7.3 HRSR 11-02-2015 tif Request for Action
River
To Item Number
Housing and Redevelopment Authority 7.3
Agenda Section Meeting Date Prepared by
General Business November 2, 2015 Amanda Othoudt, EDD
Item Description Reviewed by
Business Subsidy Policy Cal Portner, City Administrator
Reviewed by
Action Requested
Approve,by motion,the revisions made to the Business Subsidy Policy.
Background/Discussion
The purpose of the overall Business Subsidy 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
Statutes Section 116J.993 to 116J.995 (Minnesota Business Subsidy Law), and the city's policy and
guidelines of the particular form of subsidy.
The policy was originally adopted by the HRA and Council on November 25,2002,and the EDA on
December 9. Revisions were made to the document by the EDA on May 8, 2006,and February 18,2014,
and again on April 20,2015. The City Council subsequently approved the policy immediately following
each of the EDA meetings.
Staff has found that the HRA has not formally adopted the changes that were made to the subsidy policy
and is requesting that the HRA approve,by motion the revisions to the agreement since the last formal
adoption of the policy on November 25,2002.
Attachments
• Business Subsidy Policy
17y1IESEI 11
NATURE
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city of
Business Subsidy Policy
Amended: April 2015
EDA Adopted: April 20,2015
HRA Adopted: November 2,2015
City Council Adopted: April 20,2015
Amended: February 2014
EDA Adopted: February 18,2014
City Council Adopted: February 18,2014
Amended: May 2006
EDA Adopted: May 8,2006
City Council Adopted: May 15,2006
Original Adopted: November 2002
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
City of Elk River Business Subsidy Policy
Amended April 2015 1 / / E I E I 11
Page 2 of 8 INAIUREI
Table of Contents
I. Purpose 3
II. Definition of"Business Subsidy" 3
III. Public Purpose Objectives of Business Subsidies 5
IV. General Policies for the Use of Business Subsidies 5
V. Guidelines for Commercial/Industrial
Business Subsidies 6
VI. Subsidy Application Process and Procedure 7
VII. Subsidy Agreement and Reporting Requirements 7
City of Elk River Business Subsidy Policy
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Page 3 of 8 NATURE
CITY OF ELK RIVER
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
I. PURPOSE
For the purposes of this document, the term "City".shall include the Elk River City Counal,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 Statutes Section 1161993 to 116J.995 (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.
11. DEFINITION OF "BUSINESS SUBSIDY"
"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
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.
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Amended April 2015 NATURE
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The following forms of financial assistance are not considered a business subsidy that would
require a public hearing:
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 "
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Notwithstanding the definitions listed above under 1 and 21, "business subsidies" as defined
also includes the following forms of financial assistance and is subject to this policy,with the
exception of a public hearing as the amount of assistance is less than$150,000,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 financing 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
City of Elk River Business Subsidy Policy
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value. This would normally be where the acquisition price is more than 10%in
excess of market value.
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 may be considered for retail or service businesses if it will
result in satisfying a clear strategic goal of the City, including,but not limited to
substantial increase in tax base and a significant improvement in a redevelopment
project, quality employment, paying at least 175% of the state or federal minimum
wage,whichever is greater.
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.
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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.
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.
VI. 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 $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.
VII. 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
City of Elk River Business Subsidy Policy
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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,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.
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