WILLMAR — The Willmar City Council took about 90 minutes Monday night to hear public comments and debate from council members before voting 6-1 to approve a 10-year property tax abatement for Torgerson Properties’ $12 million hotel and convention center renovation project.
The council approved a resolution to authorize Mayor Frank Yanish and City Administrator Charlene Stevens to execute the tax abatement and business subsidy agreement. Under the agreement, the city will abate $189,750 in property taxes to Torgerson from 2016 through 2025.
The city received a formal abatement request from Torgerson Properties for the project located on U.S. Highway 12 East.
Construction bids came in $3 million over budget, thereby prompting the request for the tax abatement, said Planning and Development Director Bruce Peterson.
He said the abatement would decrease from a high of $23,000 each year during the first five years to $17,250 during the sixth through eighth years, and to $11,500 each year during the ninth and 10th years.
Peterson said the decline is consistent with conversations city staff has had with Kandiyohi County staff. The County Board today will consider setting a hearing for abating the county’s share of property taxes.
Peterson estimated the impact to the city at just under $190,000 using the current year tax information as a baseline.
Peterson said the project’s economic benefit comes in the form of increased employment, which is a business subsidy goal of the agreement. He said Torgerson is projecting to add 25 full-time equivalent employees. If Torgerson does not meet the goal, it will be required to make repayment to the city.
Rick Fagerlie offered the resolution to approve the agreement, seconded by Audrey Nelsen. Both spoke in favor of the abatement.
Council member Steve Ahmann offered a motion, seconded by Ron Christianson for discussion purposes, to amend the resolution to grant a 100 percent abatement during the two-year construction period, which would begin the spring of this year and end in the late fall of 2014.
Ahmann said his motion was a compromise, based on contacts with constituents. He did not oppose the project but wanted a policy developed first to evaluate abatements.
Nelsen asked Ahmann why he was trying to amend the proposal.
Ahmann said the council is elected and accountable to constituents. Ahmann said people who have contacted him have said no. During the two-year period, he said, “it’s saying we do care about the business being in town. It’s not saying we don’t want you here. My concern was also how people would be taxed to make up the loss.’’
Stevens requested clarification. Ahmann said he meant the taxes currently paid right now. After that, the property will be reevaluated, he said.
Peterson clarified Torgerson is currently paying roughly $21,000 a year in city taxes. He said the city would suffer the abatement as a direct loss as opposed to not having access to the incremental increase in the value after the project is completed.
“So there is a substantial difference between the two,’’ he said.
Christianson quoted Torgerson Properties CEO Tom Torgerson as saying about $1.5 million of the $12 million project would be spent to improve the convention center. He saw the nearly $400,000, which would be the total city and county abatement during the 10-year period, as going toward the convention center.
“I think we’d be getting a good deal out of it,’’ he said, and then withdrew his second. There was no other second and Ahmann’s motion died for lack of a second.
Fagerlie then called for a motion to close debate, seconded by Tim Johnson, and Yanish declared the motion carried by voice vote.
Council members voting in favor of the agreement were Christianson, Nelsen, Johnson, Jim Dokken, Fagerlie and Bruce DeBlieck.
Voting no was Ahmann.
Denis Anderson was absen
Christianson conditioned his vote on a request that staff work on developing a tax abatement policy. Yanish asked if Christianson’s request should be stated in the minutes. Nelsen requested point of order and said she did not think the condition could be done during a vote.
Fagerlie, chair of the Community Development Committee, said the panel will be discussing the issue at its meeting next week.