Resolution 04-07 Tax Abatement

BE IT RESOLVED, by the City Council (the “City Council”) of the City of Mountain Iron, Minnesota (the “City”), as follows:

Section 1. Recitals of Fact. The City Council makes the following recitals of fact:

1.01 Pursuant to Minnesota Statutes, Section 469.1812 through 469.1815, as amended (the “Act”), the governing body of a political subdivision may grant a current or prospective abatement, by contract or otherwise, of the taxes imposed by the political subdivision on a parcel of property, which may include personal property or machinery, or defer payments of the taxes and abate the interest and penalty that otherwise would apply, subject to certain conditions as set forth in the Act.

1.02 The City has been approached by L&M Supply, Inc., (the “Developer”) regarding entering into an agreement (the “Abatement Agreement”), with respect to an abatement of taxes imposed by the City on a parcel of property (the “Abatement”), on which the Developer will relocate a parking lot from the east side of its current facility and which is adjacent to a parcel in which the Developer intends to construct an approximately 25,000 square-foot expansion to its existing facility (the “Project”). A description of the parcel in which the Abatement will occur and the Project is set forth on Exhibit A to this Resolution.

1.03 The Project is not within a tax increment financing district.

1.04 The City Council has on this day held a duly noticed public hearing on the Abatement, at which all those wishing to speak were heard.

Section 2. Findings.

2.01 The City Council expects the benefits to the City of the proposed Abatement Agreement and the Project to at least equal the costs to the City of the proposed Abatement Agreement and the Project because the Project will increase business activities within the City and will create additional employment opportunities.

2.02 The City Council finds that the Abatement is in the public interest because it will

increase or preserve the tax base in the City and provide employment opportunities in the City.

2.03 The City Council and the Developer will enter into a Business Subsidy Agreement pursuant to Minnesota Statutes, Sections 116J.993 to 116J.995, of even date herewith (the “Business Subsidy Agreement”).

Section 3. Approval and Terms of Abatement. The Abatement is hereby approved, subject to the following terms and conditions:

3.01 The term of the Abatement is 10 years, commencing in 2007 and ending in 2017 (the “Abatement Period”).

3.02 The total amount of the Abatement must not exceed $100,000 in the aggregate for the Abatement Period (the “Abatement Amount”). The Developer must certify in the Acknowledgement and Agreement, hereby attached and incorporated into this Resolution as Exhibit B, that the Abatement Amount is a maximum figure and the actual Abatement may be less than the Abatement Amount, depending on the amount of taxes paid by the Developer during a given year with in the Abatement Period. Even if an Abatement is less than $10,000 in a given year, in no year within the Abatement Period may an Abatement exceed $10,000.

Section 4. Developer?s Obligations; Conditions Precedent.

4.01 The Developer must provide evidence to the City that the Developer has completed the Project by December 31, 2007. 

4.02 The City must issue a certificate of occupancy for the Project.

4.03 In each year of the Abatement Period, Developer must timely pay all real estate taxes and special assessments levied against the Project. For purposes of this Resolution “timely paid” shall mean that no penalties or interest shall have attached to the applicable tax payment.

4.04 A violation of any of the obligations in this Section requires the Developer to repay the aggregate amount of the Abatement received plus accrued interest pursuant to the Business Subsidy Agreement. 

Section 5. Payment of Abatement. Upon compliance with Section 4 of this Resolution, the amount of the Abatement will be paid to the Developer semiannually on or about February 1 and August 1 of each year beginning February 1, 2008 and ending on the earlier of (i) February 1, 2018 or (ii) the date on which the City has paid the Developer the Abatement in the aggregate amount of $100,000.

Section 6. Nature and Extent of Public Benefits. The nature and extent of the public benefits which the City Council expects to result from the Abatement Agreement are as follows: A 25,000 square-foot expansion of Developer?s current site of business, the provision of off-street parking to alleviate congestion on adjacent streets, and the addition of a minimum of 20 new jobs.

Section 7. Review and Modification. The City Council reserves the right to review and modify the Abatement every second year after the date of this Resolution.

Section 8. Administration.

8.01 The City will add to its levy amount for the current year under Minnesota Statutes, Section 275.065 and 275.07 the total estimated amount of the current year Abatement.

8.02 The tax amounts shown on the notice of proposed property taxes prepared and given under Minnesota Statutes, Section 275.065, subdivision 3, and on the property tax statement prepared and give under Minnesota Statutes, Section 276.04, subdivision 2, are the total amounts before the reduction of any portion of the Abatement.

8.03 The total property taxes shall be levied on the Project and shall be due and payable to St. Louis County at the times provided under Minnesota Statutes, Section 279.01.

8.04 The City Council certifies that it has not abated property taxes in excess of the greater of 10% of its current levy or $200,000 during calendar year 2007.

DULY ADOPTED BY THE CITY COUNCIL THIS 17th DAY OF JANUARY, 2007. 

EXHIBIT A

Parcel No. 175-0049-00120 (parking lot)

Parcel No. 175-0071-01075 (approximate 25,000 square-foot expansion)

EXHIBIT B

ACKNOWLEDGMENT AND AGREEMENT

The undersigned President of L&M Supply, Inc. (the “Developer”) acknowledges that he has read the foregoing Resolution, has a thorough understanding of the terms and conditions of said Resolution and agrees to be bound thereby.

The Developer further acknowledges, certifies and warrants that the total Abatement Amount of $100,000, as described in Resolution No. _______, adopted by the City Council of the City of Mountain Iron, Minnesota, on January 16, 2007, is a maximum figure and the actual Abatement may be less than the Abatement Amount, depending on the amount of taxes paid by the Developer during a given year with in the Abatement Period. Even if an Abatement is less than $10,000 in a given year, in no year within the Abatement Period may an Abatement exceed $10,000. Resolution No. ______ is hereby attached and its terms are incorporated into this Acknowledgement and Agreement. 

The undersigned further acknowledges, certifies and warrants that the Developer has relied on its own estimate or verification of the fair market value of the Project, the estimate of taxes to be paid or payable and the estimated amount of the Abatement, and has not relied on any estimates provided by the City of Mountain Iron, Minnesota.

L&M SUPPLY, INC.

By_______________________________________

Its _____________________________________