1e Amend Business Subsidy Crite7700 Market Boulevard
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FROM:
DATE:
Todd Gerhardt, City Manager
Justin Miller, Assistant to the City Manager
April 11, 2003
Amendment to the City of Chanhassen Business Subsidy Criteria
BACKGROUND
On October 25, 1999, the City Council approved the City of Chanhassen Business
Subsidy Criteria in response to requirements established by the State Legislature.
These criteria are to be followed for any business subsidy from the City that exceeds
$20,000. Since adoption, these criteria have been followed in all Tax Increment
Financing (TIF) agreements entered into by the City of Chanhassen.
In 2000, the legislature amended the criteria requirements by stating "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 mount or may be stated as a formula that will
generate a specific dollar amounL" (Minnesota State Statute Section 116.1.994)
At the time this amendment was made, the legialatare gave communities that passed
their subsidy criteria before 2000 until May 1, 2003 to update their criteria. Before
Council tonight is an amendment that will bring the City of Chanhassen's criteria into
compliance with State law.
It is important to remember that these criteria are mlnlmuin requirements, and can be
increased on a project-specific basis. In surveying many other communities, it appears
that the preferred method of establishing wage floors is by relating it to the State of
Minnesota minimum wage, instead of a fixed dollar amounL This method would then
automatically change as the State minimum wage is changed, and would not require
constant amendments by the City.
The current Business Subsidy Criteria is attached to this report, as well as the
appropriate State statutes that govern this policy.
RECOMMENDATION
That the City Council adopt a resolution amending the City of Chaahassen Business
Subsidy Criteria to the following (amendment in bold/ta//cs):
Under PROJECT SELECTION CRITERIA, Number 6, Jobs and Wages:
It is the EDA's intent that the grantee ~ the maximum number of livable
wage jobs at the site. ~ wage.floor for waees to be mddfor the iobs created
shall be 105% qf the state minimm waee. This may include jobs to be
retained but only fi job retention is imminent and demonstrable.
The City of Chanha#en · A growing community with clean lakes, quality schools, a channing downtown, thriving businesses, winding bails, and beautiful parks. A 0K place to live, work, and play.
CITY OF CHANHASSEN
CARVER AND HE~ COUNTIES, MINNES~A
DATE:
April 28~ 2003
RESOLUTION NO:
MOTION BY:
SECONDED BY:
ADOPT A RF~OLUTION AMENDING ~ CITY OF CHANHASSEN BUSINESS
SUBSIDY CRITERIA
WtlEREAS, in accordance with State statutes the City of Chanhas~ adopted a Business
Subsidy Criteria on October 25, 1999; and
WHE~, State statutes were amended after the City's adoption of such criteria, stating
that a specific wage floor be included in all Business Subsidy Criteria; and
WHEREAS, the deadline for such amendments to be made is May 1, 2003;
NOW, THEREFORE, be it resolved by the City Council of the City of Chaahass~,
That the following amendment be made to the City of Chanhas~n Business Subsidy Crit~a:
Under PROJECT SELFL'TION CRITERIA, Numbe~ 6, Jobs and Wages:
It is the EDA's intent that the grantee ~ the maximum n~ of livable wage jobs at
the site. The wage.t~r.for wages to be paid.for the.iobs created shall ~ 105% o.f th~ state
m/n/mum wage. This may include jobs to be retained but only if job retention is imminent and
demonstrable.
Passed and adopted by the Chaahassen City Council this 28th day of April, 2003.
ATFF~T:
Thomas A. Furlong, Mayor
YES NO ABSENT
Minnesota Statutes 20(0, Table of Chapters
Table of contents for Charter 116J
116J.994 Re~ulat~n~ lo~al ax~ at&be bum~nesa ~ubmt~4es.
Subdivision 1. Publia ~ur~ose. 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. Develo~in~ a .et of ariteria. 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 trade and economic
development may assist local government agencies in developing
criteria. A copy of the criteria must be submitted to the
department of trade and economic development along with the
first annual report following the enactment of this section or
with the first annual report after it has adopted criteria,
whichever is earlier.
Subd. 3. ~.i~ m4;z~e~e~t. (a) A recipient must
enter into a subsidy agreement with the grantor of the subsidy
that includes:
(1) a description of the subsidy, including the amount and
type of subsidy, and type of district if the subsidy is tax
increment financing;
(2) a statement of the public purposes for the subsidy;
(3) measurable, specific, and tangible goals for the
subsidy;
(4) a description of the financial obligation of the
recipient if the goals are not met;
(5) a statement of why the subsidy is needed;
(6) a commitment to continue operations in the jurisdiction
where the subsidy is used for at least five years after the
benefit date;
(7) the name and address of the parent corporation of the
recipient, if any; and
(8) a list of all financial assistance by all grantors for
the project.
(b) Business subsidies in the form of grants must be
structured as forgivable loans. For other types of business
subsidies, the agreement must state the fair market value of the
subsidy to the recipient, including the value of conveying
property at less than a fair market price, or other in-k/nd
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.
(d) The state or local government agency and the recipient
must both sign the subsidy agreement and, if the grantor is a
local government agency, the agreement must be approved by the
local elected governing body, except for the St. Paul Port
Authority and a seaway port authority.
(e) Notwithstanding the provision in paragraph (a), clause
(6), a recipient may be authorized to move from the jurisdiction
where the subsidy is used within the five-year period after the
benefit date if, after a public hearing, the grantor approves
the recipient's request to move. For the purpose of this
paragraph, if the grantor is a state government agency other
than the iron range resources and reb-hilitation board,
· jurisdiction" means a city or township.
Subd. 4. Wage mn~ Job ~oal,. 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-time or full-time jobs, or, in cases where job
loss is specific and demonstrable, goals for the number of jobs
retained; and (2) wage goals for the jobs created or retained.
After a public hearing, if the creation or retention of jobs is
determined not to be a goal, the wage and job goals may be set
at zero.
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 mn~he~r~n~. (a) Before
granting a business subsidy that exceeds $500,000 for a state
government grantor and $100,000 for a local government grantor,
the grantor must provide public notice and a hearing on the
subsidy. A public hearing and notice under this subdivision is
not required if a hearing and notice on the subsidy is otherwise
required by law.
(b) Public notice of a proposed business subsidy under this
subdivision by a state government grantor, other than the iron
range resources and rehabilitation board, must be published in
the State Register. Public notice of a proposed business
subsidy under this subdivision by a local government grantor or
the iron range resources and rehabilitation board must be
published in a local newspaper of general circulation. The
public notice must identify the location at which information
about the business subsidy, including a summary of 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) The 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.
Subd. 6. F&~I~_~ to~mot ~lm. 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.
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.
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. Re~or~m ~ recipients to grantor.. (a) A
business subsidy grantor must monitor the proGress by the
recipient in achieving agreement goals.
CITY OF CHANHASSEN
BUSINESS S UBSID Y CRITERIA
Approved October 11, 1999
Amended April 28, 2003
CITY OF CHANHASSEN
BUSINK.qS SUBSIDY CRITERIA
Policy and Criteria for Business Subsidy
The City Council of the City of Chanhassen has the power, should it deem necessa_~, to grant business
subsidies. The fundamental propose of Business Subsidy Crite~ in Chanhassen is to eacomage desirable
and affordable housing, senior housing, and asaiste~ living that would not otherwise occur "but for" the
assistance provided by the City of Chanha~sea Business Subsidy Criteria. This Business Subsidy Critea~
shall be used as a guide in processing and reviewing applications requesting business subsidy.
PROJECT SEL~ON CRITERIA
Business Subsidies can benefit the community by providing a broad ra%oe of housing opportunities such as
affordable housing, senior housing and assisted living. The Council reserves the right to approve or reject
business subsidies on an individual basis.
Hi~hest_~ Priority ~ Be Given to Projects Which Include:
1. Compatibility of the proposed project with the City's overall developrmmt plans and objectives.
2. Broad range of housing opportunities such as affordable housing, senior housing and assisted living
3. Minimal impact on City service needs.
4. High quality of the facility to be built
5. Increase in Tax Base: While an increase in the tax base cannot be the sole gromxts for granting a
subsidy, the EDA believes it is a n_~e-ssary condition for any subsidy.
6. Jobs and Wages: It is the EDA's intent that the grantee create the maximum number of livable wage
jobs at the site. T/~ wa~e floor for wa~s to be l~aid £or th~ iobs created shall b~ 105% of tl~ state
m/n/mum waee. This may incl,~¢ jobs to be retained but only if job retention is imminent and
demonstrable.
7. Economic Develolnmne Projects should promote one or more of the following:
a. Encourage economic and co~ diversity within the community;
b. Contribute to the estab~ of a critical mass of commercial development within an area;
c. Provide basic goods and sexvices, increase the ran~ of goods and services available,
or encourage fast-growing businesses;
d. Promote redevelopment objectives and removal of blight, including pollution cleanup;
¢. Promote the retention or adaptive reuse of buildin~ of historical or architectural si~onifieance;
f. Promote ~dditional or spin-off development within the commimity;
g. Encourage full utilization of existing or planned infxaslmeture
PROJECT REO~S
1. Applicant at aH times should retain and be assist~ by qualified financial consultants and/or
underwriters, and legal counsel.
2. Construction of the project shall not be commenced until the City has given Preliminary approval to the
application for financing.
3. The City reserves the fight to deny any application for financing at any stage of the ~ prior to
adoption of the final approval authori=in~ issuance of the bonds.
4. The City reserves the right to select a third party ~ to assist in the management of the
process.
5. The City will only consider a "pay as you go" plan for high quality industrial developments in existing
TIF districts (National Weather, 2-2; Henmpin County, 3-1; Gateway, 6-1; and ~
District, 4).
6. Development must be of the highest quality With high quality building materials and la~ as
agreed between the City and the Developer.
7. Developer must pay all costs of establishing the district unless the City agrees to allow costs to come
out of thc district.
9. Project meets "but for" analysis and statutory qualifications (Exhibit A).
10. All projects must be c. onsismm with Chanhas~n's Comprehensive Plan and any other similar plan or
guide for developn~nt of tbe community.
AC'rlVlT~ ~'.,.q TO BE I~ON~DER~ FQR FINANCING
1. Any subsidy granted by the city will be subject to the requirement of a public hearing, if necessary, and
must be approved by the Chanhassen City Council.
2. It will be necessary for both the grantee and the EDA (City of Chanhsss~n) to comply with the reporting
and monitoring requirements of the Act.
3. Land write down
4. Costs of streets and utilities
5. Demolition and relocation costs
6. City costs such as trunk utility costs, street costs, and MSA reimbursement
7. Extraordinary landscap~ and lighting
8. Soil corrections
APPLICATIQN PROCE.~
1. The application process must be complez~xt in accordance with TIF application procedures (Exhibit B).
2. Applicant shall make an application for TIF usage on forms available from the City.
3. The application will include (if appropriate):
A. Stamm~nt of Public Purposes
B. Description of Project
C. Plans and Drawings of Project
D. Description of Company
E. L~gal Opinions
F. Investment Bank Letter of Feasibility
G. Market Analysis
H. Pro Forma Analysis
I. Financial Statements
J. Zoning and Plmaning Analysis
K. Application Fee
L. Demonstration of past successful gersmfl development capability as well as specific capability in the
type and size of development proposed.
M. Other Documentation Requested by the City
.
The City's Business Subsidy program will be a~dmini.,~:red by the City of Chanhasseffs Eeo~c
Development Authority (EDA). The applicant shall submit a completed application and a $2,000 non-
refundable application fee. The application fee shall be paid to the City of Ch~xh~n at the time a final
Business Subsidy application is submitted.
At the ~ a final Business Subsidy application is submitt~xl, th~ applicant shall also de. li~ to th~ City
a dq~osit in the amount of $10,000. Tbe pm'po~ of this dqx~t is to r~j'mhurs~ tbe City for costs and
expenses incurred in connection with preparation of the development agreement and the carrying out of
all actions necessary in the fulfillmgnt of the City's obligations. Any pan of the deposit not
needed for those purposes shall be promptly rtmn'ned to tbe Redeveloper not later than the date of
issuance of the Certificate of Completion, or within 15 days following the tm'ruination of the
Development Agreement for failure to close. It is understood the deposit is not a limitation on the
Redeveloper's obligation to reimburse the City for such costs; and the Redeveloper shall pay the City
for any such costs in excess of the deposit within 30 days following a writt~ reque, st ti9 do so.
4. City staff will review the data and make preliminary recommendations to the City Council as to
compliance of the application and proposed project with City objectives and critexia/Strategic Plan.
5. Formal evaluation of the application will include, in ~ddition to items subject to preliminary review,
review of applicable credit analysis, credit enhancement and leg, al compliance. Formal reco~on
will then be made to the City Council.
6. After evaluation of the formal recommelxiation, the City CoulIcil will consider final approval of the
establishment of the Business Subsidy and hold the appropriate hearing.
7. All applications and supporting materials and documents shall become the property of the City.
CITY OF CHANHASSEN
APPLICATION FOR BUSINF...qs SUBSIDY
Business Name:
Location of Proposed Development:
Type(Partnership, etc.):
Telephone:
Nature of Business:
m~TORY OF APPLICANT
1. Have you ever filed bankruptcy? Yes No
If y~s, provide details on separate sheet.
2. Hav~ you ever defaulted on any loan commitment? Yes No.~
If yes, provide details on separate sheet
3. Have you cvc~ applied for conventional financing for thc project? Yes
If yes, provide details on separate sheet. If no, why not7
Project Cost Breakdown:
$
$
$
$.
Total: $
Da~:
No
4. List financial refcxences: NamdAddress/C~nm~
a.
5. Other information pertinent to your application-'
6. Name of Counsel:
INFORMATION CONCERNING APPLIC,.ANT'~ PROPOSED PROJECT FOR EXl,..qTIN(~
INOU~R~L o~Pl~g~rr LOC,~TEO IN TW i)i~rgt~r$~a~on~l Weather~ 2-21 mnneptn
County, 3-1; Gateway, 6=1~ Ent~dnment District~ 4)~ AND Eden ~ 4=1.
1. Is the proposed proj~ a n~w facility or re~habilitation and/or expansion of existing facility?
2. Industrial/Commercial:
3. What is the present employment of your firm?
4. What will the employment be at completion of project?.
5. Estimated Project Cost?
6. What is the principal business or product of the company?.
7. Potential other use of proposed development?
8. Will this development attract other related industries? Yes
How?
No
9. What are the proposed financing arrange~nents?.
INFORMATION ¢ONCERNINC~ APPLICANT'S PROPOSED HOUSING PROJECW
Is the proposed housing project a new facility or rehabilitation mad/or expansion of existing facility7
2 Housing Type(single family, multi-family, apartments, condominiums, etc.):
3. Numberofunits:
4. Number of bedroom.~ in each unit:
:5. Sale price of the units:
or
6. Rental price of the units:
7. Estimated total project cost and breakdown of ovea'all development costs?
8. Who are you principally marketing your product to?.
9. How long do you think it will take to sell or rent your product?
11. Do you have linkages/contacts with ~ b~? Please explain(Reason: To see if you are
meeting the local business needs.)
12. What are the proposed financing
13. How are you proposing to meet almmate ~tion needs?
WITH NO BUSINF3S SUBSIDY WITH BUSINESS SUBSIDY
Sources and Uses Sources and Uses
SOURCF~ SOURCES
Mortgage 9,600,000 8,667,000
~uity 2,400,000 2,400,000
Tax Inerern~nt 0 933,000
TOTAL SOURCES 12,000,000 12~000~000
Land
Sitework
Soil Correction
Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufac0.n'in~
Subtotal Constmcl/on Costs
Soft Costs
Taxes
Fimnce Fees
Project Manager
Developer Fee
Contingency
Subtotal Soft Costs
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
350,000
35,000
850,000
542,000
540,000
250,000
300,000
468,000
100,000
65,000
2,433,000
6,750,000
250,000
350,000
35,000
850,000
542,000
540,000
250,000
2,567,000 2,567,000
TOTAL USES I 12,000'000 I 12,000'000 I
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Scl. Ft. Per Sq. Ft.
100,000 $8.00 800,000
25,000 $8.00 212,000
25,000 $9.00 225,000
0 $0.00 0
Sq. Ft. Per Sq. Pt
100,000 $8.00 800,000
25,000 $8.00 212,000
25,000 $9.0O 225,000
0 $0.00 0
1,237,500 1,237,500
Mortgage
20 Term
9.00% Interest
9,600,000
1,051,646
20 Term
9.00%
8,667,000
949,439
INet Income
Total Return on Equi~
185,854I
7.74%
~8,~1[
12.00%
'~BUT.FOW' ANALYSIS WORKgHI~
WITH NO BUSINF.,~ SUBSIDY WITH B~ SUBSIDY
Sources and Uses Soum~ and Uses
$OURCY~ SOURCKS
Mortgage
Equity
Tax Increment
TOTAL SOURCES
Land
Sitework
Soil Correction
Demolition
Relocation
Subtotal Land Costs
Construction
Finish Manufuctufin~
Subtotal Construction Costs
SoR Costs
Taxes
Finance Fees
Proj~ Manager
Develope~r Fee
Continl~enc7
Subtotal Sof~ Costs
Rent-Space 1
Rent-Space 2
Rent-Space 3
Other
Sq. Ft. Per Sq. ~
Mortgage
Net Income ]
Total Return on Equity
I hereby certify the above finnnei~ll infommtion is true and accurate.
Title
Date
g.X H I liI'T ]~
CITY OF CHANHASSEN
APPLICATION PROCEDURES FOR BUSINESS SUBSIDY
1. Applicant shall meet with City staff to discuss the scope of the project, public assistance being
requested, time schedule and other information as may be necessary.
2. Following an initial meeting, applicant shall complete a Business Subsidy application. The completed
application shall be submitted to the Executive Director of the Economic Develo~ Authority.
3. The application shall be reviewed by City staff on a preliminary basis as to the feasibility of tho project.
City staff shall prepare a report on the project.
4. The application shall be placed on an EDA agenda for concept review. The applicant may make a
presentation of the project at that tiin~. City staff will present its preliminary findings.
5. The following items must accompany the application:
a. $2,000 application fee
b. Completed "but-for" worksheet
c. $10,000 application deposit
d. Statement of Public Purpose
e. Description of Project
f. Plans and Drawing of Project
g. Company Baclq~und Mamrial
h. Letter of Feasibility
i. Markrt Analysis
j. Pro Forma Analysis
lc Financial Statements
1. Zoning and Comprehensive Plan Analysis
m. Other Pertinent Information
.
Following the n_,-cessary analysis of the application by City staff, a report shaU be prepared and
presente~ to the EDA for formal action. If the application is approved, City staff will be directed to
undertake the following steps:
a. Prepare a redevelopment agreement between the City of Ch~h~ssen and the Developer;
b. Prepare or modify the redevelopment plan and TIF plan if l~luired.
7. If zoning amendments or Planning Commigsion action is required as part of the project, the appropriate
actions shall be taken prior to final considexation of the redevelopment agreement
8. Applicant must follow all city development review processes (e.g. site plan, platting, rezoning: PUD,
etc.) before final Business Subsidy application may be approved.
If you have any questions concerning th~ Business Subsidy application process, please contact:
City of Chanhassen
FDA Executive ]Ycector
690 City Center Drive
PO Box 147
Chanhassen, M2q 55317
(612)937-1900 e..,xL 119
10