax abatement, Onken said, the EDA also looked at abatement policies in other cities, including Pipestone, Balaton and Tracy.

“The EDA board had what I feel were some really good discussions,” Onken said.

Onken presented a tax abatement proposal for the city of Marshall.

Under the proposed abatement policy, applicants could receive a two-year abatement on 100 percent of the city’s share of increased real estate taxes created by the building. The Marshall tax abatement program would coordinate with other local government tax abatements, but applicants couldn’t receive other local public financial assistance like Tax Increment Financing, Workforce Housing or Small Cities Development Program funding.

The proposal said new single-family homes, and multi-family housing with up to 12 housing units, would be eligible to apply for abatements. Applications would be accepted from July 24, 2018, through Dec. 31, 2022.

Part of Onken’s presentation included tables estimating the effect of the abatement policy, based on 2018 rates for city taxes. Under the policy, a $200,000 house would have a total abatement of about $2,002 over two years. A 12-unit apartment complex valued at $1 million would have a total abatement of about $13,848 over two years.

Onken said the city would have to make some additional decisions, including whether to charge an application fee for the abatement program. Since applications would have to have public hearings, the fees could help cover the cost of posting the hearing notices.

Council member Glenn Bayerkohler asked several questions about the wording of the abatement policy. One key question was whether the abatement would only be for an applicant’s increased taxes, or on the full city portion of the real estate taxes.

After discussion, council member Craig Schafer moved that the council approve the abatement policy with a couple of revisions. He proposed that the abatement be for the city portion of the building’s real estate taxes — not just the increased taxes. Schafer also proposed that Workforce Housing and Small Cities Development funding be removed from the list of other financial assistance that applicants can’t receive.

In discussion, Schafer said he wasn’t in favor of charging an application fee for the abatement program.

The proposed abatement policy, with revisions, was passed in a 6-1 vote. Bayerkohler cast the vote against.

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