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HomeMy WebLinkAbout08 19 2013 EDA reptt 4A attach City of Prior Lake, Minnesota Local Business Incentives Policy Adopted: Date: City of Prior Lake 4646 Dakota Street SE Prior Lake, MN 55372 CITY OF PRIOR LAKE POLICY AND PROCEDURES RELATING TO THE USE OF LOCAL BUSINESS INCENTIVES I. DEFINITIONS “City” includes the Prior Lake City Council and/or Prior Lake Economic Development Authority. “Incentive” means any local use and approval of public resources that provide a form of subsidy to a business, including but not limited to, tax increment financing, tax abatement, below-market leases, land sale write-downs, sewer/water fee deferrals, special assessment structures, economic development revolving loans, and conduit or industrial revenue bonds. To be considered an incentive, the cumulative amount of public resources to one business shall be between $5,001 and $149,999. An incentive in the form of a below-market lease rate, for example, would be the difference in market versus below-market cost as determined by the City. However, a below-market rate loan would include the full loan amount as the incentive due to the business having access to the full funding amount, whether it is market rate or not. "Recipient" means any for-profit or nonprofit business entity that receives a business incentive. 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” 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 local business incentives that are not subject 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 local business incentives in the City of Prior Lake is to encourage desirable development or redevelopment that may not otherwise occur. This policy aims to provide transparency to the public in relationship to all public financing incentives, including such factors as the type of assistance, the gap or need for financing, the public benefits derived from such financing, and any contractual requirements, such as payback provisions. Anyone that applies for local business incentives may look to these guidelines for guidance regarding the criteria the City will use in evaluating an application. However, whether a particular project meets the criteria 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 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. 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. Meeting these policy guidelines does not guarantee that a business incentive 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. Whenever possible, it is the City’s intent to coordinate the use of its local business incentives with other applicable 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. IV. PUBLIC PURPOSE OBJECTIVES OF BUSINESS INCENTIVES The City will consider using local business incentives 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.  To enhance and diversify the City of Prior Lake’s tax base.  To encourage additional unsubsidized private development in the area due to the existence of the business that received local business incentives.  To achieve development on sites that may not be developed without local business incentives due to some well-defined market, location or land factors.  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 LOCAL BUSINESS INCENTIVES A. Local business incentives will be provided from the City, by a “pay-as-you-go” note method, to the recipient if the assistance is tax increment financing or tax abatement. Requests for up-front financing will be considered on a case-by-case basis. B. Anyone requesting local business incentives must demonstrate, to the satisfaction of the City, sufficient cash equity investment in the project as may be required within the City’s policy for the particular form of incentive. C. Local business incentives will generally 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 (or by a factor of 10-15 percent above that county value). 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. Local business incentives will not be given if it would create an unfair and significant competitive financial advantage over other similar projects in the area. F. Local business incentives 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. I. 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 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. K. The City may determine the specific wage and job goals giving consideration to the particular form of the subsidy, nature of the development, the purpose of the incentive, local economic conditions and similar factors. VI. LOCAL BUSINESS INCENTIVE AGREEMENT Anyone receiving a business incentive between $5,001 and $149,999 shall be subject to a local business incentives agreement as summarized below: (1) A description of the incentive, including the amount and type of subsidy, and type of district if the incentive is tax increment financing; (2) A statement of the public purpose(s) for the incentive as identified in Section IV of this Policy; (3) Measurable, specific, and tangible goals for the incentive; (4) A description of the financial obligation of the recipient if the goals are not met; (5) A statement of why the incentive is needed; and (6) A commitment to continue operations in the jurisdiction where the incentive, as may be required by the City; and (6) A list of all financial assistance by all jurisdictions for the project. Local business incentives in the form of grants will generally be structured as deferred and/or forgivable loans. For other types of local business incentives, the agreement will state the fair market value of the incentive to the recipient, including the value of conveying property at less than a fair market price, below-market leases, or other in-kind benefits to the recipient. If a local business incentive benefits more than one recipient, the City will assign a proportion of the incentive to each recipient that signs an 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 incentive agreement will specify the recipient's obligation if the recipient does not fulfill the agreement. The City may extend the period for meeting goals by documenting in writing the reason for the extension and attaching a copy as an addendum to each agreement. VII. REPORTING REQUIREMENTS The City will complete an comprehensive annual report on anyone receiving a local business incentive by May 1 of each year; the report shall list anyone receiving a local business incentive during the previous calendar year, including the type and amount of incentive. At a minimum, the City shall provide a copy of the report to the public on the City’s website. The report will provide information regarding goals and results for two years after the date of local business incentive approval, or until the goals are met, whichever is later. If the goals are not met, the report will continue to provide information on the incentive until it is repaid, or may otherwise be satisfied. Each recipient of a local business incentive must complete an annual report on forms approved by the City. The report must include one or more of the following as may be required by the City based on goals to be achieved: (1) The type, public purpose and amount of incentives, 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 other employee benefits provided by the employer; (4) The date the job and wage goals will be reached; (2) A statement of goals identified in the local business incentive agreement and an update on achievement of those goals; and (3) Other information the City may request. VIII. SUBSIDY APPLICATION PROCESS AND PROCEDURE A. Application for local business incentives 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 local business incentives 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. IX. AMENDMENT The Economic Development Authority will review this policy from time to time to ascertain its effectiveness in accomplishing its objectives. Any amendments will be submitted to the city council for final approval and implementation.