6.3 EDSR 02-18-2014 ECity l Request for Action
River
To Item Number
Economic Development Authority 6.3
Agenda Section Meeting Date Prepared by
General Business February 18, 2014 Brian Beeman, Director of Economic
Development
Item Description Reviewed by
Business Subsidy Policy Jeremy Barnhart,Deputy Director,CODD
Reviewed by
Action Requested
Approve by motion, the Business Subsidy Policy and recommend to the City Council on same.
Background/Discussion
As Springsted, the city's financial consultant was reviewing the TIF policy and other economic
development policies of the city,minor inconsistencies were identified. In an attempt to streamline the
policies and be consistent with current State Statutes, Springsted has developed recommendations to
update the policies. A copy of the proposed updated policy is attached.A representative from Springsted
will be available for any questions.
The recommended amendments include a revised definition of Business Subsidy,a revision to the
minimum wage requirements, and the removal of the guidelines for redevelopment and renovation
business subsidies.
Financial Impact
N/A
Attachments
• Updated Business Subsidy Policy
t'I ■ EIEI IT
INA1URE
City of
Elk
River
Business Subsidy Policy
Amended: February 2014
Amended: May 2006
EDA Adopted: May 8,2006
City Council Adopted: May 15,2006
Original Adopted:
Housing&Redevelopment Authority November 25,2002
City Council November 25,2002
Economic Development Authority December 9,2002
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River,MN 55330
763.635.1040
Pagelof7 P ® J E R E I ® 1
INA1UREI
CITY OF ELK RIVER
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
1. PURPOSE
For the purposes of this document, the term "City"shall include the Elk River City Council,Economic Development
Authority, and Housing and Redevelopment Authority.
The purpose of this policy is to establish guidelines and criteria regarding the use of business
subsidies, such as tax increment financing (TIF),tax abatement, and other business subsidies
for private development projects within the City of Elk River. This policy shall be used as
criteria for providing subsidies,in addition to the requirements and limitations set forth by
provisions of Minnesota matte Statutes Section 1161993 to 1161995 (Minnesota Business
Subsidy Law),and the City's policy and guidelines of the particular form of subsidy.
These guidelines shall be used in processing and reviewing applications requesting business
subsidy assistance. The fundamental purpose of business subsidies in the City is to
encourage desirable development or redevelopment that would not otherwise occur"but
for" the assistance provided through business subsidies.
It is the intent of the City to provide business subsidies, as well as other incentives that the
City may deem appropriate, at the shortest term required for the project to proceed. The
City reserves the right to approve or reject projects on a case-by-case basis, taking into
account established policies, specific project criteria, and demand on city services in relation
to the potential benefits to be received from a proposed project. Meeting policy guidelines
or other criteria does not guarantee the award of a business subsidy. Furthermore, the
approval or denial of one project is not intended to set precedent for approval or denial of
another project.
Whenever possible it is the City's intent to coordinate the use of business subsidies with
other applicable taxing jurisdictions.
II. DEFINITION OF "BUSINESS SUBSIDY"
The following types of assistance having a value in excess of.$25,000 arc defined as a
"business subsidy"within the MN Bu3incss Subsidy Law:
• State and local government agency grants;
• Contributions of personal property,real property, or infrastructure;
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commercially available;
• Rcduction3 or dcfcrral3 of taxes or fees;
"Business subsidy" means a local government agency grant, contribution of personal
property,real property,infrastructure,the principal amount of a loan at rates below those
City of Elk River Business Subsidy Policy 2
Amended May 2006 February 2014
commercially available to the recipient,any reduction or deferral of any tax or any fee,any
guarantee of any payment under any loan,lease, or other obligation, or any preferential use
of government facilities given to a business.
The following forms of financial assistance are not a business subsidy:
1. a business subsidy of less than$150,000;
2. assistance that is generally available to all businesses or to a general class of similar
businesses, such as a line of business, size,location,or similar general criteria;
3. public improvements to buildings or lands owned by the state or local government
that serve a public purpose and do not principally benefit a single business or defined
group of businesses at the time the improvements are made;
4. redevelopment property polluted by contaminants as defined;
5. assistance provided for the sole purpose of renovating old or decaying building stock
or bringing it up to code and assistance provided for designated historic preservation
districts, provided that the assistance is equal to or less than 50 percent of the total
cost;
6. assistance to provide job readiness and training services if the sole purpose of the
assistance is to provide those services;
7. assistance for housing;
8. assistance for pollution control or abatement, including assistance for a tax
increment financing hazardous substance subdistrict as defined;
9. assistance for energy conservation;
10. tax reductions resulting from conformity with federal tax law;
11. workers' compensation and unemployment insurance;
12. benefits derived from regulation;
13. indirect benefits derived from assistance to educational institutions;
14. funds from bonds allocated under chapter 474A, bonds issued to refund outstanding
bonds, and bonds issued for the benefit of an organization described in section
501(c)(3) of the Internal Revenue Code of 1986, as amended through December 31,
1999;
15. assistance for a collaboration between a Minnesota higher education institution and a
business;
16. assistance for a tax increment financing soils condition district as defined;
17. redevelopment when the recipient's investment in the purchase of the site and in site
preparation is 70 percent or more of the assessor's current year's estimated market
value;
18. general changes in tax increment financing law and other general tax law changes of
a principally technical nature;
19. federal assistance until the assistance has been repaid to, and reinvested by, the state
or local government agency;
20. funds from dock and wharf bonds issued by a seaway port authority;
21. business loans and loan guarantees of$150,000 or less;
22. federal loan funds provided through the United States Department of Commerce,
Economic Development Administration;and
23. property tax abatements granted under section 469.1813 to property that is subject to
valuation under Minnesota Rules, chapter 8100.
City of Elk River Business Subsidy Policy 3
Amended May 2006 February 2014
"Business subsidies" as defined also includes the following forms of financial assistance and
is subject to this policy, except for a public hearing,with limited reporting forms required:
1. a business subsidy of$25,000 or more;and
2. business loans and guarantees of$75,000 or more.
The definition of a "business subsidy" is in compliance with the current Minnesota Business
Subsidy Law and is subject to any law changes that may occur.
III. PUBLIC PURPOSE OBJECTIVES OF BUSINESS SUBSIDIES
•
In accordance with the Minnesota Business Subsidy Law, the City will consider using
business subsidies to assist private development projects to achieve one or more of the
following public purpose objectives:
• To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive wages and benefits.
• To enhance and diversify the City of Elk River's tax base.
• To encourage additional unsubsidized private development in the area, either
directly or indirectly through "spin off" development.
• To achieve development on sites which would not be developed without
business subsidies assistance.
• To remove blight and/or encourage development of commercial and industrial
areas in the city that result in higher quality development or redevelopment and
private investment.
• To offset increased costs of development of specific properties when the unique
physical characteristics of the site may otherwise preclude private investment.
• To create opportunities for the construction, operation and maintenance of
affordable housing.
IV. GENERAL POLICIES FOR THE USE OF BUSINESS SUBSIDIES
A. Business subsidy assistance will be provided from the City, on a"pay-as-you-go"
note method, to the developer if the business subsidy is tax increment financing or
tax abatement. Requests for up front fmancing will be considered on a case-by-case
basis.
B. A developer requesting business subsidy assistance must demonstrate, to the
satisfaction of the City, sufficient cash equity investment in the project as required
within the City's policy for the particular form of subsidy.
C. Business subsidy assistance will not be provided in circumstances where land and/or
property price is demonstrated by the County Assessor to be in excess of fair market
value. This would normally be where the acquisition price is more than 10%in
excess of market value.
City of Elk River Business Subsidy Policy 4
Amended May 2006 February 2014
D. A developer must be able to demonstrate to the City, or,if applicable, to the
underwriting authority, a market-demand for a proposed project.
E. Business subsidy assistance will not be used in cases where the subsidy would create
an unfair and significant competitive financial advantage over other similar projects
in the area.
F. Business subsidy assistance will not be used for projects that would place
extraordinary demands on city infrastructure and services.
G. If requested by the City the developer shall provide adequate financial guarantees to
ensure completion of the project,including,but not limited to: minimum assessment
agreements,letters of credit, cash escrows, and personal guaranties.
H. Each developer must be able to demonstrate to the City's satisfaction, an ability to
construct, operate, and maintain the proposed project based on past experience,
general reputation,and credit history.
I. If requested by the City, or its consultants, the developer shall provide sufficient
market, financial, environmental, or other data relative to the successful operation of
the project.
I. Projects receiving business subsidy approval from other affected taxing jurisdictions
will be more favorably received by the City.
V. GUIDELINES FOR COMMERCIAL/INDUSTRIAL BUSINESS
SUBSIDIES
A. Business subsidies will not be used for retail or service businesses unless it is a
redevelopment project. .-. . . -- . ill result in a substantial increase
in tax base and a significant improvement in quality employment.
B. The project must be consistent with the City's Comprehensive Plan,Land Use Plan,
and Zoning Ordinances.
C. The project must result in the retention of existing jobs that would be lost"but for"
the proposed development or result an increase and diversification in local jobs.
Business retention jobs will be considered on a one-for-one match to job creation
only in cases where job loss is specific and demonstrable in accordance with the
Minnesota Business Subsidy Law.
D. Specific wage and job goals will be determined by the City giving consideration to
the particular form of the subsidy,nature of the development, the purpose of the
subsidy,local economic conditions and similar factors. The recipient will have up to
two years from the benefit date,which is the date that the recipient receives the
subsidy, to meet the job and wage goals established by the City.
City of Elk River Business Subsidy Policy 5
Amended May 2006 February 2014
E. The minimum wage for a job to be considered a new or retained job shall be the
greater of$15.00 per hour or 150% of state or federal minimum wage,whichever is
greater, exclusive of benefits required by law. Deviations from the job and wage goal
may be considered for projects that will result in a significant increase in tax base.
Deviations less than the wage floor will be considered on a case-by-case basis and in
accordance with the requirements of the Minnesota Business Subsidy Law.
F. Business subsidies will not be used for commercial/industrial projects that have a
history of inconsistent compliance with applicable environmental rules and
regulations.
. • • .. • . 11 •
•
-BUSINESS-SUBSIDIES
IBSIDIES
In accordancc with the MN Business Subsidy Law, the following forms of financial
A. Assistance provided for the sole purpose of renovating old or decaying building
stock or bringing it up to code,provided that the assistance is equal to or less
than 50 perccnt of the total coat;
B. Assistance for pollution control or abatement;
C. Redevelopment when the recipient's investment in the purchase of the site and
in site preparation i3 70 percent or more of the assessor's current year's estimated
market value.
VII. SUBSIDY APPLICATION PROCESS AND PROCEDURE
A. Application for business subsidies shall be made on the City's forms for the
particular type of assistance. The application for business subsidies shall request
information required within the City's policies on the particular form of subsidy
including but not limited to;a detailed description of the project;a preliminary site
plan;the amount of business subsidy requested; the public purpose of the project;
the number and types of jobs to be created;the wages and benefits to be paid new
employees; and verifiable funding sources and uses.
B. Following a review by appropriate City Staff the application shall be referred to the
either the Economic Development Authority, or Housing and Redevelopment
Authority, for recommendation to the City Council for denial or approval.
C. Before granting a business subsidy that exceeds WORN$150,000, the City shall
provide public notice and hold a hearing on the subsidy unless a hearing and notice
on the subsidy is otherwise required by law.
City of Elk River Business Subsidy Policy 6
Amended May2006 February 2014
VIII. SUBSIDY AGREEMENT AND REPORTING REQUIREMENTS
Each company receiving a business subsidy shall be subject to the subsidy agreement and
reporting provisions and requirements set forth by the Minnesota Business Subsidy Law and
summarized below:
A. Progress Reports
The recipient shall file a report annually for two years after the receiving the
subsidy or until all goals set forth in the subsidy agreement have been met,which
ever is later. Reports shall be completed using the format drafted by the State of
Minnesota and shall be filed with the City's Economic Development Division no
later than March 1 of each year for the progress made the previous year.
B. Maintain Facility
The recipient agrees to maintain and operate its facility at the site where the
subsidy is used for a period of five years after the date the subsidy is provided.
C. Failure to Comply
Businesses failing to comply with the subsidy agreement will be subject to the
terms of the individual agreement fines,repayment requirements at the rate
established within the Minnesota Business Subsidy Law, and be deemed ineligible
by the State to receive any loans or grants from public entities for a period of five
years.
•
City of Elk River Business Subsidy Policy 7
Amended May 2006 February 2014