6.2. SR 11-25-2002Item -6.2.
MEMORANDUM
TO:
FROM:
DATE:
Housing & Redevelopment Authority
Mayor & Cit~ Council
Catherine Mehelich, Director of Economic Development~/~L
November 25, 2002
SUBJECT: Public Hearing-Adoption of the City of Elk River Business
Subsidies Policy
Attachments
· Proposed City of Elk River Business Subsidies Policy
Issue
The issue before the HRA and City Council is to each hold a public hearing on and consider
the adoption of the attached City of Elk River Business Subsidies Policy.
Background
Prior to awarding any subsidy, as defined by law, to any business, a City Council and any
HRA, EDA must hold a public hearing and adopt criteria for awarding business subsides.
The criteria must include a policy regarding the wages to be paid for any jobs created or
retained. The city has the flexibility to deviate from the policy in accordance with statutory
limitations (ie. documentation stating reasons for deviation must be provided to the MN
Dept of Trade & Economic Development as part of the annual report).
The EDA, Finance Committee, HRA and City Council have reviewed the attached policy
over the last two months for input. The EDA recently adopted the policy following its
public hearing held earlier this month.
Action Requested
Staff recommends that the HRA and City Council consider any input provided at its
respective public hearings and then adopt the City of Elk River Business Subsidies Policy.
S:\EDANBusSubsidy~NovHRACC.doc
PROPOSED
11/25/02
CITY OF ELK RIVER
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
I. PURPOSE
tVor the purposes of this document, the term "City"shall include the Elk Po'ver Ci[y Count/, Economic Development
,4uthori(y, and I-lousing and Redeve/opment Authofft. y.
The purpose of this policy is to establish guidelines and criteria regarding the use of business
subsidies, such as tax increment fmancing (TIF), tax abatement, and other business subsidies
for private development projects within the City of Elk River and shall be in addition to the
requirements and limitations set forth by provisions of Minnesota State Statute 116J.993
(MN Business Subsidy Law), and by the City's policy and guidelines of the particular form of
subsidy.
These guidelines shall be used in processing and reviewing applications requesting business
subsidies assistance. The fundamental purpose of business subsidies in the City is to
encourage desirable development or redevelopment that would not other, vise occur "but
for" the assistance provided through business subsidies.
It is the intent of the City to provide a minimum amount of 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 business
subsidies. 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;
· Guarantees of any payment under any loan, lease, or other obligation; and,
· Preferential use of government facilities.
City of Elk River Business Subsidies Policy 1
PROPOSED
11/2 5/02
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
direcdy or indirecdy through "spin off" development.
· To achieve development on sites which ~vould 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 other~vise preclude private investment.
· To create opportunities for the construction, operation and maintenance of
affordable housing.
IV.
A.
GENERAL POLICIES FOR THE USE OF BUSINESS SUBSIDIES
Business subsidy assistance will be provided from the City, by 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.
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.
Business subsidy 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.
A developer must be able to demonstrate to the City, or, if applicable, to the
underwriting authority, a market-demand for a proposed project.
Business subsidy 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.
Business subsidy will not be used for projects that would place extraordinary
demands on city infrastructure and services.
City of Elk River Business Subsidies Policy 2
PR OPOSED
11/2 5/02
Ho
If requested by the City, the developer shah provide adequate financial guarantees to
ensure completion of the project, including, but not limited to: assessment
agreements, letters of credit, cash escrows, and personal guaranties.
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.
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.
Projects receiving business subsidy approval from other affected taxing jurisdictions
will be more favorably received by the City.
V0
GUIDELINES FOR COMMERCIAL/INDUSTRIAL BUSINESS
SUBSIDIES
Business subsidies ~vill not be used for on-site 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.
The project must be consistent with the City's Comprehensive Plan, Land Use Plan,
and Zoning Ordinances.
The project must result in the retention of existing jobs that ~vould 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.
Specific ~vage and job goals will be determined by the City gwing 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 to meet the job and wage goals established by the City. The minimum
wage for a job to be considered a new or retained job shah be $15.00 per hour
exclusive of benefits. Deviations less than the wage floor will be considered on a
case-by-case basis and in accordance with the requizements of the MN Business
Subsidy Law.
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 Subsidies Policy 3
PROPOSED
11/2 5/02
VI. 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:
Progress Reports
The recipient shall file a report annually for txvo 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 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.
Failure to Comply
Businesses failing to comply with the subsidy agreement will be subject to frees,
repayment requirements, and be deemed ineligible by the State to receive any
loans or grants from public entities for a period of five years.
VII,
A.
SUBSIDY APPLICATION PROCESS AND PROCEDURE
Application for business subsidies shah be made on forms for the particular form of
assistance provided by the City of Elk River Director of Economic Development, or
designee. A fee of $ 5,000.00 shall accompany any Tax Inc. rement Finance, Tax
Abatement, or grant request application to cover the City's initial legal,
administrative, and planning costs. 'Micro-Loan applications shall include a fee in the
amount of 1% of the loan requested.
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 further action.
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.
City of Elk River Business Subsidies Policy 4