County not obligated to pay on TIF bonds for beef plant

Farm Forum

Even if there’s not enough property taxes collected from Northern Beef Packers to cover its next payment to tax increment financing bondholders, Brown County will not be liable for any plant-related expenses under state law.

The buyers of the bonds, sold to help finance the plant, might have to be patient, but they’ll almost certainly recoup their investment, said an attorney who specializes in TIF law.

Todd Meierhenry of Sioux Falls said Brown County officials have asked him what would happen if the TIF bonds go into default – if there isn’t enough money in the increment account to pay bondholders as scheduled on or before Dec. 1. The county would have to notify those who bought the bonds that there’s not enough money in the special account to make the payment, he said. But the county has never offered to use any of its money to pay bondholders and isn’t obligated to do so, he said.

Instead, he said, bondholders would have to wait until there is enough money in the TIF account to be paid back.

Property taxes due, including the increment total, are not forgiven by the sale of property or bankruptcy proceedings, according to state law.

Were the plant’s value to be lowered, that could slow the collection of property taxes, but two payments a year would still be required under state law.

In 2007, Brown County voters approved a tax increment district to help Northern Beef Packers. In a TIF district, extra property taxes collected resulting from new development are placed in a special account and used to help pay for qualified construction-related expenses. When the TIF is paid off, the extra money goes to local government entities. During that time, base property taxes continue to be split by local governments.

About $6.95 million in TIF bonds have been sold to help the plant. To date, $907,593 has been repaid to bondholders, said Maxine Fischer, county auditor. That total includes interest, she said.

The next bond payment is Dec. 1 and totals $452,356, she said.

While Northern Beef Packers paid enough in property taxes earlier this year to make the TIF bond payments, it did not pay its entire bill and still owes roughly $1.47 million in past-due taxes, according to the county.

A bankruptcy auction of the Northern Beef Packers plant with a starting bid of $12.75 million is scheduled for Dec. 5.