HomeMy WebLinkAbout7A-Business Subsidies Policy4646 Dakota Street SE
Prior Lake, MN 55372
ECONOMIC DEVELOPMENT AUTHORITY AGENDA REPORT
MEETING DATE:
AGENDA #:
PREPARED BY:
PRESENTED BY
AGENDA ITEM:
June 17, 2013
7A
Casey McCabe, Community Development Specialist
Dan Rogness, Community & Economic Development Director
BUSINESS SUBSIDIES POLICY
DISCUSSION: Introduction
The purpose of this agenda item is to review proposed amendments to the City of Prior Lake
Business Subsidies Policy, adopted by the City Council on October 18, 2004 and request
that the the council authorize the EDA to conduct the public hearing with regard to those
amendments.
Histor
During the June 3, 2013 meeting, the EDA reviewed and discussed possible amendments
to the current City of Prior Lake Business Subsidies Policy. The EDA directed staff to pre-
pare draft amendments to the policy for EDA review; specific direction included amend-
ments to ensure compliance with State Stature requirements and the elimination of unnec-
essary reporting requirements.
In 1999, the State Legislature adopted the "Business Subsidy Act" (Minnesota Statutes,
Section 116J.993 -995). The act authorizes any statutory or home rule charter city to offer a
business subsidy to a business so long as that subsidy serves a public purpose. This public
purpose may be increasing the tax base, but other public purposes generally related to
economic development are also valid.
Under the act, a business subsidy means a state or local government agency grant, contri-
bution 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 act, as amended, provides for certain exceptions identified in the statute, most notable
of which is the exemption from regulation of any subsidy of less than $150,000. The city's
Business Subsidies Policy was written to facilitate city compliance with the Business Subsi-
dies Act prior to the amended law. The key provisions of the Business Subsidies Policy are:
➢ To establish guidelines and criteria regarding the use of business subsidies for private
development projects within the City of Prior Lake; to define the types of business sub-
sidy which the city may consider; to clarify that subsidies must be the minimum neces-
sary assistance to allow the project to proceed; and to provide that the city will review
each application on a case -by -case basis.
➢ Business subsidies are defined in accordance with the law.
➢ Business subsidies must achieve one or more "public purpose."
➢ Specific guidelines are provided for commercial /industrial projects, including such
things as: a demonstrated increase in tax base; reduction of blight; increase in employ-
ment; retention of jobs; specific wage and job goals; etc.
➢ Required content for Business Subsidy Agreements.
➢ Reporting requirements, application process and procedure.
Current Circumstances
As directed by the EDA, city staff has proposed amendments to the Business Subsidies
Policy, which are attached for EDA review. Major amendments include:
A definition section was added so key terms used within the policy have a clear defini-
tion.
➢ Removal of the references to the "but for" test. The reference to but for is a term typically
used only in reference to TIF districts; the development would not occur but for the use
of TIF (or other financial support). These references were removed because the term
but for does not appear in the State Statute regulating local and state business subsi-
dies.
➢ An Intent to Retain Flexibility section was added. This section clarifies that the city has
the option, as allowed by State Statute, to amend or waive sections of the policy when
it is determined to be necessary and /or appropriate.
➢ The policy was amended to provide that any subsidy of $150,000 or more would be
considered a business subsidy. The Business Subsidies Policy currently defines any
financial assistance of $25,000 or more as a business subsidy. This amendment is
proposed to mirror the State Statute definition of a business subsidy.
➢ The policy was amended to clarify that any subsidy provided by the city of $150,000 or
more would require the recipient to enter into a business subsidy agreement and comply
with reporting requirements in accordance with State Statute. Presently, any subsidy of
any amount provided by the city is considered a business subsidy requiring the recipient
to enter into a subsidy agreement and meet the reporting requirements. State Statute
only requires a recipient enter into a subsidy agreement and meet the reporting require-
ments if the subsidy is $150,000 or more.
The proposed amendment does reserve the right for the city to require receipients of a
subsidy of less than $150,000 to be subject to the subsidy agreement and reporting
requirements. This amendment is proposed to mirror State Stature requirements and
improve the city's competitiveness with surrounding communities.
➢ The definition of Business Subsidy was amended to match the definition in State Stat-
ute.
➢ The amended policy identifies forms of financial assistance which are not considered a
business subsidy in State Statute. This information was added to provide clarification
on what the city considers and does not consider a business subsidy.
➢ The minimum wage for a job to be considered a new or retained job was previously set
at $13.00 /hour, exclusive of benefits. Staff amended the wage language so the mini-
mum wage will adjust based on cost of living and inflation modifications and will adjust
annually without the need to amend the policy. The revised minimum wage requirement
for a job to be considered a new or retained job is proposed to be established at 120%
of the federal poverty level for a family of four, as determined annually by the U. S.
Department of Health and Human Services, exclusive of benefits. If amended, the cur-
rent minimum wage requirement would be $13.59 per hour and the federal poverty level
has increased by an average of 2.5% each year over the past ten years.
➢ The Business Subsidy Agreement language was amended to mirror the language in
MN State Statute.
➢ The Reporting Requirements section was amended to mirror the language in MN State
Statute.
➢ References to specific fees based on the type of application received were deleted.
Instead staff has proposed to include language stating a fee, based on the City of Prior
Lake Official Fee Schedule, which is adopted annually, shall accompany any TIF, tax
abatement, and loan or grant request application to cover the city's initial legal, admin-
istrative and planning costs. Because the fees are not specified in the policy, the EDA
and City Council will have the option to amend these fees annually without the need to
amend the Business Subsidies Policy.
Conclusion
The EDA should review the proposed amendments to the Business Subsidies Policy and
recommend revisions as it deems appropriate. Amendment of the Business Subsidy Policy
requires a public hearing. The EDA, with the permission of the city council may conduct the
public hearing.
ISSUES: The EDA and city council have heretofore expended considerable time and effort to identify
ordinance requirements in Prior Lake which exceed the standards in other communities and
in doing so make Prior Lake less competitive for economic development. This review of our
business subsidies policy may be viewed as analogous. The business subsidies policy
should not contain needless provisions which render Prior Lake less competitive than its
neighbors in the area of economic development.
The proposed amendments are intended to accomplish various objectives. Some are to
assure that the Business Subsidies Policy corresponds with current statutory guidelines
while others liberalize some of the city's guidelines, such as the city's present interpretation
that a business subsidy of virtually any amount must comply with business subsidy agree-
ment and reporting requirements while the State Statute only has this requirements for as-
sistance of $150,000 or more. Given that the city is generally engaged in providing smaller
subsidies, the liberalized guidelines may be considered appropriate by the EDA.
The amended Business Subsidies Policy does not specify specific application fees, The
amended policy states a fee, based on the City of Prior Lake Official Fee Schedule, which
is adopted annually, shall accompany any TIF, tax abatement, and loan or grant request
application to cover the city's initial legal, administrative and planning costs. The EDA may
wish to recommend specific application fees are included in the policy or may wish to further
evaluate application fees and make recommendations to the City Council when the 2014
fee schedule is adopted.
FINANCIAL Unknown at this time.
IMPACT:
ALTERNATIVES: 1. Motion and second recommending the above business subsidy revisions to the city
council and that the City Council authorize that the above revisions be considered at a
public hearing conducted by the EDA.
2. Provide direction to staff and continue discussion during a future meeting,
RECOMMENDED Alternative #1
MOTION:
ATTACHMENTS: 1. MN Statutes 116J.993 through 116J.995
2. City of Prior Lake Business Subsidies Policy (Redline)
3. City of Prior Lake Business Subsidies Policy (Clean)
MINNESOTA STATUTES 2012 116J.993
1161993 DEFINITIONS.
Subdivision 1. Scope, For the purposes of sections 116J.993 to 1161995, 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, infiastructure, 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 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 116J.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;
(12) benefits derived from regulation;
(13) indirect benefits derived fiom assistance to educational institutions;
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2 MINNESOTA STATUTES 2012 116J.993
(14) fluids from bonds allocated under chapter 474A, bonds issued to refimd outstanding
bonds, and bonds issued for the benefit of an organization described in section 501(c)(3) of the
Internal Revenue Code of 1986, as amended through December 31, 1999;
(15) assistance for a collaboration between a Minnesota higher education institution and a
business;
(16) assistance for a tax increment financing soils condition district as defined 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 fiends provided through the United States Department of Commerce,
Economic Development Administration; and
(23) property tax abatements granted under section 469.1813 to property that is subject to
valuation under Minnesota Rules, chapter 8100.
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 fall -time equivalent positions, are included in this definition.
Subd. 6a. Residence. "Residence" means the place -vvliere 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 1; 2000 c 482 s 1; 2004 c 206 s 52; 1 Sp2005 c 3 ar l 7 s 1; 2006
c259ar74s1; 2008c366rn•15s2
Copyright 0 2012 by the Office of the Revisor of Statutes, State of Minnesota. All Rights Reserved.
MINNESOTA STATUTES 2012 1161994
1161994 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 employment and economic
development may assist local government agencies in developing criteria. A copy of the criteria
must be submitted to the Department 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. Nowithstanding section 116J.993, subdivision 3, clauses (1) and
(21), for the purpose of this subdivision, "business subsidies" as defined under section 116J.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 tine 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 D 2012 by the Office of the Revisor of Statutes, State of Mimiesota. All Rights Reserved.
2 MINNESOTA STATUTES 2012 1161994
(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 poet 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 gover nient 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 jobs created, which may include separate goals for the
number of part -tine 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 created or retained; and (3)
wage goals for any jobs to be enhanced through increased wages. Afler a public hearing, if tine
creation or retention of jobs is determined not to be a goal, the wage and job goats 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 lion 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 the 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) Tine public hearing by a state government grantor other than the Iron Range Resources
and Rehabilitation 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 fails to comply with sections 1I6J.993 to I I6J.995,
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3 MINNESOTA STATUTES 2012 116J.994
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 116J.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 hearing, 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 tine 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
must continue to provide information on the subsidy until the subsidy is repaid. The information
trust be filed on forms developed by the commissioner in cooperation with representatives of
local governnent. Copies of the completed forms must 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:
(1) 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 Avho ceased to be employed by the recipient when the recipient
relocated to become eligible for the business subsidy;
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MINNESOTA STATUTES 2012 116J.994
(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;
(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
1161993, 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
hands 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 commissioner 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 I I6J.993,
subdivision 3, clause (1), and of $75,000 and greater that is excluded from the definition of
Copyright 0 2012 by the Office of the Revisor of Statutes, State of M ruiesota. All Rights Reserved.
MINNESOTA STATUTES 2012 116J.994
"business subsidy" by section 110,993, 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 assistance 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 assistance 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 govermment
agency must report to the commissioner oil 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 Development 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 fi•om the benefit
date;
(7) total dollar amount of business subsidies that did not meet their goals after thvo years
from the benefit date;
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6 MINNESOTA STATUTES 2012 116J.994
(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 terms 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 Department 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. ] l.. 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 116J.993 to 116J.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 116J.993 to 116J.995.
(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.
Histoly: 1999 c 243 ar112 s 2, 2000 c 482 s 2 -11; 2001 c 7 s 28; 2003 c 128 art 13 s
24 -26; 1Sp2003 c 4 s 1; 2004 c 206 s 24,25; ISp2005 c 1 w-14 s 23,24; 1Sp2005 c 3 amY 7 s
2 -5; 2008 c 366 ar15 s 3 -5
Copyright CO 2012 by the Office of the Revisor of Statutes, State of Minnesota. All Rights Reserved.
MINNESOTA STATUTES 2012 116J.995
1161995 ECONOMIC GRANTS.
An appropriation rider in an appropriation to the Department of Employment and Economic
Development that specifies that the appropriation be granted to a particular business or class of
businesses must contain a statement of the expected benefits associated with the grant. At a
minimum, the statement must include goals for the number of jobs created or enhanced, wages
paid, and the tax revenue increases due to the grant. The wage and job goals must contain specific
goals to be attained within two years of the benefit date. The statement must specify the recipient's
obligation if the recipient does not attain the goals. At a minimum, the statement must require
a recipient failing to meet the job and wage goals to pay back the assistance plus interest to
the Department of Employment and Economic Development provided that repayment may be
prorated to reflect partial fiilfillment of goals. The interest rate must be set at no less than the
implicit price deflator as defined under section 116J.994, subdivision 6. The legislature, after a
public hearing, may extend for up to one year the period for meeting the goals provided in the
statement.
History: 1999 c 293 art 12 s 3; 2000 c 482 s 12; 2001 c 7 s 29; 2003 c 128 art 13 s 27;
1 Sp2003 c 9 s 1
Copyright 0 2012 by the Office of the Revisor of Statutes, State of Minnesota. All Rights Reserved.
City of Prior Lake, Minnesota
Business Subsidies Policy
Adopted Date
Prior Lake City Council Oct. 18, 2004
Amended: Date:
Prior Lake City Council
City of Prior Lake
4646 Dakota Street SE
16200 E eek Ab
Prior Lake, MN 55372
(952) 447 - 981395
CITY OF PRIOR LAKE
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
I. DEFINITIONS
Terms used in this Policy are intended to have the same meaning as used in the MN
Business Subsidy Law and this Policy shall apply only with respect to subsidies granted
under MN Business Subsidy Law if and to the extent required thereby. For the purposes
of this document the following definitions apply:
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.
City. "City" includes the Prior Lake City Council and /or Prior Lake Economic Development
Authority.
Grantor. "Grantor" means any state or local government agency with the authority to grant
a business subsidy.
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.
State "State" means any State of Minnesota agency that has the authority to award
business subsidies.
1.11. PURPOSE
This policy establishes guidelines and criteria regarding the use of business subsidies,
such as tax increment financing ( "TIF "), tax abatement loans and other business
subsidies for private development projects within the City of Prior Lake. These guidelines
and criteria are in addition to the requirements and limitations set forth by provisions of
Minnesota Statute 116J.993 — 116J.995 ( "MN Business Subsidy Law ") and policies and
guidelines with respect to any particular form of subsidy.
The fundamental purpose of providing business subsidies in the City of Prior Lake is to
encourage desirable development or redevelopment that may not otherwise occur,
;z; the ass +sta„Ge. Business subsidies do not exist to not to enhance the return on
investment for individual projects. that would n-the P.A lose Ges61r but t f
development thp�WC)- "d nnt nth
Any that applies for business subsidy assistance may look to these
guidelines for guidance regarding the criterion the City will use in evaluating an
application. However, whether a particular project meets the criterion and serves the
City's present needs shall be the City's decision. The guidelines are instructive only and
do not have the force of law. If the City finds that its present needs require one project to
be given priority over another, then the City's judgment will ultimately prevail.
The City will provide subsidies and incentives in the most limited fashion possible to
assure that the project will 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 achieved
from a proposed project. This process is inherently subjective, and whether a project
receives a business subsidy may be as much a function of the City's budget as the merit
of the project.
While it is recognized that the creation of good paying lobs is a desirable goal that benefits
the city, it must also be recognized that not all projects assisted with business subsidies
derive their public purposes solely by virtue of mob creation. The City believes that each
economic development opportunity offers its own unique benefit to the city, whether it be
retail commercial or industrial in nature These benefits may be in the form of added tax
base new or retained mobs higher incomes overall investment in the area, business
diversification and /or increased economic activity and vitality. It is the desire of the City to
promote lob creation redevelopment and investment in the city as well as to expand the
city's tax base and diversify the city's industrial commercial and retail base.
The City will work to maximize the subsidies to those projects that, in the City's judgment,
will address the most pressing public purpose. The ability to demonstrate that the project
will most likely achieve its stated goals and therefore address the most pressing public
purpose will be the primary factor in determining whether a project receives a business
subsidy. Meeting these policy guidelines does not guarantee that a business subsidy will
be awarded. Furthermore, the approval or denial of one project should not be construed
as setting a precedent that another similar project should be approved or denied. The City
cannot possibly approve a business subsidy for every worthy project. Whenever possible,
it is the City's intent to coordinate the use of business subsidies with other applicable
taxing jurisdictions.
W ill. INTENT TO RETAIN FLEXIBILITY
Because it is not possible to anticipate every type of project that may provide benefit to
the City of Prior Lake the City shall retain the option to amend or waive sections of this
policy when it is determined to be necessary and /or appropriate. Minnesota Statute
116J 994 Subd 2 allows the City to 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 State.
M.IV. DEFINITION OF "BUSINESS SUBSIDY"
The following types of assistance in are defined as a "business
subsidy" within the MN Business Subsidy Law:
• A Estate or ate local government agency grants;
• Contributions of personal property, real property, or infrastructure;
• The principal amount of a loan at rates below those commercially available to the
recipient;
0 nterest aGGrues at a rate below thase GOrnmeMially available fer loan that risk
• Any Rreductions or deferrals of any taxes or fees;
• &OL Gguarantees of any payment under any loan, lease, or other obligation or
• &�L P-preferential use of government facilities given to a business
In any case where the value of the business subsidy is indeterminate, the City will make
a good faith determination of the value of the subsidy.
Minnesota Statute 116J.993, Subd. 3 as amended from time to time identifies forms of
financial assistance which are not considered a business subsidy; including:
(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 Minnesota
Statute 116J.552, subd. 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 mob 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 Minnesota
Statute 469.174, subd. 23;
(9) Assistance for energy conservation;
(10) Tax reductions resulting from conformity with federal tax law;
(11) Workers' compensation and unemployment insurance;
(12) Benefits derived from regulation;
(13) Indirect benefits derived from assistance to educational institutions;
(14) Funds from bonds allocated under Minnesota Statute, chapter 474A, bonds
issued to refund outstanding bonds and bonds issued for the benefit of an
organization described in section 501(c)(3) of the Internal Revenue Code of 1986,
as amended through December 31, 1999;
(15) Assistance for a collaboration between a Minnesota higher education institution
and a business;
(16) Assistance for a tax increment financing soils condition district as defined under
Minnesota Statute 469.174, subd. 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 Development Administration; and
(23) Property tax abatements granted under Minnesota Statute 469.1813 to property
that is subject to valuation under Minnesota Rules, chapter 8100.
IV-. 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 in an attempt 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. If the stated public
purpose is to retain lobs, CteGau ° i+ �� the MN Business Subsidy Law
requires if +h° c +o + °rJ r�iihli'+ „��rn, i� +„ r ° +'+in inhc there must be a showing
r r r �
that job loss in the affected area is specific and demonstrable.
• To enhance and diversify the City of Prior Lake's tax base.
• To encourage additional unsubsidized private development in the area, either
directly or indirectly, through "spin off' development. In this case, a business
subsidy may be given to an "anchor" property in the hopes that one business
locating in the area will create a domino affest and other unsubsidized
businesses will locate to the area.
• To achieve development on sites that may wo -uW 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.
V-. GENERAL POLICIES FOR THE USE OF BUSINESS SUBSIDIES
A. Business subsidy assistance will be provided from the City, by a "pay -as- you -go"
note method, to the recipientde 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. However, the MN Business Subsidies Law requires that any
up front grant financing be given in the form of forgivable loans. This means that
any grants will be documented as loans that will be forgiven if the specific goals of
the subsidy are met.
B. A nyone '� %W 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. The City will
assure that the business will be adequately capitalized to guarantee it will continue
as a going concern for many years.
C. Business subsidies 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 as determined by an independent appraiser.
D. A applicant develope must be able to demonstrate to the City, or, if applicable,
to the underwriting authority, market demand for a proposed project.
E. Business subsidies will not be given if the subsidy would create an unfair and
significant competitive financial advantage over other similar projects in the area.
F. Business subsidies will not be given to projects that would place extraordinary
demands on city infrastructure and services.
G. If requested by the City, or its consultants, the G requests it, — the
applicant will provide adequate financial guarantees to ensure
completion of the project, including, but not limited to: assessment agreements,
letters of credit, cash escrows, personal guaranties, mortgages, and other
securities.
H. Each applicant devetspe must be able to demonstrate, to the City's satisfaction,
an ability to construct, operate, and maintain the proposed project based on past
experience, general reputation, and credit history.
I. If requested by the City, or its consultants, the applicant develeper shall provide
sufficient market, financial, environmental, or other data relative to the successful
operation of the project.
J. Projects receiving business subsidy approval from other affected taxing
jurisdictions will be more favorably received by the City.
V4-.VII. GUIDELINES FOR COMMERCIAL /INDUSTRIAL BUSINESS SUBSIDIES
A. Business subsidies will not be used for on -site retail or service business unless it
is a redevelopment project that demonstrates that it will result in a substantial
increase in tax base and /or 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 „r MUSt result ;n the Protects that result in the retention of existing jobs
that may would-be lost without "hfor" the proposed development, or result in an
increase and diversification in local jobs that may we_not otherwise occur
without,, "bu"er� proposed development will be strongly considered
D. The City will determine the specific wage and job goals 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 after the Benefit Date to meet the job and wage goals established by
the City. The City's goal in this area is to assist in the creation of jobs at wage and
benefit levels that will support families. The minimum wage for a job to be
considered a new or retained job shall be established at 120% of the federal
poverty level for a family of four, as determined annually by the U. S. Department
of Health and Human Services 00 per , exclusive of benefits. 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.
In projects where a business subsidy provided by the City is secondary to a
business subsidy provided by another granting agency, such as the State or
federal government the wage guidelines set by that agency shall be used.
E. Business subsidies will not be given to commercial /industrial projects or
appli , antsd°vefepe-rs that have a history of inconsistent compliance with
applicable environmental rules and regulations, or failure to comply with State and
Federal Regulations regarding Equal Opportunity and Occupational Safety
Standards.
VW VIII. BUSINESS SUBSIDY AGREEMENT
Anyone EaGh develeper receiving a business subsidy of $150,000 or more regardless
of the size of that subsidy, shall be subject to the subsidy agreement set forth by the MN
Business Subsidy Law. an summarized below The City reserves the right to require
anyone receivinq a business subsidy of less than $150,000 to be subject to the subsidy
agreement set forth by the MN Business Subsidy Law and summarized below
(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. At a minimum the
agreement will outline the number of mobs created or retained and the wage goals
for each of those iobs.
(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 protect.
Bu siness subsidies in the form of grants will be structured as forgivable loans. F or other
type of b usiness subsidies the agreement will state the fair market value of the subsidy
to the r including the value of conveying property at less than a fair market price,
or other in -kind benefits to the recipient.
If a bu siness subsidy benefits more than one recipient the City will assi a proportio of
the bu siness subsidy to each recipient that signs a subsidy agreeme The proportion
asses to each recipient will reflect a reasonable estimate of the r ecipient's sha of
the total benefits of the protect.
The su bsidy agreement will specify the recipient's obligation if the recipie does not fulfill
the ag reement At a minimum the agreement will require a recipie failing to meet
subsidy agreement goals to pay back the assistance plus interest to t he City provided
tha repayment may be prorated to reflect partial fulfillment of goals. The inte rest rate
mus be se at no less than the implicit price deflator for governme consumption
expend and gross investment for state and local governments prepared by th
Bureau of Economic Analysis of the United States Department of C for the 12-
month pe riod ending March 31 of the previous year. The City after a pu blic hearing, may
exten for up to one year the period for meeting the wage and lob goa provided in the
subsidy agreement The City may extend the period for meeting other goals by
docu menting in writing the reason for the extension and attaching a copy of the do cument
to it next annual report to the State.
A r ecipient 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 o failure or until a
recipient satisfies its repayment obligation under this subdivision whichever occurs first.
V44 1 -. IX. REPORTING REQUIREMENTS
Anyone F"rh d- eve -bpef receiving a business subsidy of $150,000 or more , FegaF r e&&
of the si of t subsidy, shall be subject to the subsidy reporting requirements set forth
by the MN Business Subsidy Law The City reserves the right to require anyone receiving
a business subsidy of less than $150,000 to be subject to the subsidy reporting
requirements set forth by the MN Business Subsidy Law and summarized below:
A recipient must provide information regarding goals and results for two yea after the
Benefit Date or until the goals are met whichever is later. If the goals are not met, the
reci pient must continue to provide information on the subsidy until the subsidy is repaid.
The information must be filed on forms approved by the City. The report must include:
(1) The type public purpose and amount of subsidies and type of distric if the
subsidy is tax increment financing;
(2) The hourly wage of each lob created with separate bands of wages;
(3) The sum of the hourly wages and cost of health insurance provide 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 up date 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 recipie if the
recipient relocated to become eligible for the business subsidy;
(8) Why the recipient did not complete the project outlined in the subsidy ag reement
at their previous location if the recipient was previously located at anothe site in
Minnesota;
(9) The name and address of the parent corporation of the recipient, if a ny;
(10) A list of all financial assistance by all Grantors for the project; and
(11) Other information the City or State may request.
A report must be filed no later than March 1 of each year for the previous yea The City
must forward copies of the reports received by recipients to the State by April 1 or as
may otherwise be required by the State.
If the recipient does not submit its report the City must mail the recipient a wa rnin g within
one week of the required filing date If, after 14 days of the postmarked da of the
warning the recipient fails to provide a report the recipient must pay to the Ci a penalty
of $100 for each subsequent day until the report -• penaltV shall no
exc eed $1
A. Responsibility to Report. ARy developer FeGe a business subsidy will previ
regarding the goals and results for twD years after the subsidy is
granted, er unto! the goals are Met, WhiGhever is later. if the geals go unmet b8yGRd
two years, then the develeper will pFevide reports unto! the subsidy is fully repaid.
B.
- developer
Wages. G. - - w ill eaGh jGb _
Date. a R-enefits. The developer will report on the sum of hourly wages and any health
nsuranGe provided by the develepef--.
EaGh year - -
report
SpeG job and wage geals and F. Update. EaGh year the developer will provide aR iRfOrma Update en the Iffike-lih
that the goals will be aGhieved and indiGate the p^egress made during tie yea
aGhi eV i Rg the stated
R ec ip ient G. - ar the reGipient deve report
sum iary of a l l fi RanG i a l assistanGe reGeived from the A uthority
organizatien and any otheF infermation the Commissioner of Employment and
Development
MX. SUBSIDY APPLICATION PROCESS AND PROCEDURE
A. Application for business subsidies shall be made on forms for the particular form
of assistance provided by the City of Prior Lake Community & Economic
Development Director, or designee. A fee based on the City of Prior Lake Official
Fee Schedule which is adopted annually, , shall accompany any Tax
Increment Finance, Tax Abatement, loan or grant request application to cover the
City's initial legal, administrative, and planning costs.
B. Following a review by appropriate City Staff, the application shall be referred to
either the Economic Development Authority or City Council for further action.
C. 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 Prior Lake, Minnesota
Business Subsidies Policy
Adopted Date
Prior Lake City Council Oct. 18, 2004
Amended Date:
Prior Lake City Council
City of Prior Lake
4646 Dakota Street SE
Prior Lake, MN 55372
(952) 447 -9813
CITY OF PRIOR LAKE
POLICY AND PROCEDURES RELATING TO
THE USE OF BUSINESS SUBSIDIES
DEFINITIONS
Terms used in this Policy are intended to have the same meaning as used in the MN
Business Subsidy Law and this Policy shall apply only with respect to subsidies granted
under MN Business Subsidy Law if and to the extent required thereby. For the purposes
of this document, the following definitions apply:
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.
City. "City" includes the Prior Lake City Council and /or Prior Lake Economic Development
Authority.
Grantor. "Grantor" means any state or local government agency with the authority to grant
a business subsidy.
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.
State. "State" means any State of Minnesota agency that has the authority to award
business subsidies.
II. PURPOSE
This policy establishes guidelines and criteria regarding the use of business subsidies,
such as tax increment financing ( "TIF "), tax abatement, loans and other business
subsidies for private development projects within the City of Prior Lake. These guidelines
and criteria are in addition to the requirements and limitations set forth by provisions of
Minnesota Statute 116J.993 — 116J.995 ( "MN Business Subsidy Law ") and policies and
guidelines with respect to any particular form of subsidy.
The fundamental purpose of providing business subsidies in the City of Prior Lake is to
encourage desirable development or redevelopment that may not otherwise occur; not to
enhance the return on investment for individual projects.
Anyone that applies for business subsidy assistance may look to these guidelines for
guidance regarding the criterion the City will use in evaluating an application. However,
whether a particular project meets the criterion and serves the City's present needs shall
be the City's decision. The guidelines are instructive only and do not have the force of
law. If the City finds that its present needs require one project to be given priority over
another, then the City's judgment will ultimately prevail.
The City will provide subsidies and incentives in the most limited fashion possible to
assure that the project will 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 achieved
from a proposed project. This process is inherently subjective, and whether a project
receives a business subsidy may be as much a function of the City's budget as the merit
of the project.
While it is recognized that the creation of good paying jobs is a desirable goal that benefits
the city, it must also be recognized that not all projects assisted with business subsidies
derive their public purposes solely by virtue of job creation. The City believes that each
economic development opportunity offers its own unique benefit to the city, whether it be
retail, commercial or industrial in nature. These benefits may be in the form of added tax
base, new or retained jobs, and higher incomes, overall investment in the area, business
diversification and /or increased economic activity and vitality. It is the desire of the City to
promote job creation, redevelopment and investment in the city as well as to expand the
city's tax base and diversify the city's industrial, commercial and retail base.
The City will work to maximize the subsidies to those projects that, in the City's judgment,
will address the most pressing public purpose. The ability to demonstrate that the project
will most likely achieve its stated goals and therefore address the most pressing public
purpose will be the primary factor in determining whether a project receives a business
subsidy. Meeting these policy guidelines does not guarantee that a business subsidy will
be awarded. Furthermore, the approval or denial of one project should not be construed
as setting a precedent that another similar project should be approved or denied. The City
cannot possibly approve a business subsidy for every worthy project. Whenever possible,
it is the City's intent to coordinate the use of business subsidies with other applicable
taxing jurisdictions.
III. INTENT TO RETAIN FLEXIBILITY
Because it is not possible to anticipate every type of project that may provide benefit to
the City of Prior Lake, the City shall retain the option to amend or waive sections of this
policy when it is determined to be necessary and /or appropriate. Minnesota Statute
116J.994, Subd. 2 allows the City to 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 State.
IV. DEFINITION OF "BUSINESS SUBSIDY"
The following types of assistance are defined as a "business subsidy" within the MN
Business Subsidy Law:
• A state or local government agency grant;
• Contribution of personal property, real property, or infrastructure;
• The principal amount of a loan at rates below those commercially available to the
recipient;
• Any reduction or deferral of any tax or fee;
• Any guarantee of any payment under any loan, lease, or other obligation; or
• Any preferential use of government facilities given to a business.
In any case where the value of the business subsidy is indeterminate, the City will make
a good faith determination of the value of the subsidy.
Minnesota Statute 116J.993, Subd. 3, as amended from time to time, identifies forms of
financial assistance which are not considered a business subsidy; including:
(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 Minnesota
Statute 116J.552, subd. 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 Minnesota
Statute 469.174, subd. 23;
(9) Assistance for energy conservation;
(10) Tax reductions resulting from conformity with federal tax law;
(11) Workers' compensation and unemployment insurance;
(12) Benefits derived from regulation;
(13) Indirect benefits derived from assistance to educational institutions;
(14) Funds from bonds allocated under Minnesota Statute, chapter 474A, bonds
issued to refund outstanding bonds, and bonds issued for the benefit of an
organization described in section 501(c)(3) of the Internal Revenue Code of 1986,
as amended through December 31, 1999;
(15) Assistance for a collaboration between a Minnesota higher education institution
and a business;
(16) Assistance for a tax increment financing soils condition district as defined under
Minnesota Statute 469.174, subd. 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 Development Administration; and
(23) Property tax abatements granted under Minnesota Statute 469.1813 to property
that is subject to valuation under Minnesota Rules, chapter 8100.
V. 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 in an attempt 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. If the stated public
purpose is to retain jobs, the MN Business Subsidy Law requires there must be a
showing that job loss in the affected area is specific and demonstrable.
• To enhance and diversify the City of Prior Lake's tax base.
• To encourage additional unsubsidized private development in the area, either
directly or indirectly, through "spin off' development. In this case, a business
subsidy may be given to an "anchor" property in the hopes that one business
locating in the area will create a domino effect and other unsubsidized businesses
will locate to the area.
• To achieve development on sites that may 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.
VI. GENERAL POLICIES FOR THE USE OF BUSINESS SUBSIDIES
A. Business subsidy assistance will be provided from the City, by a "pay -as- you -go"
note method, to the recipient 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. However, the MN Business Subsidies Law requires that any up front
grant financing be given in the form of forgivable loans. This means that any grants
will be documented as loans that will be forgiven if the specific goals of the subsidy
are met.
B. Anyone 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. The City will assure that
the business will be adequately capitalized to guarantee it will continue as a going
concern for many years.
C. Business subsidies 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 as determined by an independent appraiser.
D. An applicant must be able to demonstrate to the City, or if applicable to the
underwriting authority, market demand for a proposed project.
E. Business subsidies will not be given if the subsidy would create an unfair and
significant competitive financial advantage over other similar projects in the area.
F. Business subsidies will not be given to projects that would place extraordinary
demands on city infrastructure and services.
G. If requested by the City, or its consultants, the applicant will provide adequate
financial guarantees to ensure completion of the project, including, but not limited
to: assessment agreements, letters of credit, cash escrows, personal guaranties,
mortgages, and other securities.
H. Each applicant 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 applicant shall provide sufficient
market, financial, environmental, or other data relative to the successful operation
of the project.
J. Projects receiving business subsidy approval from other affected taxing
jurisdictions will be more favorably received by the City.
VII. GUIDELINES FOR COMMERCIAL /INDUSTRIAL BUSINESS SUBSIDIES
A. Business subsidies will not be used for on -site retail or service business unless it
is a redevelopment project that demonstrates that it will result in a substantial
increase in tax base and /or 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. Projects that result in the retention of existing jobs that may be lost without the
proposed development, or result in an increase and diversification in local jobs that
may not otherwise occur without the proposed development will be strongly
considered.
D. The City will determine the specific wage and job goals 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 after the Benefit Date to meet the job and wage goals established by
the City. The City's goal in this area is to assist in the creation of jobs at wage and
benefit levels that will support families. The minimum wage for a job to be
considered a new or retained job shall be established at 120% of the federal
poverty level for a family of four, as determined annually by the U. S. Department
of Health and Human Services, exclusive of benefits. 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.
In projects where a business subsidy provided by the City is secondary to a
business subsidy provided by another granting agency, such as the State or
federal government, the wage guidelines set by that agency shall be used.
E. Business subsidies will not be given to commercial /industrial projects or applicants
that have a history of inconsistent compliance with applicable environmental rules
and regulations, or failure to comply with State and Federal Regulations regarding
Equal Opportunity and Occupational Safety Standards.
Vlll. BUSINESS SUBSIDY AGREEMENT
Anyone receiving a business subsidy of $150,000 or more shall be subject to the subsidy
agreement set forth by the MN Business Subsidy Law. The City reserves the right to
require anyone receiving a business subsidy of less than $150,000 to be subject to the
subsidy agreement set forth by the MN Business Subsidy Law and summarized below:
(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. At a minimum, the
agreement will outline the number of jobs created or retained and the wage goals
for each of those jobs.
(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.
Business subsidies in the form of grants will be structured as forgivable loans. For other
types of business subsidies, the agreement will 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.
If a business subsidy benefits more than one recipient, the City will assign a proportion of
the business subsidy to each recipient that signs a subsidy agreement. The proportion
assessed to each recipient will reflect a reasonable estimate of the recipient's share of
the total benefits of the project.
The subsidy agreement will specify the recipient's obligation if the recipient does not fulfill
the agreement. At a minimum, the agreement will require a recipient failing to meet
subsidy agreement goals to pay back the assistance plus interest to the City, 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 City, after a public hearing, may
extend for up to one year the period for meeting the wage and job goals provided in the
subsidy agreement. The City may extend the period for meeting other goals by
documenting in writing the reason for the extension and attaching a copy of the document
to its next annual report to the State.
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.
IX. REPORTING REQUIREMENTS
Anyone receiving a business subsidy of $150,000 or more shall be subject to the subsidy
reporting requirements set forth by the MN Business Subsidy Law. The City reserves the
right to require anyone receiving a business subsidy of less than $150,000 to be subject
to the subsidy reporting requirements set forth by the MN Business Subsidy Law and
summarized below:
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 must continue to provide information on the subsidy until the subsidy is repaid.
The information must be filed on forms approved by the City. The report must include:
(1) 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 if 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;
(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 City or State may request.
A report must be filed no later than March 1 of each year for the previous year. The City
must forward copies of the reports received by recipients to the State by April 1, or as
may otherwise be required by the State.
If the recipient does not submit its report, the City 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 City a penalty
of $100 for each subsequent day until the report is filed. The maximum penalty shall not
exceed $1,000.
X. SUBSIDY APPLICATION PROCESS AND PROCEDURE
A. Application for business subsidies shall be made on forms for the particular form
of assistance provided by the City of Prior Lake Community & Economic
Development Director, or designee. A fee, based on the City of Prior Lake Official
Fee Schedule, which is adopted annually, shall accompany any Tax Increment
Finance, Tax Abatement, and loan or grant request application to cover the City's
initial legal, administrative, and planning costs.
B. Following a review by appropriate City Staff, the application shall be referred to
either the Economic Development Authority or City Council for further action.
C. 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.