Agenda Packets - 1986/11/03 - Laserfiche WebLink

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DF-8. Tax -Exempt Status of land Held by Cities for Development (C) T..e League supports granting unlimited tax-exempt status to property held by cities and their political. subdivisions for later resale to promote economic Up until recently, almost all property owned by political subdivisions was granted tax-exempt status. In 1979, the Legislature changed the law to provide that property held by a political subdivision of the state for later resale fur economic development purposes would be considered a public purpose and therefore tax-exempt for a maximum period of three years. In 1984, the Legislature revised the statute, providing tax-exempt status for a period of eight years in most situations and granting an exemption for an unlimited period of years if the property is held for housing programs or is classified as "blighted land" under state law. The 1984 law provides, however, that the property will be taxable if the property is acquired for economic development purposes, and building or other improvements are constructed after acquisition of the property, and if more than _ one-half of the floor space of the buildings or Improvements available for lease to or use by a private individual, corporation, or other entity is leased to or otherwise used by a private individual, corporation, or other entity. The overall intent of the statute is to create an incentive for political subdivisions to engage in economic development activities as well as to promote moving the property back onto the tax rolls. Unfortunately, it does not fully recognize that the process of developing industrial and economic growth, rehabilitating, or building housing may extend over a long period of time. The uncertainty caused by the vague provision on improvements and leasing of one-half of the property discourages cities from being active in establishing;l and maintaining local development corporations, from retaining as much control as possible over their economic development and planning process, and from being - selective as to the type of development which may occur in the city. Cities have every incentive to get property back on the tax rolls as soon as possible. Therefore, the League recommends that the provision concerning one-half installation of improvements ba deleted or at the very least clarified, and that the eight -year limit on tax-exempt status be removed. -10-