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7.4 HRSR 11-02-2015 hi Request for Action River To Item Number Housing and Redevelopment Authority 7.4 Agenda Section Meeting Date Prepared by General Business November 2,2015 Amanda Othoudt, EDD Item Description Reviewed by HRA Blighted Properties &Forgivable Cal Portner, City Administrator Commercial/Industrial Loan program Reviewed by Action Requested Approve,by motion,the revisions to the HRA Blighted Properties Forgivable Commercial/Industrial Loan program policy and application. Background/Discussion The HRA approved the attached Blighted Properties Forgivable Commercial and Industrial Loan Policy at the September 8,2015,meeting and subsequently approved by the city council at the September 21, 2015, meeting. After careful review of the city's business subsidy policy, staff has made some administrative corrections to the Blighted Properties Forgivable Commercial and Industrial policy to correlate with the policy that was amended on April 20,2015. Corrections include: • Staff updated the wages as it correlates to the adopted business subsidy policy. The minimum wage for a job to be considered a new or retained job shall be the greater of V 15.00 per hour or 150%of state or federal minimum wage, whichever is greater, exclusive of benefits required by law. • Staff included in parenthesis the maximum points allowed per criteria in the application review worksheet, and recalculated subtotal for section 3 of the review worksheet. Following HRA approval it will go to City Council for final action. Financial Impact None Attachments • HRA Blighted Properties &Forgivable Commercial/Industrial Loan program • 2015 Business Subsidy Policy R / ERER Rr NA 'URE City of Elk Rive r Housing and Redevelopment Authority Blighted Properties Forgivable Commercial/Industrial Loan Policy Guidelines & Application Original Amended: November 2015 HRA Adopted November 2, 2015 City Council Adopted: November 2, 2015 Original Adopted: September 2015 City Council Adopted: September 21,2015 HRA Adopted: September 8,2015 City of Elk River Housing and Redevelopment Authority 13065 Orono Parkway Elk River,MN 55330 763.635.1040 www.elkrivermn.gov INATUR1 71IERE1 1r 14.1ATI10E D Y 1IOIERED Blighted Properties Forgivable Commercial/Industrial Loan Policy&Guidelines ► 0 / E ® E I t 1 Page 2 of 16 NATURE ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY BLIGHTED PROPERTIES FORGIVABLE COMMERCIAL/INDUSTRIAL LOAN POLICY GUIDELINES & APPLICATION OVERVIEW The Housing and Redevelopment Authority for the City of Elk River (HRA) recognizes the need to stimulate private sector investment to help spur new construction, create and retain employment opportunities and promote the sale and redevelopment of structurally substandard properties. The focus is on commercial,retail,industrial, manufacturing,and technology-related industries to increase the local and state tax base and improve economic vitality. The program can be used toward the purchase of properties deemed structurally substandard. 11. TO APPLY Applications will be accepted on an ongoing basis. Projects will be scored based on attached Application Review Worksheet.The applicant shall complete and submit the attached application to the city,along with a processing fee of$2000 to cover processing expenses. Once application is deemed complete,it will be reviewed by the cities Financial Advisor, Executive Director and HRA (process may take up to six weeks). III. PURPOSE The Blighted Properties Forgivable Commercial/Industrial Loan funds are to be used for business start-ups,expansions, and relocations where jobs are created and tax base is generated. This can be accomplished by the following means: 1. Creation of permanent private-sector jobs in order to create above average economic growth; 2. Stimulation or leverage of private investment to ensure economic renewal and competitiveness; 3. Increase local tax base; 4. Improvement of employment and economic opportunity for citizens in the region to create a reasonable standard of living;and 5. Stimulation of productivity growth through improved commercial,retail, manufacturing or new technologies. IV. PROJECT ELIGIBILITY AND REQUIREMENTS The Blighted Properties Forgivable Commercial/Industrial Loan must be based on the following criteria: Blighted Properties Forgivable Commercial/Industrial Loan Policy&Guidelines 1 1 / ERE 1 1 1 Page 3 of 16 NATURE Creation of new jobs must equal a minimum of$12.19/hr. including benefits. 1. 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. 1. 2. Increase in tax base 3. The project can demonstrate that investment of public dollars induces private funds; 4. The project provides higher wage levels to the community or will add value to current workforce skills; 5. The project results in the sale and/or redevelopment of properties deemed structurally substandard; 6. Whether assistance is necessary to retain existing business;and 7. Whether assistance is necessary to attract out-of-state business. A Blighted Properties Forgivable Commercial/Industrial Loan is required to meet clause 5.). A loan cannot be made solely on a finding that the conditions in clause 5.), 6.) or 7.) exist. A finding must be made that a condition in clause 1.), 2.), 3.), or 4.) also exists. Blighted Properties Forgivable Commercial/Industrial Loans are awarded to businesses that meet all project and job requirements as outlined within. Projects are evaluated on a first-come, first-served basis and awarded based upon meeting program criteria. V. ELIGIBLE ACTIVITIES 1. Blighted Properties Forgivable Commercial/Industrial Loan may be used for the following activities: a. Property acquisition, demolition, soil prep,infrastructure, or building construction. b. Purchase furniture, fixtures, and equipment (FF&E) along with new construction. VI. BUSINESSES ELIGIBILITY Any project meeting the above criteria, and located or proposed to be located within the city limits of Elk River as defined by this program,may be eligible for a Housing and Redevelopment Authority Blighted Properties Forgivable Commercial/Industrial Loan as further defined herein: • Business must be a for-profit corporation,partnership, or sole proprietorship. • Business must be a small business as defined by the Small Business Administration (SBA). • Business must have a positive net worth. • non-profit corporations, casino, sports facilities and sexually oriented businesses are not eligible to use the Housing and Redevelopment Authority Blighted Properties Forgivable Loan Program. VII. BLIGHTED PROPERTIES FORGIVABLE Blighted Properties Forgivable Commercial/Industrial Loan Policy&Guidelines P 11 w E R E 1 1 1 Page 4 of 16 NATURE COMMERCIAL/INDUSTRIAL LOAN TERMS & CONDITIONS Loan Amount There is a maximum of$75,000 per Blighted Properties Forgivable Commercial/Industrial Loan. Federal guidelines require a minimum of one job to be created for every$15,000 requested. To receive maximum loan amount of$75,000, applicant would need to create five new FTE positions. 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. Wage and benefits must be equal or greater than$12.19/hr. Loan Structure All Housing and Redevelopment Authority Blighted Properties Forgivable Commercial/Industrial Loans shall be structured as direct loans. Applicant must provide at least 50% of project cost through other means. Equity down payment requirements may vary depending on project and primary lending institution. Blighted Properties Forgivable Commercial/Industrial Loan funds may be used as equity upon approval of primary lending institution The HRA may require additional agreements to be signed by the borrower (i.e. mortgage,promissory note, security agreement,personal guarantees,business subsidy agreement). Other HRA Incentives Projects can combine the Blighted Properties Forgivable Commercial/Industrial Loan with all other incentives (i.e.: Micro Loan Program,Tax Abatement,TIF, etc.) Evaluate Building(s) Existing Condition An evaluation must be conducted to determine if the building(s) is structurally substandard by a licensed structural engineer with experience in inspection and facility assessment projects. Structurally substandard shall mean containing defects in structural elements or a combination of deficiencies in essential utilities and facilities, light and ventilation, fire protection including adequate egress,layout and condition of interior partitions, or similar factors,which defects or deficiencies are of sufficient total significance to justify substantial renovation or clearance. Deliver a written narrative analysis of the property describing why the property does or does not meet the criteria as "structurally substandard" as established in Minnesota Statutes Section 117.025, subdivision 7. Call of Loan Blighted Properties Forgivable Loan terms are set by the HRA. Projects which don't meet the terms may be required to repay all or a portion of the loan as determined in the loan agreement. A job creation extension may be granted upon review of the Housing and Redevelopment Authority on a case by case basis, except as otherwise required by law. Repayment terms will vary depending on the use of funds and collateral securing the loan. Specific repayment terms will be defined in the loan Blighted Properties Forgivable Commercial/Industrial Loan Policy&Guidelines ► s / ERE I 1 1 Page 5 of 16 NATURE agreement in the event repayment of part or the entire Blighted Properties Forgivable Commercial/Industrial Loan is required. A loan shall become due and payable in full if a business relocates outside of the city of Elk River prior to the maturity date of the loan. Jobs created must be maintained for a period of 2 years from the date of closing. VIII. LOAN SECURITY AND GUARANTEES Applicant must secure the loan by providing the HRA with a minimum of a subordinate mortgage upon the building and/or assets or other approved collateral. Personal guarantees and entity guarantees may be made part of all loan agreements. Key person life insurance may be required as determined by the HRA based on loan amount and company ownership partners. VIII. TIMING OF PROJECT EXPENSES/PROJECT TIMELINE No project should commence until the Elk River Housing and Redevelopment Authority has approved the loan application. Any costs incurred prior to the approval of the loan application are generally not eligible expenditures. Applicant must submit project timeline with application; timeline will assist in determining job creation goal deadlines. The applicant will be responsible for all legal,recording, and other fees required for protection of a security interest in the loan,payable by a non-refundable$2,000 processing fee,which is paid at the time of application. In addition to the non-refundable$2,000 processing fee,all legal and filing fees shall be paid by the borrower at loan closing. X. PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL 1. All applicants shall first contact a primary lending institution to determine if additional equity is needed, and if so, how much. 2. The applicant and the primary lender (if applicable) shall then meet with City Staff to obtain information about the Housing and Redevelopment Blighted Properties Forgivable Commercial/Industrial Loan program,discuss the project, and obtain application forms. 3. The applicant shall complete and submit an application form to the City,along with a non-refundable processing fee of$2,000. The applicant must provide evidence of their ability to meet the equity requirements or provide a letter of commitment for conventional financing from the primary lending institution if applicable. 4. The HRA is a governmental entity and as such must provide public access to public data it receives. Data deemed by Applicant to be nonpublic data under State law should be so designated or marked by Applicant. See Minn. Sat. Blighted Properties Forgivable Commercial/Industrial Loan Policy&Guidelines P O I E R E I 1 1 Page 6 of 16 NATURE Sections 13.59, Subd. 1,respectively. 5. The application will be reviewed by the City staff to determine if it conforms to all City policies and ordinances and to consider the following: a. The availability and applicability of other governmental grants and/or loan programs. b. Whether the proposed project will result in conformance with building and zoning codes. c. Whether it is desirous and in the best interests of the public to provide funding for the project. 7. The HRA Commissioners will review each application in terms of its consistency with the goals of the City's Comprehensive Plan and Housing and Redevelopment Authority Strategic Plan and in relation to the project's overall impact on the community's economy and will evaluate the project application in terms of the following: a. Project Design- Evaluation of project design will include review of proposed activities, time lines and a capacity to implement. b. Financial Feasibility-Availability of funds,private involvement, financial packaging and cost effectiveness. • Appropriate ratio of private funds to the Blighted Properties Forgivable Loan funds. • Sufficient cash flow to cover proposed debt service as demonstrated by financial statements and projections. • Ability to demonstrate a positive net worth. • Letter of Commitment from applicant pledging to complete the project during proposed project duration,if the loan application is approved. • Letter of Commitment from other financing sources stating terms and conditions of their participation in the project if applicable. • Sufficient collateral. • Certificate of Good Standing from the Minnesota Secretary of State c. All other information as required in the application and/or additional information as may be requested by the Housing and Redevelopment Authority. d. Project compliance with all city codes and policies. e. Program Objectives - In addition to quality job and wage creation/retention requirements, the applicant must meet all of the Blighted Properties Forgivable Loan Program criteria and demonstrate how the proposed activities will meet at least one of the following objectives listed on page two of this application. Blighted Properties Forgivable Commercial/Industrial Loan Policy&Guidelines 1P1111EllEI 1 1 Page 7 of 16 NATURE 8. The Housing and Redevelopment Authority will recommend the approval, denial, or request a resubmission. 9. Loan proceeds will be disbursed upon execution of the Blighted Properties Forgivable Commercial/Industrial Loan documents. A closing to execute the Blighted Properties Forgivable Commercial/Industrial Loan documents will only occur upon the following: Evidence of Applicant's portion of project funds have been disbursed or escrowed;or written confirmation from the primary lender that Applicant has met equity requirements for the project and primary Lender has either funded their portion of the project;Lender has fully funded the project and is seeking take out financing by HRA for HRA's portion of the project;or Lender is requesting simultaneous closing for the funding of the project. XI. LOAN POLICY REVIEW The above criteria will be reviewed on an annual basis to ensure that the policies reflected in this document are consistent with the housing and redevelopment authority goals set forth by the City. XII. RIGHT OF REFUSAL The Elk River Housing and Redevelopment Authority may deny any project which it deems inappropriate according to the guidelines established in this document. XIII. COMPLIANCE WITH MN BUSINESS SUBSIDY LAW Each company receiving assistance in the principal amount of$75,000 from the HRA Blighted Properties Forgivable Commercial/Industrial Loan Program shall be subject to the provisions and requirements set forth by Minnesota Business Subsidy Law Statute 116J.993 and the City of Elk River Business Subsidy Policy. All applicants will be required to submit annual progress reports to the Housing and Redevelopment Authority until job creation requirements are met. Blighted Properties Forgivable Commercial/Industrial Loan Policy&Guidelines ri ,„ , 1 E 1 1 1 Page 8 of 16 ATURE ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY FORVIABLE COMMERCIAL/INDUSTRIAL LOAN APPLICATION I. CONTACT INFORMATION Legal Name of Business: Project Site Address: 5.� City / State / Zip a . Contact Person(s) Business Phone Fax Home Phone Email-, Check One: ti.nrietor k Oeft5oration Partnership Federal ID # StafrID # 4 II. NATU AN REU ,.r Does your project involl e the redevelopmenofrstructurally substandard property? NO tt Amount equested: $ Total Project Cost: $ Project timee:: .� Please give a brief summary of your business and its products or service: Blighted Properties Forgivable Commercial/Industrial Loan Fund Application Page 9 of 16 DRAFT Please give a brief summary of the project and how it complies to the criteria for approval of the blighted properties forgivable commercial/industrial loan program: Please describe how this loan will impact your project: III. FINANCING ''''',:!',7 Project Costs 2' Site improvements $ x Buildings (attach plans &costs Equipme• m chin '/Fixtures , $(attach hs and estimat , •sts) -.; Remodeling $ Industrial Inventory ing Capital.`�: $ Ph z r (attach description) $ Total Costs $ Comments: Proposed Sources of Financing SOURCE NAME TERMS AMOUNT Bank Loan $ Blighted Properties Forgivable Commercial/Industrial Loan Fund Application Page 10 of 16 DRAFT Bank Loan $ Other Private Funds $ Applicant Contribution $ Other $ Fed Grant/Loan $ State Grant/Loan $ HRA Blighted $ Properties Forgivable Commercial/Industrial oar3 Program �� Tax Increment Financing $ Tax Abatement ..4 $ Total Financing ; ' Collateral Assignments ::- Lien Descripti e of Co Position To Bank 1 To Bank 2 �� �. To Priva * durces ; To Other Sources: ToSta`e To HRA Micro Loan, HRA Blighted Properties Forgivable C/I loan Value of Collateral Book Value Cost Existing Liens Land $ $ $ Buildings $ $ $ Machinery&Equip. $ $ $ Blighted Properties Forgivable Commercial/Industrial Loan Fund Application Page 11 of 16 DRAFT Other $ $ $ Other $ $ $ IV. JOB & WAGE GOALS How many employees do you currently have? Guidelines require a minimum of one job created for every$100 requested. Jobs to be Creat * Please provide the following information on job �000u exert to create within 2-years. Average Are Jobs Expected Number Hourly Ahhual Perm. ' is or Hiring Job Title of Jobs Wage ,salary Tempora Date f - pia �1 Program Qbjectives ,> (Check all that Apply) '' a e proje�f ltributesg to fulfillment of the city's approved and adopted hou' ' and r eyelopme ' utho .ty and/or redevelopment plans. The Aject pre _tits or eliminates slums and blight. The prof increafe the local tax base. The project brings a `�' «ture into compliance with an existing building code : violation. Blighted Properties Forgivable Commercial/Industrial Loan Fund Application Page 12 of 16 DRAFT V. PROJECT CONTACTS Attorney Name Address Phone Accountant Name Address Phone ex, Financing Sources (lenders,partners, etc ,,) Name Address Phone Name .;; efi Address * 1 Phone • Parent Co _0,a Name Addr Phone emu' Others Name Address Phone Name Address Phone Page 13 of 16 Blighted Properties Forgivable Commercial/Industrial Loan Fund Application DRAFI VI. ATTACHMENTS CHECK LIST Please attach the following: A) Written Business Plan: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products/Services 6. Future Plans B) Financial Statements for Past Tz Years� C) Financial Projections for orYears D) Resume of Owner/Manag ent E) Personal Fine •1 Statements c f 'rop etor,Partners, Guarantors .- F) Letter of Commitment fry Applicant l dging to Complete D the Propose Projec ration 4A' , b. G)' Letter of(ommitmen r ,,,sir e Other Sources of Financing, Stating Terms and Conditions of their Participation in Project H) ,Application Fee of$2,000 of amount of loan request I) Cer Fate of :a-od Standing VI. AGREEMENT 4 I /We certify that Wo !on provided in this application is true and correct to the best of my/our knowledge "/We authorize the City of Elk River Housing and Redevelopment Authority to check credit references and verify financial and other information. I /We agree to provide any additional information as may be requested by the HRA. APPLICANT SIGNATURE BY DATE Blighted Properties Forgivable Commercial/Industrial Loan Fund Application Page 14 of 16 DRAFT APPLICATION REVIEW WORKSHEET TO BE COMPLETED BY CITY STAFF In the event of multiple applicants, and limited funds dedicated to the program, the attached worksheet will be used to determine how the funds will be allocated. The project meets the criteria set forth in Section IV of the Blighted Properties Forgivable Commercial/Industrial Loan Policy. Check those which apply. Must meet first four to score 20 points. 0 points if any of the first four boxes are un,aecked. Creates new jobs with wages and benefits equal least$12.19/hr Creates new jobs.The minimum wage for,,a.jo'be considered a new or retained job shall be the greater of$15.00 per hour or 1 i'/o of state orfral minimum wage, whichever is greater,exclusive of benef, guired by law. ( points) Increases tax base (5 points , _ r The project can demonstrate that investment of public dollars ins s private funds . . (5 points) �> `� r The project provides hig e age levels to the community or will add `1,e to current workforce skills. ( e oit The project results in the sale /or evelopment c; f structurally substandard properties as determined by a structural e i n eer. (additional 100 points given) Su = a on l maximum 120 points) 2. Consideration a . e acity. ',beck those appiy. Must meet all four to score 20 points. 0 points if an saxes are uncle d Applicant ins .ed a f listic implementation /project schedule (5 points) ,., pplicant has the bility`e tdminister and monitor project (5 points) ` plicant has the°ability to co arm to city, state and federal requirements (5 points) Applicant has agreeClip annual progress reports and submission of salary surveys for all new hires (5 points),,,,, . Subtotal Section 2 (maximum 20 points) 3. Impact Points Number of new jobs as a result of the project: *Award five points per job created up to 150 points Ratio of loan funds to jobs created/retained $15,000 or less/job 80 points $15,001-$24,999/job 60 points $25,000-$34,999/job 40 points Blighted Properties Forgivable Commercial/Industrial Loan Fund Application Page 15 of 16 DRAFT $35,000 and over/job 20 points Increase in the local real estate tax base >$500,000 20 points $250,000 to $500,000 15 points <$250,000 10 points Immediacy of Impact *20 points awarded if project will begin within 6 months Subtotal Section 3 (maxim* 320 270 points) *minimum of 60 points must come from this section in order for project to be considered 4. Wage Level of new jobs created Points Minimum hourly wage of jobs created/retained: Over$21/ hour 5 points $18-21 / hour 4 p oints 4' .�� $14-17 / hour points $11-13 / hour 2 poi Below$11/ hour application qualifie G � x 5. Project size: 1M' The project will result it itffig, cons on of -.4...z7„, square feet. ,.T 80,000+ 50 . gr'ts 65,000+ 40 points 50,000+ 30 points ,000+ 20 points � 25,00;6+ 10 point qr ,f Subtotal Sections 4-5(maximum 55 points) Sub-Total Points: of a possible 465 points. Blighted Properties Forgivable Commercial/Industrial Loan Fund Application Page 16 of 16 DRAFT City of Elk River 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 ri RE /Page2of8 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 IPOIIERED 1 Amended April 2015 � �� Page 3 of 8 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 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 Statutes Section 116J.993 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. II. 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. City of Elk River Business Subsidy Policy INAIURE1 0 ■ ENE 0 1 2015 Page 4of8 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 [ OVUM 1 Amended April 2015 NATURE Page 5 of 8 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 Amended April 2015 � R E D D[NATUREI 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 siguificant 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. City of Elk River Business Subsidy Policy !POWERED� 1 Amended April 2015 INATURI Page 7 of 8 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 IFOIERED 1 Amended April 2015 Page of e 8 of 8 NATURE Pag 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. City of Elk River Business Subsidy Policy — Amended April 2015 [POWERED 1 1 Page 9 of 8 NATURE