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HomeMy WebLinkAbout11.24.14 Special EDA PacketAGENDA SPECIAL ECONOMIC DEVELOPMENT AUTHORITY MEETING November 24, 2014 5:00 PM Room 170 Todd Larson, Chair; Geraldine Jolley, Vice -Chair Douglas Bonar, Steve Wilson, Kirk Zeaman 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL 4. APPROVE AGENDA 5. CITIZENS COMMENTS 6. CITIZENS COMMENTS 7. CONSENT AGENDA 8. PUBLIC HEARINGS 9. DISCUSSION ITEMS (a) Business Subsidy Policy Work Session Discussion 10. ADJOURN TO: FROM: SUBJECT: DATE: City of Farmington 430 Third Street Farmington, Minnesota 65L280.6800 - Fax 651.280.6899 www.ci.farmington.mn.us Economic Development Authority Adam Kienberger, Community Development Director Business Subsidy Policy Work Session Discussion November 24, 2014 INTRODUCTION/DISCUSSION A strategic priority of the City Council is to become more active in and strengthen the City's economic development efforts. Economic development typically revolves around three main ideas: creation of jobs, expanding the tax base, and increasing the quality of life within the community. When exploring ways to encourage growth and bring in new businesses to a community, it is often a good idea to review the policies in place that impact how businesses work with and perceive the community. A common question that arises during early discussions with potential business prospects is the availability of financial assistance. While not always crucial to securing a deal, having a current business assistance policy in place demonstrates that the community knows what its priorities are and how it will handle requests for assistance. Farmington's current Business Subsidy Policy dates back to 2002. Farmington does not have a specific TIF or Tax Abatement policy. After a bit of research it would appear that the EDA discussed updating its Business Subsidy Policy in the form of a Business Incentive Grant Program back in May of 2013. That idea was ultimately shelved in order to focus on a Marketing Plan which is currently in the implementation stage. I have attached several resources that can be utilized during our discussion of the business subsidy policy: • Farmington's current business subsidy policy (2002) • A memo from our city attorney from 2009 providing general background on business subsidies • Minnesota State Statutes 116J.993- 116J.994 governing business subsidies in Minnesota • A summary of the differences between TIF and Tax Abatement (City of Northfield's website) • Lakeville's current business subsidy policy (2011) • Lakeville's TIF policy (2013) • Northfield's Tax Abatement policy (2013) I will walk through the current Business Subsidy Policy with the EDA and note where there are areas we may want to consider expanding or further defining our priorities. Specifically be thinking about minimum number of jobs to be created, minimum wage criteria, and project criteria relating to "public purposes ". ACTION REQUESTED None, this discussion item is meant to further the conversation on how to utilize our financial tools to promote proactive economic development in Farmington. ATTACHMENTS: Type D Backup Material Description Business Subsidy Reference Materials CITY OF FARMINGTON, MINNESOTA Business Subsidy Policy SECTION 1. PURPOSE OF POLICY. The purpose of this Business Subsidy Policy (the "Policy ") is to establish criteria by which the City of Farmington, Minnesota (the "City ") may grant a business subsidy to a business (a "Business Subsidy "), as defined in Minnesota Statutes, Section 116J.993, subdivision 3. This policy sets forth the criteria to be considered by the City in awarding a Business Subsidy in compliance with Minnesota Statutes, Sections 116J.993 to 116J.995 (the "Act "). The City may deviate from this Policy only by documenting in writing the reason for deviation and attaching a copy of such documentation to its annual report to the Department of Trade and Economic Development, as provided in the Act. SECTION 2. PUBLIC PURPOSES. A Business Subsidy granted hereunder must meet one or more of the following public purposes: A. To redevelop blighted or under - utilized areas of the City. B. To provide for or promote housing for persons and families of low and moderate incomes within the City. C. To provide for mixed - income housing developments within the City. D. To promote neighborhood stabilization and revitalization by the removal of blight and the upgrading in existing housing stock in residential areas of the City. E. To create additional job opportunities within the City. F. To retain local jobs in the City, where job loss is specific and demonstrable. G. To enhance the economic diversity of the City and to provide essential products and services within the City. A Business Subsidy shall not be granted hereunder merely because it is found that the granting of the Business Subsidy will result in an increase in the tax base of the City. SECTION 3. MANDATORY MINIMUM CRITERIA. Any project for which a Business Subsidy is granted by the City shall meet the following mandatory minimum criteria: A. Where the public purpose of a project is the creation of additional jobs in the City, the project receiving business assistance must create a minimum of 1 new full - time equivalent [FTE] job in the community, with a minimum wage of at least 125% of the prevailing federal minimum wage. 1 B. Where the public purpose of a project is the retention of existing jobs in the City, the party requesting the Business Subsidy shall provide evidence that the loss of jobs in the City is imminent in the absence of the granting of the Business Subsidy. C. Any party requesting a Business Subsidy must be able to demonstrate successful general development capability, as well as specific capability in the type and size of development proposed. D. All project proposals shall, in the opinion of the City Council, optimize the private development potential of a site. E. The project must meet the "but for" test, meaning that but for the Business Subsidy requested, it would not be financially feasible for the project to proceed in the manner as proposed. F. The project must not generate significant environmental concerns in the opinion of local, state or federal governmental units. G. The project must be in accordance with the comprehensive plan, zoning, redevelopment plans, and policies of the City. SECTION 4. AWARD OF BUSINESS SUBSIDY. A project meeting the above criteria will not automatically be approved for a Business Subsidy. Meeting such criteria creates,no contractual rights on the part of any party seeking a Business Subsidy. A Business Subsidy shall be provided within applicable state and local legal requirements. In granting a Business Subsidy, the City shall enter into an agreement with the recipient that provides the information, wage and job goals, commitment to provide necessary reporting data, recourse for failure to meet such goals, and other covenants, as required by the Act. 2 MEMORANDUM TO: Farmington EDA Chair and Board members FROM: Andrea McDowell Poehler DATE: March 20, 2009 RE: Business Subsidies BACKGROUND Staff has requested that our office provide some general information to the EDA concerning laws regulating business subsidies. Business subsidies are regulated by Minnesota State law, chapter 116J. A business subsidy is defined under Minn. Stat. §116J.993, subd. 3, as a state or 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." The statute provides a list of 23 exceptions to the foregoing definition of financial assistance that do not constitute a business subsidy. Prior to awarding a business subsidy, including a business subsidy of $25,000 or more or a loan of $75,000 or more, to any business, a City or EDA must hold a public hearing and adopt criteria for awarding business subsidies. The criteria must include a specific wage floor for the wages to be paid for the jobs to be created stated as a specific dollar amount or formula that will generate a specific dollar amount. A grantor may deviate from its criteria by documenting in writing the reason for the deviation and attaching a copy of the document to its next annual report to the department. The City and EDA have complied with this requirement through the adoption of its business subsidy policy. Once criteria are established for providing a business subsidy, the City /EDA and the recipient must enter into a subsidy agreement that meets the statutory requirements. The agreement must include an obligation to repay part or the entire subsidy if the recipient does not meet its obligations. The subsidy agreement, in addition to any other goals required by the City /EDA, must include: • Goals for the number of jobs created, which may include separate goals for the number of part-time or full -time jobs, or, in cases where the job loss is specific and demonstrable, goals for the number of jobs retained; • Wage goals for any jobs created or retained; and • Wage goals for any jobs to be enhanced through increased wages. The wage and job goals must contain specific goals to be attained within two years of the benefit date. During the period of the subsidy, the grantor must monitor the progress of the recipient in achieving the agreement goals and the recipient is required to provide information and reports relevant to their progress. If a business subsidy will exceed $150,000, the City /EDA must provide public notice and a hearing on the subsidy. The law provides for a 180 day statute of limitations for citizens or owners of property in the city to bring a civil action against the city for failure to comply with the business subsidy laws. ATTACHMENTS Minnesota Statutes Ch. 116J.993-994 1 116J.993 DEFINITIONS. MINNESOTA STATUTES 2014 1161993 Subdivision 1. Scope. For the purposes of sections 116.1993 to 116J.995, the terms defined in this section have the meanings given them. Subd. 2. Benefit date. "Benefit date" means the date that the recipient receives the business subsidy. If the business subsidy involves the purchase, lease, or donation of physical equipment, then the benefit date begins when the recipient puts the equipment into service. If the business subsidy is for improvements to property, then the benefit date refers to the earliest date of either: (1) when the improvements are finished for the entire project; or (2) when a business occupies the property. If a business occupies the property and the subsidy grantor expects that other businesses will also occupy the same property, the grantor may assign a separate benefit date for each business when it first occupies the property. Subd. 3. Business subsidy. "Business subsidy" or "subsidy" means a state or local government agency grant, contribution of personal property, real property, infrastructure, the principal amount of a loan at rates below those cornrnercially 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. The following forms of financial assistance are not a business subsidy: (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 in section 1167.552, subdivision 3; (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 under section 469.174, subdivision 23; (9) assistance for energy conservation; (10) tax reductions resulting from conformity with federal tax law; (11) workers' compensation and unemployment insurance; Copyright ® 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. 1161993 MINNESOTA STATUTES 2014 2 (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 fmancing soils condition district as defined under section 469.174, subdivision 19; (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 De- velopment Administration; and (23) property tax abatements granted under section 469.1813 to property that is subject to valuation under Minnesota Rules, chapter 8100. Subd. 4. Grantor. "Grantor" means any state or local government agency with the authority to grant a business subsidy. Subd. 5. Local government agency. "Local government agency" includes a statutory or home rule charter city, housing and redevelopment authority, town, county, port authority, economic development authority, community development agency, nonprofit entity created by a local government agency, or any other entity created by or authorized by a local government with authority to provide business subsidies. Subd. 6. Recipient. "Recipient" means any for - profit or nonprofit business entity that receives a business subsidy. Only nonprofit entities with at least 100 full -time equivalent positions and with a ratio of highest to lowest paid employee, that exceeds ten to one, determined on the basis of full -time equivalent positions, are included in this definition. Subd. 6a. Residence. "Residence" means the place where an individual has established a permanent home from which the individual has no present intention of moving. Subd. 7. State government agency. "State government agency" means any state agency that has the authority to award business subsidies. History: 1999 c 243 art 12 s I; 2000 c 482 s 1; 2004 c 206 s 52; 1Sp2005 c 3 art 7 s I; 2006 c 259 art 4sl; 2008c366art5s2 Copyright © 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. 1 MINNESOTA STATUTES 2014 116J.994 116J.994 REGULATING LOCAL AND STATE BUSINESS SUBSIDIES. Subdivision 1. Public purpose. A business subsidy must meet a public purpose which may include, but may not be limited to, increasing the tax base. Job retention may only be used as a public purpose in cases where job loss is specific and demonstrable. Subd. 2. Developing a set of criteria. A business subsidy may not be granted until the grantor has adopted criteria after a public hearing for awarding business subsidies that comply with this section. The criteria may not be adopted on a case -by -case basis. The criteria must set specific minimum requirements that recipients must meet in order to be eligible to receive business subsidies. The criteria must include a specific wage floor for the wages to be paid for the jobs created. The wage floor may be stated as a specific dollar amount or may be stated as a formula that will generate a specific dollar amount. A grantor may deviate from its criteria by documenting in writing the reason for the deviation and attaching a copy of the document to its next annual report to the department. The commissioner of etnployinent and economic development may assist local government agencies in developing criteria. A copy of the criteria must be submitted to the Deparhnent of Employment and Economic Development along with the first annual report following May 15, 2000, or with the first annual report after it has adopted criteria, whichever is earlier. Notwithstanding section 1161.993, subdivision 3, clauses (1) and (21), for the purpose of this subdivision, "business subsidies" as defined under section 1161.993 includes the following forms of financial assistance: (1) a business subsidy of $25,000 or more; and (2) business loans and guarantees of $75,000 or more. Subd. 3. Subsidy agreement. (a) A recipient must enter into a subsidy agreement with the grantor of the subsidy that includes: (1) a description of the subsidy, including the amount and type of subsidy, and type of district if the subsidy is tax increment financing; (2) a statement of the public purposes for the subsidy; (3) measurable, specific, and tangible goals for the subsidy; (4) a description of the financial obligation of the recipient if the goals are not met; (5) a statement of why the subsidy is needed; (6) a commitment to continue operations in the jurisdiction where the subsidy is used for at least five years after the benefit date; (7) the name and address of the parent corporation of the recipient, if any; and (8) a list of all financial assistance by all grantors for the project. (b) Business subsidies in the form of grants must be structured as forgivable loans. For other types of business subsidies, the agreement must state the fair market value of the subsidy to the recipient, including the value of conveying property at less than a fair market price, or other in -kind benefits to the recipient. (c) If a business subsidy benefits more than one recipient, the grantor must assign a proportion of the business subsidy to each recipient that signs a subsidy agreement. The proportion assessed to each recipient must reflect a reasonable estimate of the recipient's share of the total benefits of the project. Copyright © 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. 1167.994 MINNESOTA STATUTES 2014 2 (d) The state or local government agency and the recipient must both sign the subsidy agreement and, if the grantor is a local government agency, the agreement must be approved by the local elected governing body, except for the St. Paul Port Authority and a seaway port authority. (e) Notwithstanding the provision in paragraph (a), clause (6), a recipient may be authorized to move from the jurisdiction where the subsidy is used within the five -year period after the benefit date if, after a public hearing, the grantor approves the recipient's request to move. For the purpose of this paragraph, if the grantor is a state government agency other than the Iron Range Resources and Rehabilitation Board, "jurisdiction" means a city or township. Subd. 4. Wage and job goals. The subsidy agreement, in addition to any other goals, must include: (1) goals for the number of j obs created, which may include separate goals for the number of part -time or full - time jobs, or, in cases where job loss is specific and demonstrable, goals for the number of jobs retained; (2) wage goals for any jobs created or retained; and (3) wage goals for any jobs to be enhanced through increased wages. After a public hearing, if the creation or retention of jobs is determined not to be a goal, the wage and job goals may be, set at zero. The goals for the number of jobs to be created or retained must result in job creation or retention by the recipient within the granting jurisdiction overall. In addition to other specific goal time frames, the wage and job goals must contain specific goals to be attained within two years of the benefit date. Subd. 5. Public notice and hearing. (a) Before granting a business subsidy that exceeds $500,000 for a state government grantor and $150,000 for a local government grantor, the grantor must provide public notice and a hearing on the subsidy. A public hearing and notice under this subdivision is not required if a hearing and notice on the subsidy is otherwise required by law. (b) Public notice of a proposed business subsidy under this subdivision by a state government grantor, other than the Iron Range Resources and Rehabilitation Board, must be published in the State Register. Public notice of a proposed business subsidy under this subdivision by a local government grantor or the Iron Range Resources and Rehabilitation Board must be published in a local newspaper of general circulation. The public notice must identify the location at which information about the business subsidy, including a summary of terms of the subsidy, is available Published notice should be sufficiently conspicuous in size and placement to distinguish the notice from the surrounding text. The grantor must make the information available in printed paper copies and, if possible, on the Internet. The government agency must provide at least a ten -day notice for the public hearing. (c) The public notice must include the date, time, and place of the hearing. (d) The public hearing by a state government grantor other than the Iron Range Resources and Reha- bilitation Board must be held in St. Paul. (e) If more than one nonstate grantor provides a business subsidy to the same recipient, the nonstate grantors may designate one nonstate grantor to hold a single public hearing regarding the business subsidies provided by all nonstate grantors. For the purposes of this paragraph, " nonstate grantor" includes the iron range resources and rehabilitation board. (f) The public notice of any public meeting about a business subsidy agreement, including those required by this subdivision and by subdivision 4, must include notice that a person with residence in or the owner of taxable property in the granting jurisdiction may file a written complaint with the grantor if the grantor Copyright © 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. 3 MINNESOTA STATUTES 2014 1167.994 fails to comply with sections 1167.993 to 1167.995, and that no action may be filed against the grantor for the failure to comply unless a written complaint is filed. Subd. 6. Failure to meet goals. (a) The subsidy agreement must specify the recipient's obligation if the recipient does not fulfill the agreement. At a minimum, the agreement must require a recipient failing to meet subsidy agreement goals to pay back the assistance plus interest to the grantor or, at the grantor's option, to the account created under section 1167.551 provided that repayment may be prorated to reflect partial fulfillment of goals. The interest rate must be set at no less than the implicit price deflator for government consumption expenditures and gross investment for state and local governments prepared by the Bureau of Economic Analysis of the United States Department of Commerce for the 12 -month period ending March 31 of the previous year. The grantor, after a public bearing, may extend for up to one year the period for meeting the wage and job goals under subdivision 4 provided in a subsidy agreement. A grantor may extend the period for meeting other goals under subdivision 3, paragraph (a), clause (3), by documenting in writing the reason for the extension and attaching a copy of the document to its next annual report to the department. (b) A recipient that fails to meet the terms of a subsidy agreement may not receive a business subsidy from any grantor for a period of five years from the date of failure or until a recipient satisfies its repayment obligation under this subdivision, whichever occurs first. (c) Before a grantor signs a business subsidy agreement, the grantor must check with the compilation and summary report required by this section to determine if the recipient is eligible to receive a business subsidy. Subd. 7. Reports by recipients to grantors. (a) A business subsidy grantor must monitor the progress by the recipient in achieving agreement goals. (b) A recipient must provide information regarding goals and results for two years after the benefit date or until the goals are met, whichever is later. If the goals are not met, the recipient roust continue to provide information on the subsidy until the subsidy is repaid. The information must be filed on forms developed by the commissioner in cooperation with representatives of local government. Copies of the completed forms roust be sent to the local government agency that provided the subsidy or to the commissioner if the grantor is a state agency. If the Iron Range Resources and Rehabilitation Board is the grantor, the copies must be sent to the board. The report must include: (I) the type, public purpose, and amount of subsidies and type of district, if the subsidy is tax increment financing; (2) the hourly wage of each job created with separate bands of wages; (3) the sum of the hourly wages and cost of health insurance provided by the employer with separate bands of wages; (4) the date the job and wage goals will be reached; (5) a statement of goals identified in the subsidy agreement and an update on achievement of those goals; (6) the location of the recipient prior to receiving the business subsidy; (7) the number of employees who ceased to be employed by the recipient when the recipient relocated to become eligible for the business subsidy; (8) why the recipient did not complete the project outlined in the subsidy agreement at their previous location, if the recipient was previously located at another site in Minnesota; Copyright ® 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. 1167.994 MINNESOTA STATUTES 2014 4 (9) the name and address of the parent corporation of the recipient, if any; (10) a list of all financial assistance by all grantors for the project; and (11) other information the commissioner may request. A report must be filed no later than March 1 of each year for the previous year. The local agency and the Iron Range Resources and Rehabilitation Board must forward copies of the reports received by recipients to the commissioner by April 1. (c) Financial assistance that is excluded from the definition of "business subsidy" by section 1167.993, subdivision 3, clauses (4), (5), (8), and (16), is subject to the reporting requirements of this subdivision, except that the report of the recipient must include instead: (1) the type, public purpose, and amount of the financial assistance, and type of district if the assistance is tax increment financing; (2) progress towards meeting goals stated in the assistance agreement and the public purpose of the assistance; (3) if the agreement includes job creation, the hourly wage of each job created with separate bands of wages; (4) if the agreement includes job creation, the sum of the hourly wages and cost of health insurance provided by the employer with separate bands of wages; (5) the location of the recipient prior to receiving the assistance; and (6) other information the grantor requests. (d) If the recipient does not submit its report, the local government agency must mail the recipient a warning within one week of the required filing date. If, after 14 days of the postmarked date of the warning, the recipient fails to provide a report, the recipient must pay to the grantor a penalty of $100 for each subsequent day until the report is filed. The maximum penalty shall not exceed $1,000. Subd. 8. Reports by grantors. (a) Local government agencies of a local government with a population of more than 2,500 and state government agencies, regardless of whether or not they have awarded any business subsidies, must file a report by April 1 of each year with the commissioner. Local government agencies of a local government with a population of 2,500 or less are exempt from filing this report if they have not awarded a business subsidy in the past five years. The report must include a list of recipients that did not complete the recipient report required under subdivision 7 and a list of recipients that have not met their job and wage goals within two years and the steps being taken to bring them into compliance or to recoup the subsidy. If the commissioner has not received the report by April 1 from an entity required to report, the com- missioner shall issue a warning to the government agency. If the commissioner has still not received the report by June 1 of that same year from an entity required to report, then that government agency may not award any business subsidies until the report has been filed. (b) The report required under paragraph (a) is also required for financial assistance of $25,000 and greater that is excluded from the definition of "business subsidy" by section 1167.993, subdivision 3, clause (1), and of $75,000 and greater that is excluded from the definition of "business subsidy" by section Copyright 0 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. 5 MINNESOTA STATUTES 2014 1167.994 1167.993, subdivision 3, clause (21). The report for the financial assistance under this paragraph must be completed within one year of the granting of the financial assistance. The report required for financial as- sistance under this paragraph must include: (1) the name of the recipient, its organizational structure, its address and contact information, and its industry sector; (2) a description of the amount and use of the financial assistance and the total project budget, including a list of all financial assistance by all grantors for the project and the private sources of financial assistance; (3) the public purpose of the financial assistance, the job goals associated with both the financial as- sistance and the total project in which the financial assistance is included, the hourly wage of each job created, and the cost of health insurance provided by the employer; (4) the date the project will be completed; (5) the name and address of the parent corporation of the recipient, if any; and (6) any other information the commissioner may request. (c) Within one year of completing a report under paragraph (b), the local government agency must report to the commissioner on progress in achieving the purposes and goals under paragraph (b), clause (3). (d) The commissioner of employment and economic development must provide information on reporting requirements to state and local government agencies. Subd. 9. Compilation and summary report. The Department of Employment and Economic De- velopment must publish a compilation and summary of the results of the reports for the previous two calendar years by December 1 of 2004 and every other year thereafter. The reports of the government agencies to the department and the compilation and summary report of the department must be made available to the public. The commissioner must make copies of all business subsidy reports submitted by local and state granting agencies available on the department's Web site by October 1 of the year in which they were submitted. The commissioner must coordinate the production of reports so that useful comparisons across time periods and across grantors can be made. The commissioner may add other information to the report as the commissioner deems necessary to evaluate business subsidies. Among the information in the summary and compilation report, the commissioner must include: (1) total amount of subsidies awarded in each development region of the state; (2) distribution of business subsidy amounts by size of the business subsidy; (3) distribution of business subsidy amounts by time category; (4) distribution of subsidies by type and by public purpose; (5) percent of all business subsidies that reached their goals; (6) percent of business subsidies that did not reach their goals by two years from the benefit date; (7) total dollar amount of business subsidies that did not meet their goals after two years from the benefit date; Copyright © 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. 1167.994 MINNESOTA STATUTES 2014 6 (8) percent of subsidies that did not meet their goals and that did not receive repayment; (9) list of recipients that have failed to meet the tenns of a subsidy agreement in the past five years and have not satisfied their repayment obligations; (10) number of part -time and full -time jobs within separate bands of wages for the entire state and for each development region of the state; (11) benefits paid within separate bands of wages for the entire state and for each development region of the state; and (12) number of employees in the entire state and in each development region of the state who ceased to be employed because their employers relocated to become eligible for a business subsidy. Subd. 10. Compilation. The Departtnent of Employment and Economic Development must publish a compilation of granting agencies' criteria policies adopted in the previous two calendar years by December 1 of 2004 and every other year thereafter. Subd. 11. Enforcement. (a) A person with residence in or an owner of taxable property located in the jurisdiction of the grantor may bring an action for equitable relief arising out of the failure of the grantor to comply with sections 1167.993 to 1167.995. The court may award a prevailing party in an action under this subdivision costs and reasonable attorney fees. (b) Prior to bringing an action, the party must file a written complaint with the grantor stating the alleged violation and proposing a remedy. The grantor has up to 30 days to reply to the complaint in writing and may take action to comply with sections 1167.993 to 1161995. (c) The written complaint under this subdivision for failure to comply with subdivisions 1 to 5, must be filed with the grantor within 180 days after approval of the subsidy agreement under subdivision 3, paragraph (d). An action under this subdivision must be commenced within 30 days following receipt of the grantor's reply, or within 180 days after approval of the subsidy agreement under subdivision 3, paragraph (d), whichever is later. History: 1999 c 243 art12 s 2; 2000 c 482 s 2-11; 2001 c 7 s 28; 2003 c 128 art13 s 24-26; 1Sp2003 c 4 s 1; 2004 c 206 s 24,25; 15p2005 c 1 art4 s 23,24; 1Sp2005 c 3 art? s 2 -5; 2008 c 366 art5 s 3-5 Copyright ® 2014 by the Revisor of Statutes, State of Minnesota. All Rights Reserved. Policy 1.25 BUSINESS SUBSIDY POLICY Adopted 8/1/11 1.00 PURPOSE 1.01 This Policy is adopted for purposes of the Business Subsidies Act (the "Act "), Minnesota Statues, Sections 1167.993 through 1161.995. Terms used in this Policy are intended to have the same meanings as if used in the Act, and this Policy shall apply only with respect to "subsidies" as defined by the Act if and to the extend required thereby. 2.00 POLICY 2.01 The City of Lakeville and the Lakeville Economic Development Commission maintain several policy documents which speak to the general goals and objectives for the provision of public assistance for private development or redevelopment activities. These documents include, but are not limited to the current Strategic Plan for Economic Development and the Comprehensive Land Use Plan. 2.02 The City of Lakeville has determined that in order for any project to be considered for financial assistance, a finding is needed that determines that, "but for" the City's assistance, this project will not occur or will not occur within a reasonable amount of time. The City will also need to demonstrate a return on its investment based on one or more of the public benefit categories listed in this Policy. 2.03 Because projects vary greatly in structure and public benefit derived, each project will be considered on its own merits. Consideration will be given to projects providing public benefits in one or more of the following categories: a. The creation of new jobs /increase in total payroll. In the case of new job creation, new jobs must pay an average wage equal to the minimum wage level for business assistance programs administered by the Minnesota Department of Employment and Economic Development for cities located in the seven county metropolitan area in place at the time of an application by any business seeking a subsidy. Preference will be given to higher paying jobs that also provide benefits such as health care coverage. b. Projects that provide value in the forms of needed transportation and other utility infrastructure improvements including regional infrastructure in the community that would be completed in conjunction with the project. c. Redevelopment projects that result in the stabilization of business districts or neighborhoods by elimination of blighting conditions. d. Projects that enhance or increase the economic diversity of the community by attracting businesses or industries not currently located in the City. New job wage requirements will apply to any new jobs created. e. Projects that result in the development of affordable senior or workforce housing. z_41.1 poo TAX INCREMENT FINANCING POLICY Policy 2.06 1) PURPOSE For the purposes of this document, the term "City" shall include the Lakeville City Council. a) The purpose of this policy is to establish the City of Lakeville's position relating to the use of Tax Increment Financing (TIF) 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. b) The City of Lakeville (City) is granted the power to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. The fundamental purpose of tax increment financing in the City of Lakeville is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through TIF. c) 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 business assistance to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. d) The City Council can deviate from this policy for projects that supersede the objectives identified herein. 2) OBJECTIVES OF TAX INCREMENT FINANCING a) Tax Increment Financing (TIF) uses the increased property taxes generated by new real estate development within a tax increment district to pay for certain eligible costs associated with the development. As a matter of adopted policy, the City will consider using TIF to assist private development projects that will achieve one or more of the following objectives: 1) To retain local jobs and /or increase the number and diversity of jobs that offer stable employment and /or attractive wages and benefits. Preference will be given to higher paying jobs that also provide benefits such as health care coverage. ii) Projects that provide value in the forms of needed transportation and other utility infrastructure improvement that would be completed in conjunction with the project. iii) To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. iv) To facilitate the development process and to achieve development on sites which would not otherwise be developed but -for the use of TIF. v) To remove blight and /or encourage redevelopment of commercial and industrial areas in the City that result in high quality redevelopment and private reinvestment. vi) To offset increased costs of redevelopment (i.e. contaminated site clean -up) over and above the costs normally incurred in development. vii) To create opportunities for affordable housing. viii) Projects that improve the quality of life in the City by providing a desirable good or service and address an unmet demand in the community. 1 ix) 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. 3) 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: a) Public improvements, legal, administrative, and engineering costs. ii) Site preparation, site improvement, land purchase, demolition, and environmental remediation. iii) Capitalized interest, bonding costs. b) The following types of TIF districts may be established: i) Economic Development Districts (maximum term 9 years) ii) Redevelopment Districts (maximum term 26 years) iii) Housing Districts (maximum term 26 years) iv) Renewal and Renovation Districts (maximum term 16 years) v) Other types of TIF districts, along with specific criteria, may be considered on a case by case basis. c) TIF assistance shall not be provided for reimbursement of land and /or property price that is in excess of fair market value. An appraisal by a third party, agreed upon by the City and Developer, will determine the fair market value of the land. d) The City shall retain a fee to reimburse administrative costs up to but not to exceed ten percent (10 %) of any tax increment received. e) Only for a project which significantly supersedes the objectives identified herein, will the term of the TIF assistance exceed 15 years. f) Any developer receiving TIF assistance shall provide a minimum of twenty percent (20 %) cash equity investment in the project. The assistance shall not be used to supplant cash equity. The City may consider exceptions for "pay -as- you -go" TIF projects. 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 shall not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the City. i) TIF shall not be provided 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: assessment agreements, letters of credit, personal guarantees, etc. 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. I) 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. 2 4) PROJECT QUALIFICATIONS All TIF projects considered by the City of Lakeville must meet all of the following requirements: a) To be eligible for TIF, a project shall result in: i. For Economic Development TIF Districts, new construction of a minimum of 5,000 square feet. ii. For Economic Development TIF Districts, the minimum creation of one new or retained full time job per $25,000 of TIF provided. For Redevelopment TIF Districts, a minimum value increase of $200,000 or not Tess than 2 times the current year assessed value, whichever is greater. b) The project shall meet at least one of the objectives set forth in Section 2. c) The developer shall demonstrate that the project is not financially feasible but -for the use of TIF. d) The project must be consistent with the City's Comprehensive Plan, Land Use Plan, and Zoning Ordinances. e) The project shall serve at least two of the following public purposes: i. Creation of jobs with livable wages and benefits, per City's Business Subsidy Policy. ii. Increase of tax base. iii. Enhancement or diversification of the City's economic base. iv. Industrial development that will spur additional private investment in the area. v. The project contributes to the fulfillment of the City's development or redevelopment objectives. vi. Removal of blight or the rehabilitation of a high profile or priority downtown site. 5) SUBSIDY AGREEMENT & REPORTING REQUIREMENTS a) All developers /businesses receiving tax increment financing assistance from the City of Lakeville shall be subject to the provisions and requirements set forth by State Statute 1161.993 and summarized below. b) All developers /businesses receiving TIF assistance shall enter into a Subsidy Agreement with the City of Lakeville that identifies: the reason for the subsidy, the public purpose served by the subsidy, and the goals for the subsidy, as well as other criteria set forth by State Statute 1161.993. c) The developer /business shall file a report annually for two years after the date the benefit is received or until all goals set forth in the application and performance 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 of Lakeville no later than March 1 of each year for the previous calendar year. Businesses fulfilling job creation requirements must file a report to that effect with the City within 30 days of meeting the requirements. d) The developer /business owner shall maintain and operate its facility at the site where TIF assistance is used for a period of five years after the benefit is received. e) The developer /business will be required to attain or exceed the jobs and wages goals set forth in the Subsidy Agreement. f) Developer /Businesses failing to comply with the above provisions will be subject to fines, repayment requirements, and be deemed ineligible by the State of Minnesota to receive any loans or grants from public entities for a period of five years. 3 6) APPLICATION PROCESS a) Applicant submits the completed application along with a nonrefundable initial application fee of $500. i. City staff reviews the application and completes the Application Review Worksheet. ii. Results of the Worksheet are submitted to the appropriate governing authorities for preliminary approval of the proposal. b) If preliminary approval is granted, the applicant submits the final application fee of $5,500 and the Tax Increment Financing Plan, along with all necessary notices, resolutions and certificates are prepared by City staff and /or consultants. 1 Notices are published and sent to the county and school board. ii. Public hearing(s) on the proposed project are held. iii. The City Council grants final approval or denial of the proposal. 4 I. POLICY PURPOSE The purpose of this policy is to establish the City of Northfield's, hereafter referred to as the City, guide for the processing and review of applications requesting tax abatement. The fundamental purpose of tax abatement in Northfield is to encourage desirable development, redevelopment, or public improvements which clearly demonstrate a need for assistance and a public benefit. The City is granted the power to utilize tax abatement financing by the Minnesota Tax Abatement Act (Minnesota Statutes, Section 469.1812 to 469.1815, as amended). Tax abatement in this context is a rebate of taxes, rather than an exemption from paying property taxes. It is the intent of the City to provide the minimum tax abatement, as well as other incentives, at the shortest term required for the project 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 tax abatement to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. II. OBJECTIVES FOR USE OF TAX ABATEMENTS As a matter of adopted policy, the City will consider using tax abatement financing to assist private development projects and public improvements to achieve one or more of the following objectives: 1. To enhance and diversify the City of Northfield's economic base. 2. To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off' development. 3. To facilitate the development process and to achieve development on sites which would not be developed without assistance or would not be developed at a level of quality acceptable to the Council and the Community. 4. To encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. 5. To encourage the removal of blight or the rehabilitation of a high profile or priority site. 6. To offset increased costs of redevelopment (i.e. contaminated site cleanup, demolition expenses etc.) over and above the costs normally incurred in development. 7. To increase the tax base. 8. To create affordable housing opportunities. 9. To retain local jobs or increase the number and diversity of jobs that offer stable employment and/or attractive wages and benefits. 10. To finance the costs associated with public infrastructure and public facilities. 11. To contribute to the implementation of other public policies as adopted by the City , such as the promotion of quality architectural design, enhanced recreational opportunities, and decreasing capital and /or operating costs of local government. III. EVALUATION CRITERIA The project shall comply with all provisions set forth in Minnesota's Tax Abatement Law, (Minnesota Statutes 469.1812 to 469.1815) as amended. The term of any tax abatement may not exceed 15 years if all three taxing jurisdictions participate or 20 years if one or two jurisdictions participate. Priority will be given to tax abatement proposals that secure another taxing jurisdiction's participation. The applicant is responsible for requesting tax abatement from either the County or the School District. When abatement is being utilized to finance public facility and infrastructure projects, as opposed to those benefitting private business and development objectives, the EDA and/or }IRA will recommend the preliminary use of tax abatement financing for a particular facility/infrastructure project. A formal application, deposit agreement, and application worksheet will not be required. The decision to use tax abatement for a project will be based on the following criteria: A. The project shall meet at least one objective set forth to further the public interest, as defined in Section 11 of this document. B. The use of tax abatement will be limited to: • Industrial development, expansion, redevelopment, or rehabilitation; • Commercial redevelopment or rehabilitation; • Office or research facilities; • Housing and infrastructure; or • Public infrastructure C. The demonstration, to be provided by the developer, of the project's benefits and that the project is not financially feasible without the tax abatement financing provided. D. The project must be consistent with the City's Comprehensive Plan and Zoning Ordinances. E. Tax abatement assistance will be provided to private developers upon receipt of taxes by the City, otherwise referred to as the pay-as-you-go method. Requests for up front financing will be considered but are generally discouraged. F. The demonstration of market demand for the proposed project, to be provided by the developer. G. The adequacy of the developer's financial guarantees to ensure completion of the project including, but not limited to: assessment agreements, letters of credit, personal guaranties, or additional documentation as necessary. H. The Demonstration, to the City's sole satisfaction, of the developer's ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including experience with the size and scope of the proposed project. I. In an effort to support local business, extra consideration will be given to existing businesses seeking to expand and grow within the City. J. Priority will be given to services not already provided in the City. K. Additional consideration will be given based upon the level of private financial investment into the project. L. In any given calendar year, the total amount of property taxes abated by the City may not exceed ten percent of the net tax capacity of the City or other applicable limitations existing in current law. M. Tax abatement cannot be granted for any period while the property is located in a tax increment fmancing district. IV. APPLICATION A written application from a private business or developer, available from the Economic Development Authority (the "EDA") or the Housing and Redevelopment Authority (the "HRA ") of the City, shall be submitted for all projects seeking tax abatement from the City. Applications must include: A. A letter formally requesting tax abatement from the City. B. A completed application for tax abatement with all supporting material attached. C. A non - refundable application fee of $250 D. A refundable processing fee of 1.0 percent of the requested amount of abatement. Refunding will be prorated to corresponding staff time if the application is denied by the City or removed by the applicant. The actual cost of searches, credit reports, filing fees, and legal fees will be paid directly by the applicant. Fees will be waived if the City serves as developer. E. Financial projections. An independent financial analysis may be requested. 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. V. APPROVAL PROCESS The approval process for a private or public proposal may take anywhere from three weeks to three months, including any required public hearings. A. City staff reviews the application. B. Proposals are submitted to the EDA or the HRA, as applicable, for preliminary approval or denial. C. The EDA/HRA must determine that the proposed use of funds meets the appropriate test(s) for eligibility D. The EDA/HRA will determine if the financing gap exists between project funding sources and uses. E. The EDA/HRA will recommend a specific amount of abatement, if any, to the City Council. F. The City Council will hold a public hearing. The City Council will act on a resolution that identifies conditions upon which an application is approved or findings upon which an application is denied. The City Council will grant final approval or denial of the project. VI. SUBSIDY AGREEMENT & ANNUAL REPORTING REQUIREMENTS All projects granted tax abatement that meet the requirements of Minnesota Statutes, Section 1161 (Business Subsidy Statute) will be required to enter into a subsidy agreement and be subject to annual reporting requirements. A. The subsidy agreement with the City shall clearly identify: the reason for the subsidy, the public purpose served by the subsidy, and the goals for the subsidy, as well as other criteria set forth by the Business Subsidy Statute. B. The developer/business shall file a report annually for two years after the date the benefit is received or until all goals set forth in the application and business 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 of Northfield no later than March 1 of each year for the previous calendar year. Businesses fulfilling job creation requirements must file a report to that effect with the city within 30 calendar days of meeting the requirements. C. The developer/business owner shall maintain and operate its facility at the site where the tax abatement and/or other assistance is used for a period of five years after the benefit is received. D. In addition to attaining or exceeding the jobs and wages goals set forth in the subsidy agreement, the borrower shall achieve at least one of the objectives furthering the public interest as set forth in Section II of this document. E. Developers/Businesses failing to comply with the above provisions will be subject to fines and repayment requirements, as well as deemed ineligible by the State to receive any loans or grants from public entities for a period of five years. See the City's Business Subsidy Policy for additional information. VII. RECAPTURE OF ABATEMENT Imposition of any recapture is at the sole discretion of the City and shall be considered on a case -by -case basis. Recapture considerations may include but are not limited to the: A. Sale, refinance or closure of the facility and departure of the company from the jurisdiction. B. Significant change in the use of the facility and /or the business activities of the company. C. Significant employment reductions not reflective of the company's (normal) business cycle and /or local and national economic conditions. D. Failure to achieve the minimum number of net new jobs and wage levels as specified in the abatement policy, application, and City Business Subsidy Policy. E. Failure to comply with annual reporting requirements. 1 > What's the Difference? A 1 N C 0 0 c c c A 1 E u 0 8 A Tax Increment Financing Tax Abatement Governed by complex set of statutes which limits TIF uses 4' N 0 7 Q U }LL N 0) X 0) N ro 0 U 0) 4, 0. U 0 U �L-- I"' "Rebate" rather than exemption from paying taxes TIF does not require approval from all taxing jurisdictions 4-, 0. ro a 4 O N N 4-5 ra 7 ) ES C' E � ro cnV 4-, X U (0 Lu Economic Development District: C .N 7 O t CI BOO Ot a' N Ql .. N •-■ C X 7 CO a) E � t L = is E c N E Cv 0) c m E L c . j v E O V 00 O O tD • L = N v-. a) • O (0 'N 0) • L N a ( o 0 Term can extend 15 -20 years is maximum • Redevelopment District: 7 N '7 .O N N E r N roo E cu N 71 O 1 t C rp C7 L • "-5 7 0) N j 7 N N N C LO +' U N O N L. • a (0 0 (0n • C O t L- 0 • N L C 0) U N a) W '7 rn a) C W 4-, O C N U C a) N N a. T 7 a) a) N •n a L. co E > CO •D C 0) y_ a) O N T N O � O cu 0 E a c • c c a) CD • N N c C O a-, C U CO d • • Renewal District: • Redevelops blighted area L L CO C fo O N .O 7 N N .Q 7 X 7 c E U L L N (0 .0 7 U 4.5 N �' E N N 0 ro f0 N N 55 > � O t- O • 7 .O 4' '(- C O U C N U L 0 a • o• • • Finances public infrastructure State property tax and /or market value tax is not abated Governed by MN Statutes 469.1812 -1815 Eligible uses include: • Demolition and clearance c a) > 0 0. cu E 4- Ln • • Public Utilities TIF requires a public hearing Tax Abatement requires a public hearing v a) .r. Cr' E CCC 0) .n O L 0. N e N O 4-, N ro (a • L O O) C1) 11/19/2014 11:24 AM N O