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Continued: Burnsville officials say Arts Center won't mean higher taxes

  • Article by: JOY POWELL , Star Tribune
  • Last update: February 27, 2008 - 12:25 AM

The walls are going up on Burnsville's crown jewel -- its downtown Performing Arts Center -- which is on track to open by the end of the year and draw crowds from the south metro area to its theaters and art gallery. It's the city's biggest public investment in its Heart of the City, a $150 million redevelopment built mostly by private investors this decade.

But since planning got underway in 1999, there's been controversy -- and confusion-- over public financing for the center's construction.

City officials want to reinvest the increasing tax collections that are coming in -- courtesy of the city's economic development -- and see the Performing Arts Center (PAC) as a way to attract yet more business to Burnsville. But opponents see the center as a huge tax burden and say it should have been left to private developers.

Mayor Elizabeth Kautz and other city leaders have insisted all along that private property taxes won't go up for construction of the $20 million PAC. Nor, they say, will property taxes be raised to pay for an adjacent parking deck that the city plans to build for $3.5 million to $4.5 million.

So how can the city pay for such big projects without raising property taxes?

Tammy Omdal, the city's chief financial officer, said the city will pay for the Arts Center with tax levies and with host fees collected at a Burnsville landfill serving the metro area.

For several years the city's Economic Development Authority has collected taxes -- a levy that this year totals $410,000 -- and that money will be used to pay debt on the center, Omdal said

Also, money will be transferred from the general fund to cover operating shortfalls.

"Nobody has tried to make the statement that there aren't taxes going into the Performing Arts Center," Omdal said. "There absolutely is. That's where our revenue comes from, our property-tax payers. It's just that people's taxes aren't going up as a result of the PAC. But on a flip side, their taxes aren't going to go down."

Omdal said these sources will be used to pay for the center's construction:

• $16.5 million cash from the sale of bonds.

• $3 million in cash reserves from the general fund and the Economic Development Authority.

• $500,000 in host fees from the Burnsville Sanitary Landfill, a subsidiary of Waste Management. The city collects $1 for every ton of refuse dropped off from throughout the metro.

Not everybody agrees that the city should be spending public money for the PAC and the parking deck, and even the City Council is divided over the issue. Opponents say they want some of the city's growing tax revenues to be used for property tax relief, or for other municipal purposes. Some worry about how deeply the center's operating costs will dig into the city's general fund.

Deb Moran was a City Council member from 1994 to 2002, when she supported the idea of private investors building an arts center but opposed a publicly funded project. Moran, a Republican, is now running for state representative. She recently resigned from a website called "NoPerformingArtsCenter.com."

Moran suspects cost overruns will boost the center's price tag. And, she added, the center's annual operating expenses, including heating the 8 1/2-story building, will come from the general fund.

But even as the debate continues, construction is well underway. Beneath a towering crane, workers are erecting the center, the capstone to the 54-acre redevelopment.

"Our group has recognized that while our opposition to the PAC raised the level of dialogue and scrutiny of city government, the PAC is being built, and there is nothing we can do about it," said Vickie Loher, another founder of the opposition group.

Supporters, on the other hand, project more than 100,000 visits a year to the center, which they say will benefit all businesses in the downtown redevelopment.

The arts center is to open in December with a 1,000-seat main theater, a 150-seat "black box" theater, an art gallery and banquet space. It's to host national touring and local concerts, theater, dance recitals and conferences, with newly named executive director Wolf Larson.

Also planned is a public parking deck with 250 spaces, though the scope of that project could change. Anderson Builders recently pulled out of a deal to build a 450-space parking ramp and two office complexes, a setback that led the council to scramble to have the city take over construction of the ramp.

To generate cash for the center's construction, the city sold $16.8 million in general obligation tax abatement bonds to Merrill Lynch in January. The city has 20 years to pay the tax-exempt bonds at an average interest rate of 4.03 percent.

To help pay for the bonds, in a few years the city will use revenue coming from two tax-increment financing (TIF) districts in southwest Burnsville.

The districts are generally north and south of Hwy. 42 and west of Hwy. 5, at the Southcross Corporate Center and Industrial Park. Now, that TIF money stays in those districts, where it's used to pay debt, build new infrastructure and for business subsidies to help create jobs.

Omdal said economic development has boosted property tax collections in one of those districts from less than $50,000 in 1985 to more than $1.5 million today.

In the other district, tax collections grew from a few thousand in 1987 to $1.9 million.

Those districts will be decertified in 2010 and 2013, a process that will allow the City Council to direct part of the additional tax proceeds to the PAC debt. The council could also decide to use some of this TIF money for other purposes, including lowering property taxes.

In addition, at least $250,000 a year will be transferred from the city's general fund tax levy into the PAC fund to pay operating costs, according to city documents. In a worst-case scenario, that operating expense might hit $350,000 a year.

And, if the council approves the parking deck, it could use the pooled TIF fund in the Southcross area.

Joy Powell • 952-882-9017

  • WHAT'S NEXT

    The City Council is to decide what kind of parking facility to build, and to accept bids for construction this spring. The parking structure and the Performing Arts Center are slated to open late this year.

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