7.1. SR 02-19-2019 EGty1� ,.,�� Request for Action
River
To Item Number
Mayor and City Council 7.1
Agenda Section Meeting Date Prepared by
Public Hearin s lFebruary19, 2019 Amanda Othoudt,EDD
Item Description Reviewed by
Business Subsidy Agreement Cal Portner, City Administrator
Reviewed by
Action Requested
1. Open public hearing to consider changes to the city's Business Subsidy Policy.
2. Following the public hearing, the Council is asked to consider adoption of the attached resolution
approving the changes to the city's Business Subsidy Policy.
Background/Discussion
The Business Subsidy Policy establishes guidelines and criteria for the use of business subsidies including
tax increment financing and tax abatement for private development projects. It is set in accordance with
the requirements and limitations set forth by provisions of Minnesota Statutes Section 1161J.993 to
116J.995 (Minnesota Business Subsidy Law) and city policy and guidelines of the particular subsidy.
These guidelines shall be used in processing and reviewing applications for business subsidies. The policy
was last amended in April of 2015 and subsequently approved by the City Council.
Our attorney recommended the following changes to the policy and subsequently the EDA and the HRA
approved those changes:
■ The definition of"benefit date" as the Business Subsidy Act,Minnesota Statutes, Sections
116J.993 — 116J.995,gives recipients more flexibility as to how to determine the benefit date than
is reflected in the current policy.
■ Cleaning up some other sections to allow for future updates in the Business Subsidy Act.
Following approval of the changes, the EDA and the HRA would then adopt resolutions approving the
changes at their next meetings and submitted to DEED.
Financial Impact
N/A
Attachments
■ 2015 Approved Business Subsidy Policy
■ 2019 Attorney changes to the Business Subsidy Policy (Redlined)
■ 2019 Business Subsidy Policy (Clean)
■ Resolution
The Elk River Vision
A PehoMing community 2a itb revolutionary and spirited resourcefulness, exceptional POWERED By
service, and community engagement that encourages and inspires prosperity INAWRE1
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
City of Elk River Business Subsidy Policy
Amended April 2015
Page 2 of 8
13065 Orono Parkway
Elk River, MN 55330
763.635.1040
City of Elk River Business Subsidy Policy
Amended April 2015
Page 3 of 8
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
Amended April 2015
Page 4 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
Amended April 2015
Page 5 of 8
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
Amended April 2015
Page 6 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
Page 7 of 8
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.
City of Elk River Business Subsidy Policy
Amended April 2015
Page 8 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
Amended April 2015
Page 9 of 8
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.
�1
City of
i
er
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
Cit,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 WE R E Re rPage 2 of 8 IN" AU
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*
Amended April 2015 P O W E R E D A V
Page 3 of 8A "UR
CITY OF ELK RIVER
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
I. PURPOSE
For the purposes of this document, the terra "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 has the meaning set forth in the Minnesota Business Subsidy Law
and may include 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
Amended April 2015 WE REoe rPage 4 of 8 JN" AU
A business subsidy does not include financial assistance excluded by the Minnesota Business
Subsidy Law including The following forms of financial assistance are no cotisi ere
Lb 11 Is i-fq�ess subsidy that would require a public hear4n
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
Amended April 2015 WE REoe rPage 5 of 8 JN" AU
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.
City of Elk River Business Subsidy Policy
Amended April 2015 WE REos rPage 6 of 8 1N" AU
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.
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
City of Elk River Business Subsidy Policy
Amended April 2015 WE REoe rPage 7 of 8 JN" AU
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,as defined in the Minnesota Business Subsidy Law
subsidy,which is the date that the recipiet-A receives the 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:
City of Elk River Business Subsidy Policy
Amended April 2015 WE REoe rPage 8 of 8 JN" AU
A. Progress Reports
The recipient shall file a report annually for two years after the receMng the
benefit date, as defined in the Minnesota Business Subsidy Law, 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
previdedfrom the benefit date, as defined in the Minnesota Business Subsidy
Law.
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 WE REoe rPage 9 of 8 JN" AU
city of
ver
Business Subsidy Policy
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
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
I. PURPOSE
For the purposes of this document, the terra '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" has the meaning set forth in the Minnesota Business Subsidy Law and may include 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.
A business subsidy does not include financial assistance excluded by the Minnesota Business Subsidy Law
including the following forms of financial assistance:
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;
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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.
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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 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.
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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.
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,as
defined in the Minnesota Business Subsidy Law, 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
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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 benefit date, as defined in the
Minnesota Business Subsidy Law, 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 from the benefit date, as defined in the Minnesota Business Subsidy Law.
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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.
Business Subsidy
Policy History
Adopted by: On date Item#
City Council 02/19/2019 7.1
City Council 4/20/2015 4.11
EDA 4/20/2019 6.1
HRA 11/2/2015 7.3
City Council 2/18/2014 4.9
EDA 2/18/2014 6.3
City Council 11/25/2002 6.2
EDA 12/09/2002 3.5
HRA 11/25/2002 6.1
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City of
Elk City of Elk River
Wver City Council
Resolution 19-
A Resolution of the City Council of the City of Elk River Approving an
Amended Business Subsidy Policy
WHEREAS, the City Council (the "Council") of the City of Elk River,Minnesota (the
"City") acknowledges the need to provide financial assistance to businesses to further the
economic development objectives of the City; and
WHEREAS, Minnesota Statutes. Sections 116J.993 through 116J.995, as amended (the
"Business Subsidy Act") requires any state or local government agency with the authority to
grant a business subsidy to establish business subsidy criteria before any new business
subsidy can be provided; and
WHEREAS, the Council previously approved business subsidy criteria and has now
determined to amend the criteria in accordance with the Business Subsidy Act; and
WHEREAS, the Council has performed all actions required bylaw to be performed prior
to the adoption of an amended version of the City of Elk River,Minnesota Business Subsidy
Criteria (the "Policy"),including the holding of a public hearing on behalf of itself, the
Economic Development Authority of the City of Elk River and the Housing and
Redevelopment Authority in and for the City of Elk River,Minnesota, upon published
notice as required by law.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Elk
River,Minnesota, as follows: 1. The Council hereby adopts the amended Policy, a copy of
which is on file at the City Hall. 2. City staff is authorized to transmit a copy of the Policy to
the Minnesota Department of Employment and Economic Development in accordance with
the Business Subsidy Act.
Passed and adopted this 191h day of February 2019.
John J. Dietz,Mayor
ATTEST:
Tina Allard, City NATUREJ