Business subsidy policy, water and wastewater discounts being considered for big, new developments

    It’s not like people who want to build a major business development in Crookston are beating down the doors of City Hall or the CHEDA office every day, but if and when someone is interested in embarking on a major business development here, the decision-makers want to be as ready to act as possible.

    For months, City officials, city council members and CHEDA board members have been discussing various incentives and subsidy packages to sweeten the pot when developers are considering a significant business investment here. The efforts have branched into two, and the Crookston City Council Monday evening will consider a resolution, required by the state in instances such as this, that would put on the books official language relating to a business subsidy of $150,000 or more. City Administrator Shannon Stassen said the council has the ability to modify the resolution’s language in the future, but in the interest of keeping things moving forward, an initial resolution needs to be adopted. Mayor Wayne Melbye said he’s consulted with Stassen and CHEDA Director Craig Hoiseth, “and it seems to them like a standard operating procedure type of thing, and something that we need to bring forward.”

    What will be discussed further before the council considers a resolution is the second branch of the discussion involving a resolution that would provide major business developments a break on their water and wastewater bills. Early talks focused on basing discounts on water and wastewater usage by significant developments, Stassen explained, but then the talk shifted to the development’s value and acreage as the primary parameter instead. The amounts on the resolution language put before the council’s Ways & Means Committee were $15 million and 20 acres for a new development, although Stassen noted that both could be changed.

    After some council members said they’d prefer a little more flexibility, especially if, for example, a potential new development was close to the financial and acreage minimums, but not quite large enough on both fronts. Ward 2 Council Member Steve Erickson said he felt the $15 million and 20 acres were too large. “I don’t see one this size coming in; those are phenomenal numbers,” he said.

    Hoiseth noted that the council would be able to consider potential subsidies for developments on a case-by-case basis. “Any incentive worth any real dollars is going to be discussed in this room,” he said.

    So the water and wastewater subsidy discussion has now shifted back to usage.

    Hoiseth tells the Times that he’s OK with that shift.

    “Crookston has some great water coming in and being treated from the vast wells east of town.  The quality of the water is extremely good, and yet the cost we charge for that water is some of the best pricing you will find across the state,” he explained. “Our availability (gallons available to supply Crookston) is strong, and our permit to allow for additional wastewater is ample as well.”

    Hoiseth said he sees a lot of benefit in using Crookston’s great water as an economic development tool, instead of cash. “For new business coming to town, increasing our tax base and creating new jobs, I wanted the ability to offer our water and wastewater at a reduced rate for an introductory period,” he said. “Obviously, with a new business development, it would be new revenue for the City even if it was offered at a discounted rate.”

    He offers an example of how it all might work:

    “If a new business was going to come to town and use 100,000 gallons of water per day and our rates are $3.20 per thousand gallons, the new customer would pay $320 per day.  Assuming this company was year round, with a few weeks off for maintenance shutdowns, they would pay $320 for 340 days or $108,800 per year.  Wastewater runs at approximately half the rate of consumed water, or $54,400 per year. If you combine those two numbers this new hypothetical business would pay $163,200 per year total water/wastewater,” Hoiseth explained. “If we took that example and offered a 50 percent discount, the incentive to the new business would be worth $81,600 per year. If you provided that 50 percent discount for a five-year period, the new business would realize over $400,000 of savings over that period of time.  But don't forget the City would realize $400,000 of new revenue also that we currently do not have, either.”

    He stressed that the discount could be more or less than 50 percent, and the duration could be more or less than five years.

    Hoiseth likes the flexibility that comes with the usage-based water and wastewater subsidy.

    “It just puts another tool in the tool box in the event we need it to attract new businesses, and keeps it flexible for our negotiations,” he said. “The council seems to agree that latitude is warranted, and each time the potential water discount is offered, it would be individually approved.”