Special tax could fund downtown projects

By Jeffrey Pieters

Say you’re an average Rochester taxpayer. How would you feel having $29 added to your annual tax bill to help improve the city’s downtown and core neighborhoods?

It’s a question city residents might be asked one day. Officials are examining whether to impose a special "downtown tax" or to form another tax-abatement district to raise money for government to buy and prepare land downtown for redevelopment.

The existing downtown tax abatement district, formed by the city government, generates nearly $1.2 million per year for downtown projects. But that is not nearly enough to cover all of the projects officials consider necessary.


"We’re finding that getting housing downtown is far more difficult than we ever dreamed," said Sandy Keith, director of the Rochester Downtown Alliance. "It’s tough all over, not just here."

The city has lost one, and perhaps two, prospective developers over the matter of how difficult and expensive it is to assemble downtown land parcels from multiple owners for redevelopment, Keith said.

A special tax or new tax abatement would infuse perhaps another $1 million downtown. In the case of the special tax, the money would be levied by Rochester’s Economic Development Authority, a legally distinct entity made up of the same seven members on the city council.

Meanwhile, a tax abatement would be Olmsted County’s decision. Keith has met individually with members of the county board and found commissioners generally opposed to the idea.

The Downtown Alliance is just one of several players examining the financing issue. Others include the Rochester Area Chamber of Commerce, Rochester Area Foundation and the Olmsted County Housing and Redevelopment Authority, which periodically has sought approval for a special housing-related tax levy of its own.

Economic development authorities have authority from the state Legislature to assess taxes at rates up to 0.01813 percent for development purposes. A levy set at the maximum rate would add about $29 per year to the tax bill of a $160,000 house.

Almost certainly, raising taxes would be politically unpopular. But officials might conclude that it’s necessary to achieve the downtown renewal goals considered important to Rochester’s economic future.

"We’re going to have to get a lot of details before we go down that road," said city council President Dennis Hanson.


There is also budding interest in shoring up Rochester’s core neighborhoods. "Rochester’s downtown is more than just 50 blocks," Keith said. "We’ve got 26,000 people living in the surrounding neighborhoods."

Imagine Kutzky, a revitalization project in the Kutzky Park Neighborhood, is the kind of program that might be carried to other core neighborhoods.

The Rochester Area Foundation is considering an urban renewal program to be called First Neighborhoods, said John Wade, a foundation board member and president of the Chamber of Commerce.

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