3.9.C. SR 05-15-2006
City of Elk River
REQUEST FOR COUNCIL ACTION
Agenda Section Meeting Date
Consent May 15,2006
Item Number
3.9.C.
Prepared by
Catherine Mehelich, Director of /J
Economic Develo ment ty
Reviewed by
Scott Clark, Community Development
Director
Item Description
Consider Adoption of Amended Tax Increment Financing
Polic
Introduction
The City of Elk River adopted its original Tax Increment Financing Policy in August 1991. The policy
was amended in March of 2000 to include provisions of the MN Business Subsidy Law and the City's
Business Subsidy Criteria.
Discussion
The attached policy includes the amendments noted in the April 1 0, 2006 staff report and discussion at
the EDA meeting.
Financial Impact
None
Attachments
. City of Elk River Tax Increment Financing Policy & Application, Amended May 2006
. Staff report to the EDA dated April 1 0, 2006
Action Requested
The EDA recendy reviewed and adopted the attached amended Tax Increment Financing Policy. Staff
requests the City Council consider adoption of the amended Tax Increment Financing Policy.
Council Action
Motion by _
Second by _
Vote
Follow Up
S:\EDA \ TIF\pOLICY & APPLICATION\5.15.06 COUNCIL.TIF.doc
MEMORANDUM
TO: Economic Development Authority
FROM: Catherine Mehelich, Director of Economic Development
DATE: April I 0, 2006
SUBJECT: Discuss Draft Amendments to the City's Tax Increment
Financing Policy and Application
Attachments
. Tax Increment Financing Policy and Application, 1st Draft Amended April 2006
Background
Staff has been working on a review of the city's various economic development financing
programs and policies for amendments. The City of Elk River adopted its original Tax
Increment Financing Policy in August 1991. The policy was amended in March of 2000 to
include the provisions of the MN Business Subsidy Law and the City's Business Subsidy
Policy.
Issue
Since the many of the amendments were minor (but significantly affected the document
reformatting) staff has provided the attached clean copy of the revised policy and application
for the EDA's review. Please contact staff if you wish to receive a copy of the word-by-
word tracking of revised policy amendments. Below is a summary of the significant staff
amendments:
. Added the following objectives to the use of TIF (Section II)
*To significantly increase the City's tax base
* To enhance and diversify the City's economic base
. Reduced the owner cash equity requirement from 20% to 10% (Section III)
. Added provision that all TIF proposals optimize the private development potential
of a site (Section III)
. Increased the following project qualifications (Section IV)
o Minimum increase of $37,500 per year in property taxes (originally $25,000)
o Result in a minimum market value of $1,250,000 (originally $1,000,000)
. Deleted the summary of the City's Business Subsidy Policy and state statute. Rather
the City's Business Subsidy Policy will be fully referenced within all financing policies
and applications (Section V)
. Increased the $5,000 application fee to a $10,000 non-refundable deposit (to cover
costs associated with establishing the TIF district) with the provision that
professional services in excess of the deposit shall be paid by the applicant, in
addition to professional cost associated with eminent domain and redevelopment
substandard tests (Section VI)
. Added provision that redevelopment and housing projects will be evaluated on a
case-by-case basis rather than using the scoring worksheet which is primarily
designed to evaluate industrial developments (Section VI)
. Added "Market Value/Tax Base Generation" to the application scoring worksheet
(Section IX)
Recommendation
Staff recommends that the EDA review the draft revised policy and provide feedback on any
additional revisions. Following the EDA's feedback staff will make the final revisions and
prepare the document for EDA and City Council adoption, along with the final Micro Loan
and Tax Abatement Policies, in May.
-""'
Tax Increment Financing
Policy & Application
Amended: May 2006
Amended: March 2000
Adopted: August 1991
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River, MN 55330
763.635.1040
Table of Contents
I. Policy Purpose 3
II. Objectives of Tax Increment Financing 3
III. City of Elk River Policies for the Use of TIF 4
IV. Project Qualifications 5
V. Application Process for TIF 6
VI. Application for TIF 7
Applicant Information 7
Project Information 8
Public Purpose 8
Sources & Uses 9
Checklist & Additional Information 10
VII. Sample But-For Analysis I I
VIII. Application Review Worksheet 12
IX. City of Elk River Business Subsidy Policy 13
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 2 of 14
I. POLICY 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 the City of Elk River's position relating to the
use of Tax Increment Financing (TIP) for private development above and beyond the
requirements and limitations set forth by State Law. This policy shall be used as a guide
in the processing and review of applications requesting tax increment assistance. The
fundamental purpose of tax increment financing in Elk River is to encourage desirable
development or redevelopment that would not otherwise occur but for the assistance
provided through TIF.
The City of Elk River is granted the power to utilize TIF by the Minnesota Tax
Increment Financing Act, as amended. It is the intent of the City to provide the
minimum amount ofTIF, as well as other incentives, 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 consideration established policies, project criteria, and
demand on city services in relation to the potential benefits from the project. Meeting
policy criteria does not guarantee the award of TIF to the project. Approval or denial of
one project is not intended to set precedent for approval or denial of another project.
II. OBJECTIVES OF TAX INCREMENT FINANCING
As a matter of adopted policy, the City will consider using TIF to assist private
development projects to achieve one or more of the following objectives:
. To retain local jobs and/or increase the number and diversity of jobs that offer
stable employment and/or attractive wages and benefits as defined in the City's
Business Subsidy Policy.
. To encourage additional unsubsidized private development in the area, either
direcdy or indirecdy through "spin off' development.
. To facilitate the development process and to achieve development on sites
which would not be developed without TIF assistance.
. To remove blight and/or encourage redevelopment of commercial and
industrial areas in the city that result in high quality redevelopment and private
reinvestment.
. To offset increased costs of redevelopment (i.e. contaminated site clean up)
over and above the costs normally incurred in development.
. To create opportunities for affordable housing.
. To contribute to the implementation of other public policies, as adopted by the
city from time to time, such as the promotion of quality urban or architectural
design, energy conservation, and decreasing capital and/or operating costs of
local government.
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 3 of 14
. To enhance and diversify the City of Elk River's economic base.
. To significandy increase the City of Elk River's tax base.
III. POLICIES FOR THE USE OF TIF
a. When possible, TIF shall be used to finance public improvements associated
with the project. The priority for the use of TIF funds is:
1. Public improvements, legal, administrative, and engineering costs.
2. Site preparation, site improvement, land purchase, and demolition.
3. Capitalized interest, bonding costs.
b. It is the City's policy to establish the following types ofTIF districts:
1. Economic Development Districts
. It is desired that the project result in a minimum creation of
one full time job per $25,000 ofTIF, or
. Result in a significant increase in the tax base.
2. Redevelopment Districts
. The market value of a redeveloped site shall increase by a
minimum of 50% of the current market value.
Other types of TIF districts, along with specific criteria, may be considered
on a case-by-case basis.
c. TIF assistance will be provided to the developer upon receipt of the
increment by the City, otherwise referred to as the pqy-asjlou-go method.
Requests for up front financing will be considered on a case-by-case basis.
d. A maximum of ten percent (10%) of any tax increment received from the
district may be retained by the City to reimburse administrative costs.
e. Any developer receiving TIF assistance shall provide a minimum of ten
percent (10%) owner cash equity investment in the project.
f. TIF will not be used in circumstances where land and/ or property price is in
excess of fair market value.
g. Developer shall be able to demonstrate a market demand for a proposed
project. TIF shall not be used to support purely speculative projects.
h. TIF will not be utilized in cases where it would create an unfair and
significant competitive financial advantage over other projects in the area.
1. TIF shall not be used for projects that would place extraordinary demands
on city services or for projects that would generate significant environmental
impacts.
J. The developer must provide adequate financial guarantees to ensure
completion of the project, including, but not limited to: minimum assessment
agreements, letters of credit, personal guaranties, and etcetera.
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 4 of 14
k. The developer shall adequately demonstrate, to the City's sole satisfaction, an
ability to complete the proposed project based on past development
experience, general reputation, and credit history, among other factors,
including the size and scope of the proposed project.
1. For the purposes of underwriting the proposal, the developer shall provide
any requested market, financial, environmental, or other data requested by
the City or its consultants.
m. All TIF proposals shall optimize the private development potential of a site.
IV. PROJECT QUALIFICATIONS
All TIF projects considered by the City of Elk River must meet each of the following
requirements:
a. To be eligible for TIF, a project shall result in:
i. The new construction of a minimum of 25,000 square feet;
11. A minimum increase of $37,500 per year, excluding the state portion
in property taxes; and,
ill. Have a market value of at least $1,250,000 upon completion.
b. The project shall meet at least one of the objectives set forth in Section II
and satisfy all the provisions set forth in Section III of this document.
c. The developer shall demonstrate that the project is not financially feasible
butforthe use ofTIF.
d. The project shall comply with all provisions set forth in the Tax Increment
Financing Act, Minnesota Statutes 469.124 to 469.134, inclusive, as amended,
and Statutes 469.174 to 469.1799, inclusive, as amended.
e. The project must be consistent with the City's Comprehensive Plan, Land
Use Plan, and Zoning Ordinances.
f. The project shall serve at least two of the following public purposes:
. Creation of jobs with livable wages and benefits.
. Significantly increase the City's tax base.
. Enhancement or diversification of the city's economic base.
. Industrial development that will spur additional private investment in
the area.
. Fulfillment of defined city objectives such as those identified in the
City's Comprehensive Plan and the City's Economic Development
Strategic Plan, among others.
. Removal of blight or the rehabilitation of a high profile or priority
site.
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 5 of 14
v. APPLICATION PROCESS FOR TIF
1. Applicant submits the completed application along with a non-refundable
$10,000 application deposit. The application deposit will be used toward the
cost of services provided in the evaluation of financial feasibility, establishment
or modification of the TIF district, and preparation of legal documents and
agreements. An additional deposit of $10,000 will be required for projects the
require meeting statutory eminent domain and/or redevelopment substandard
tests. Projects that demand professional services in excess of the initial deposit
shall be required to reimburse the City for the additional expenses.
2. City staff reviews the application and completes the Application Review
Worksheet. The Application and Application Review Worksheet is primarily
designed to score the desirability of an industrial project. Redevelopment and
Housing projects will be evaluated on a case-by-case basis and as the projects
meet the city's desired objectives.
3. Results of the Worksheet are submitted to the appropriate governing authorities
(EDA or HRA) for recommendation to the City Council of approval or denial
of the request.
4. If preliminary approval is granted, the Tax Increment Financing Plan, along
with all necessary notices, resolutions are prepared by City staff and/or
consultants.
5. Notices are published and sent to the county and school board.
6. Public hearing(s) on the proposed request are held.
7. The City Council grants final approval or denial of the request.
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 6 of 14
VI. APPLICATION FOR TAX INCREMENT FINANCING
A. APPLICANT INFORMATION
Name of Corporation/Partnership
Address
Primary Contact
Address
Phone
Fax
Email
Brief description of the corporation/partnership's business, including history, principal
product or service:
Brief description of the proposed project:
Attorney Name
Address
Phone Fax Email
Accountant Name
Address
Phone Fax Email
Contractor Name
Address
Phone Fax Email
Engineer Name
Address
Phone Fax Email
Architect Name
Address
Phone Fax Email
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 7 of 14
B. PROJECT INFORMATION
1. The project will be:
_Industrial Greenfield: _New Construction
_Commercial Redevelopment: _New Construction
_Industrial Redevelopment: _New Construction
_Other
_ Expansion
Rehabilitation
Rehabilitation
2. The project will be:
_Owner Occupied _Leased Space
3. Project Address
Legal Description & Parcel Identification Number(s)
4. Site Plan and Preliminary Construction Plans Attached:
Yes
No
s. Amount of Tax Increment Requested for:
Land Purchase $
Public Improvement $
Site Improvement $
6. Current Real Estate Taxes on Project Site: $
Estimated Real Estate Taxes upon Completion:
Phase I $
Phase II $
7. Construction Start Date:
Construction Completion Date:
If Phased Project:
Year
Year
% Completed
% Completed
C. PUBLIC PURPOSE
It is the policy of the City of Elk River that the use of Tax Increment Financing should
result in a benefit to the public. Please indicate how this project will serve a public
purpose.
_Job Creation/Retention: Number of existing jobs
Number of jobs created by project
Average hourly wage of jobs created/retained
_New industrial development, which will result in additional private
investment in the area.
_Enhancement or diversification of the city's economic base.
_The project contributes to the fulfillment of the City's Economic Development
Strategic Plan.
_Removal of blight or the rehabilitation of a high profile or priority site.
_Significandy increase the City's tax base.
_Other:
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 8 of 14
D. SOURCES & USES
SOURCES NAME
Bank Loan
Other Private Funds
Owner Cash Equity
Fed Grant/Loan
State Grant/Loan
EDA Micro Loan
Tax Increment
ID Bonds
TOTAL
USES
Land Acquisition
Site Development
Construction
Machinery & Equipment
Architectural & Engineering Fees
Legal Fees
Interest During Construction
Debt Service Reserve
Contingencies
TOTAL
City of Elk River
Tax Increment Policy & Application
Amended May 2006
AMOUNT
$
$
$
$
$
$
$
$
$
AMOUNT
$
$
$
$
$
$
$
$
$
$
Page 9 of 14
E. ADDITIONAL DOCUMENTATION AND CHECKLIST
Applicants will also be required to provide the following documentation.
A) Written business plan, including a description of the business,
ownership/management, date established, products and services, and
future plans
B) Financial Statements for Past Two Years
Profit & Loss Statement
Balance Sheet
C) Current Financial Statements
Profit & Loss Statement to Date
Balance Sheet to Date
D) Two Year Financial Projections
E) Personal Financial Statements of all Major Shareholders
Profit & Loss
Current Tax Return
F) Letter of Commitment from Applicant Pledging to Complete
During the Proposed Project Duration
G) Letter of Commitment from the Other Sources of Financing,
Stating Terms and Conditions of their Participation in
Project
H) Non-refundable application deposit of $10,000
I) Construction Plans and Itemized Project Construction Statement
J) Attach the following documentation as Exhibits
Exhibit A - Corporation/Partnership Description
Exhibit B - Description of Project
Exhibit C - List of Shareholders/Partners
Exhibit D - But-For Analysis
Exhibit E - List of Prospective Lessees
Exhibit F - Legal Description and PID Number(s)
Note: All Major shareholders will be required to sign personal guarantees if up front
financing of the project is required.
The undersigned certifies that all information provided in this application is true and correct to the best of the
undersigned's knowledge. The undersigned authorizes the City of Elk River to check credit references and
verify financial and other information. The undersigned also agrees to provide any additional information as
may be requested by the City after the filing of this application.
Applicant Name
Date
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 10 of 14
VII. SAMPLE BUT-FOR ANALYSIS
WITH NO WITH
TAX INCREMENT TAX INCREMENT
SOURCES AND USES SOURCES AND USES
SOURCES SOURCES
Mortgage 9,600,000 8,667,000
Equity 2,400,000 2,400,00
Tax Increment Financing 0 933,000
TOTAL SOURCES 12,000,000 12,000,000
USES USES
Land 1,500,000 1,500,000
Site Work 300,000 300,000
Soil Correction 468,000 468,000
Demolition 100,000 100,000
Relocation 65,000 65,000
Subtotal Land Costs 2,433,000 2,433,000
Construction 6,750,000 6,750,000
Finish Manufacturing 250,000 250,000
Subtotal Construction Costs 7,000,000 7,000,000
Soft Costs 350,000 350,000
Taxes 35,000 35,000
Finance Fees 850,000 850,000
Project Manager 542,000 542,000
Developer Fee 540,000 540,000
Contingency 250,000 250,000
Subtotal Soft Costs 2,567,000 2,567,000
TOTAL USES 12,000,000 12,000,000
Income Statement Income Statement
Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft.
Rent-Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000
Rent-Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500
Rent-Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000
Other 0 $0.00 0 0 $0.00 0
1,237,500 1,237,500
Mortgage 20 Term 1,051,646 20 Term 949,439
9.00% Interest 9.00% Interest
9,600,000 Principal 8,667,000 Principal
Net Income 185,854 288,061
Total Return on Equity 7.74% 12.00%
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 11 of 14
VIII. TAX INCREMENT FINANCING APPLICATION REVIEW
WORKSHEET
I TO BE COMPLETED BY CITY STAFF I
1. The project meets the criteria set forth in Section IV of the City's Tax Increment
Financing policy.
a) Meets minimum thresholds for size, value, and tax revenue.
b) Meets at least one of the objectives in Section II and satisfies
the provision set forth in Section III.
c) Demonstrates need for TIF with the butjor analysis.
e) Consistent with all city plans and ordinances.
f) Serves at least two public purposes as defined in Section IV.
2. Ratio of Private to All Public Investment in Project:
$ Private investment
$ Public Investment
Ratio Private: Public Financing
3. Job Creation in the City of Elk River:
Number of new jobs as a result of the project.
Number of existing/retained jobs divided by 10.
Total
4. Ratio of Public Investment to Job Creation:
$ Public Investment
Number of new jobs created/retained
$ Public Investment per new job
5. Wage Level of new jobs created/retained:
Minimum hourly wage
of jobs created/retained:
6. Project size:
The project will result in the construction
of square feet
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Points:
5:1 5
4:1 4
3:1 3
2:1 2
Less than 2:1 1
Points:
40+ 5
30+ 4
20+ 3
10+ 2
Less than 10 1
Points:
$15,000 or less 5
$20,000 or less 4
$22,000 or less 3
$25,000 or less 2
Over $25,000 1
Points:
Over $21/ hour 5
$18-21 / hour 4
$14-17 / hour 3
$10-13 / hour 2
Under $10/ hour 1
Points:
80,000+ 5
65,000+ 4
50,000+ 3
35,000+ 2
25,000+ 1
Page 12 of 14
7. Market Value/Tax Base Generation:
The project will result in a per square foot
estimated market value (land and building)
of
Points:
Industrial Commercial
$80/sH $110/sH 5
$70/sH $100/sH 4
$60/ sH $90/ sH 3
$50/ sH $80/sH 2
$40/sH $70/sH 1
Points:
5
4
3
Points:
5
4
3
2
1
8. Type of Project:
100% Owner Occupied
Mix Owner Occupied & Investment
Investment Property
9. Use:
Manufacturing
Research & Development
Commercial Redevelopment
Warehouse/Distribution
Housing
High
Moderate
Low
Points:
5
3
1
10. Likelihood that the project will result in
unsubsidized, spin-off development.
I Sub - Total Points:
of a possible 45 points.
I
11. Bonus Points
Bonus Points:
The project will be 100% Pqy-asjlou-go TIF.
The project contributes to the goals of Energy City.
. Product promotes sensible use of energy, OR
. Project utilizes significant energy efficient design &/ or
materials in construction.
3 points
2 points
Total Points:
Overall project analysis:
High
Moderate
Low
Not Eligible
45-38 points
37-29 points
28-20 points
19-0 points
City of Elk River
Tax Increment Policy & Application
Amended May 2006
Page 13 of 14
Business Subsidy Policy
Amended & Adopted:
May 2006
Origjnal Adopted:
Housing & Redevelopment Authority
City Council
Economic Development Authority
November 25,2002
November 25, 2002
December 9, 2002
City of Elk River
Economic Development Division
13065 Orono Parkway
Elk River, :MN 55330
763.635.1040
CITY OF ELK RIVER
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
I. PURPOSE
For the purposes oj this document, the term "Ciry" shall include the Elk River Ciry Council, Economic Development
Authoriry, and Housing and Redevelopment Authoriry.
The purpose of this policy is to establish guidelines and criteria regarding the use of business
subsidies, such as tax increment financing (TIp), 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 State Statute 116].993 (MN 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 servicesin relation
to the potential benefits to be received from a proposed project. Meeting policy guidelines
or other criteria does not guarantee the award of a business subsidy. Furthermore, the
approval or denial of one project is not intended to set precedent for approval or denial of
another project.
Whenever possible it is the City's intent to coordinate the use of business subsidies with
other applicable taxing jurisdictions.
II. DEFINITION OF "BUSINESS SUBSIDY"
The following types of assistance having a value in excess of $25,000 are defined as a
"business subsidy" within the MN Business Subsidy Law:
. State and local government agency grants;
. Contributions of personal property, real property, or infrastructure;
. The principal amount of a loan that exceeds $75,000 at rates below those
commercially available;
. Reductions or deferrals of taxes or fees;y. Guarantees of any payment under any loan, lease, or other obligation; and,
. Preferential use of government facilities.
City of Elk River Business Subsidy Policy
Amended May 2006
2
III. PUBLIC PURPOSE OBJECTIVES OF BUSINESS SUBSIDIES
In accordance with the MN 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.
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.
City of Elk River Business Subsidy Policy
Amended May 2006
3
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.
1. 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.
1. Projects receiving business subsidy approval from other affected taxing jurisdictions
will be more favorably received by the City.
V. GUIDELINES FOR COMMERCIAUINDUSTRIAL BUSINESS
SUBSIDIES
A. Business subsidies will not be used for retail or service businesses unless it is a
redevelopment project that demonstrates that it will result in a substantial increase in
tax base and a significant improvement in quality employment.
B. The project must be consistent with the City's Comprehensive Plan, Land Use Plan,
and Zoning Ordinances.
C. The project must result in the retention of existing jobs that would be lost "but for"
the proposed development or result an increase and diversification in local jobs.
Business retention jobs will be considered on a one-for-one match to job creation
only in cases where job loss is specific and demonstrable in accordance with the MN
Business Subsidy Law.
D. Specific wage and job goals will be determined by the City giving consideration to
the particular form of the subsidy, nature of the development, the purpose of the
subsidy, local economic conditions and similar factors. The recipient will have up to
two years from the benefit date, which is the date that the recipient receives the
subsidy, to meet the job and wage goals established by the City.
E. The minimum wage for a job to be considered a new or retained job shall be $15.00
per hour, 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 MN 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.
City of Elk River Business Subsidy Policy
Amended May 2006
4
VI. GUIDELINES FOR REDEVELOPMENT AND RENOVATION
BUSINESS SUBSIDIES
In accordance with the MN Business Subsidy Law, the following forms of financial
assistance related to redevelopment and renovation are not a "business subsidy":
A. Assistance provided for the sole purpose of renovating old or decaying building
stock or bringing it up to code, provided that the assistance is equal to or less
than 50 percent of the total cost;
B. Assistance for pollution control or abatem~nt;
C. 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.
VII. SUBSIDY APPLICATION PROCESS AND PROCEDURE
A. Application for business subsidies shall be made on the City's forms for the
particular type of assistance. The application for business subsidies shall request
information required within the City's policies on the particular form of subsidy
including but not limited to; a detailed description of the project; a preliminary site
plan; the amount of business subsidy requested; the public purpose of the project;
the number and types of jobs to be created; the wages and benefits to be paid new
employees; and verifiable funding sources and uses.
B. Following a review by appropriate City Staff the application shall be referred to the
either the Economic Development Authority, or Housing and Redevelopment
Authority, for recommendation to the City Council for denial or approval.
C. Before granting a business subsidy that exceeds $100,000, 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.
VIII. SUBSIDY AGREEMENT AND REPORTING REQUIREMENTS
Each company receiving a business subsidy shall be subject to the subsidy agreement and
reporting provisions and requirements set forth by the MN Business Subsidy Law and
summarized below:
A. Progress Reports
The recipient shall file a report annually for two years after the receiving the
subsidy or until all goals set forth in the subsidy agreement have been met, which
ever is later. Reports shall be completed using the format drafted by the State of
Minnesota and shall be filed with the City's Economic Development Division no
later than March 1 of each year for the progress made the previous year.
City of Elk River Business Subsidy Policy
Amended May 2006
5
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. F allure to Comply
Businesses failing to comply with the subsidy agreement will be subject to fines,
repayment requirements at the rate established within the MN 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 May 2006
6