Maplewood OK’s tax increment financing for 3M project


The project area for the research and development building is part of the 28-acre 3M corporate headquarters, located on the corner of McKnight and Conway avenues in Maplewood. (submitted graphic)

$156 million R&D building will house 700 employees

At the July 22 city council meeting, Maplewood officials held a public hearing and voted to establish a tax-increment financing district with 3M for the construction of a new research and development laboratory on its 28-acre campus on the corner of McKnight and Conway avenues.

The TIF agreement will help 3M move forward with the project, which is estimated to cost around $156 million and will house about 700 employees and support staff when it is completed in two years. These employees already work for 3M, but will be relocated into the new 400,000-square-foot building.

The property value of the project area, where the R&D facility will be built, will be frozen and any property value increase over the term of the agreement will count as “incremental value.” The property taxes paid on the incremental value then are placed into a TIF account, which is used to pay the expenditures of the redevelopment project.

The term of the 3M TIF agreement is 25 years and will begin after the date of the first increment in 2015.

At the meeting, Tom Denaway, an analyst with Springsted Incorporated, gave a presentation detailing the specifics of the TIF agreement. Springsted Inc. has been working with the city and 3M to prepare the plan.

“3M and the city worked together to receive special (state) legislation which provided special authority to the city,” Denaway explained. “The city now has the ability to create more TIF districts within the project area (the 3M campus)...and removes the blight requirement for redevelopment.”

Normally, for a project to be classified as “redevelopment,” there must be some level of blight - whether aesthetic, physical or financial - on the property. Then, 90 percent of the TIF dollars would need to go toward removing that blight.

However, with the new legislation, the city was able to bypass that requirement so all of the TIF funds would be spent within the project area.

Agreement to retain 700 employees

For the city, one of the most attractive reasons for helping 3M with the facility is the retention of about 700 R&D employees.

3M made it clear to the city that but for the TIF aid, the company would not be able to keep those positions in Maplewood. This “but-for” provision played a large role in city council members’ decision to garner their support.

“The 3M position is that they need to upgrade their facilities to retain and attract the scientists and technical employees that will serve the company for the next 15-20 years,” the agenda item reads. “They have indicated that many of their current staff are nearing retirement and as they compete for the ‘brightest and best,’ they want their Maplewood campus to reflect an attractive and state-of-the-art facility and campus.”

City manager Chuck Ahl informed the council that the average salary for the R&D employees is about $50 an hour. In order to ensure that the employees will stay on the Maplewood 3M campus, the two parties will enter into a business subsidy agreement. This agreement allows 3M to formally present employee and wage goals for the R&D facility, and those numbers must be met within a few years of development in order to continue receiving TIF money.

“If those goals aren’t met, the development agreement provides that the TIF that has been paid would be repaid to the city,” Denaway said.

Each year, 3M will provide documentation to the Minnesota Department of Employment and Economic Development proving that it is reaching those goals.

Housing and economic development commission member Mark Jenkins said that he believes the benefit of retaining those employees outweighs the cost of the TIF.

“(The agreement) preserves 700 jobs and prevents the relocation of 700 area residents who spend their money at Maplewood’s small businesses and support our community,” he said. “I estimate those employees have about a $72 million regional impact.”

Possibility for future development

Denaway explained that the redevelopment project meets specific city criteria including the maximum opportunity for development, conformity to the city’s development plans and that without the TIF, the project would not be able to move forward.

“Because the TIF is being used, the amount of value that’s being generated would be much greater than if it weren’t being used,” Denaway said. “We assume that very limited growth would occur on the site if not for the TIF assistance.”

In addition to the R&D building, 3M has agreed to reinvest an additional $50 million in its campus by 2022. This will include at least one more building project, not including the R&D facility.

Originally, Maplewood had hoped to construct a new fire station just north of the new R&D building on the 3M campus, but the legislation was not approved.

The TIF agreement will allow the city to capture 20 percent of future revenue from the project, about $1.25 million, which the city will use to fund the construction of the fire station.

Approval from city officials

After hearing positive remarks from members of the planning commission as well as the housing and economic development commission, the council opened the public hearing. No comments were made, so the council voted unanimously to pass three resolutions regarding the TIF agreement.

The first two resolutions develop and execute the TIF plan, and the third allows the city to use money from the TIF account to finance the project.

“Now that all this has been approved, 3M is going to start work almost immediately,” Ahl said. “The project will get going right away.”

Mayor Will Rossbach expressed his appreciation to 3M and city staff as they negotiated the agreement over the course of the last year.

“This has been a long process for both entities involved, and probably during the negotiations had some interesting moments, but I think we felt all along that we would eventually get to a point of resolution that was satisfactory to both parties,” Rossbach remarked. “We are very appreciative of the chance to partner with a company of this stature.”

Council member Kathy Juenemann reminded 3M that Maplewood recently became a Step 3 GreenStep city for its sustainability and environmental practices.

“Since you are always trying to be an environmentally friendly company ... you’re in the right place,” she said.

Johanna Holub can be reached at jholub@lillienews.com or 651-748-7814.
 

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