7.2. EDSR 03-18-2019
Request for Action
To Item Number
Economic Development Authority 7.2
Agenda Section Meeting Date Prepared by
General Business March 18, 2019 Amanda Othoudt, EDD
Item Description Reviewed by
Business Subsidy Policy Cal Portner, City Administrator
Reviewed by
Action Requested
Approve, by motion, a resolution approving changes to the city’s Business Subsidy Policy.
Background/Discussion
At their February 18, 2019, annual meeting, the EDA approved the changes to the Business Subsidy
Policy recommended by the EDA attorney. The City Council held a public hearing on February 19, 2019,
to consider the changes to the policy and invite public comment. No one spoke at the public hearing. The
Council adopted resolution 19-06 approving the changes to the policy.
The purpose of the Business Subsidy Policy is to establish guidelines and criteria regarding the use of
business subsidies including tax increment financing and tax abatement for private development projects.
This policy outlines 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 for business subsidies.
Financial Impact
N/A
Attachments
2019 Business Subsidy Policy
CC Resolution 19-06
EDA Resolution
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
Business Subsidy Policy
1
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
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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" 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, whichever 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.
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Business Subsidy
Policy History
Adopted by: On (date) Item #
EDA 3/18/2019 7.2
HRA 3/4/2019 7.1
City Council 2/19/2019 7.1
City Council 4/20/2015 4.11
EDA 4/20/2015 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 Hk River
ver (City CouncH
Resolution l 9. 06
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 by law 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 19"' day of February 2019.
J n J. ietz, yox
ATTEST:
Tina Allard, City Clerk
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF ELK RIVER
COUNTY OF SHERBURNE
STATE OF MINNESOTA
RESOLUTION NO. 2019-____
RESOLUTION APPROVING AN AMENDED
BUSINESS SUBSIDY POLICY
WHEREAS, the Board of Commissioners (the “Board”) of the Economic Development
Authority of the City of Elk River (the “EDA”) acknowledges the need to provide financial
assistance to businesses to further the economic development objectives of the City of Elk River,
Minnesota (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 EDA previously approved business subsidy criteria and has now
determined to amend the criteria in accordance with the Business Subsidy Act; and
WHEREAS, on the date hereof, the City Council of the City held a duly noticed public
hearing on amending the business subsidy criteria on behalf of the Board of the EDA; and
WHEREAS, the Board has performed all actions required by law to be performed prior to
the adoption of an amended version of the City of Elk River, Minnesota Business Subsidy Criteria
(the “Policy”).
NOW THEREFORE, BE IT RESOLVED by the Board of Commissioners of the
Economic Development Authority of the City of Elk River as follows:
1. The Board hereby adopts the amended Policy, a copy of which is on file at the City
Hall.
2. EDA 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.
554554v1 EL185-13
Approved by the Board of Commissioners of the Economic Development Authority of the City of Elk
th
River this 18 day of March, 2019.
President
ATTEST:
Executive Director
554554v1 EL185-13