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CITYOF City Center Drive, PO Box 147 5anhassen, Minnesota 55317 Phone 612.937.1900 5eneral Fax 612.937.5739 dineering Fax 612.93Z 9152 51lc Safe~y Fax 612. 934.2524 ~b www. ci. chanhassen, mn. us MEMORANDUM TO: Scott A. Botcher, City Manager FROM: Todd Gerhardt, Assistant City Manager DATE: September 22, 1999 SUB J: Business Subsidy Criteria The 1999 Minnesota Legislature enacted a new law requiring cities to establish a set of Business Subsidy Criteria (see Attachment #1). Under this law, cities cannot provide TIF assistance of over $25,000 until a Business Subsidy Criteria Plan is approved. Mr. Ron Batty, our EDA attorney from Kennedy & Graven, has prepared Business Subsidy Plans for other Minnesota cities and therefore staff asked him to prepare the attached draft for council consideration (see Attachment #3). The contents of this plan meet the state's minimum requirements as addressed in Mr. Batty's memo dated September 22, 1999 (see Attachment #2). Also attached is a copy of the city's current TIF Policy that already includes most of the criteria required by state law. Mr. Dan Greensweig from Kennedy & Graven will attend Monday night's meeting to present this item as Mr. Batty, Scott and I will all be out of town. Monday night's meeting is a public hearing and therefore the Mayor should open the public hearing, ask Mr. Greensweig to give the staff report, and accept any public comment on the plan. Following that, the public hearing should be closed and the council has the option to either approve the plan, amend the plan, or table action to the next meeting. If council members have questions about the document prior to Monday evening,. they should feel free to contact Mr. Greensweig directly at 337-9231. ATTACHMENTS 2. 3. 4. Minnesota Statutes Regarding Business Subsidy Plans Memo from Ron Batty dated September 22, 1999 Proposed Business Subsidy Criteria City of Chanhassen TIF Policy gSadmin\tg\business subsidy I .doc 5'itl, of Chanhassen. A ~rowing community with dean lakes, auali, schools, a charming downtown, thrivin~ businesses, and beautiful oarks. A ereat ~lace to live. work. a,d a/aw Minnesota Session Laws 1999, Chapter 243, Article 12, Business Subsidies Page 1 of 6 [ Hom_e ] [ Business Assistance ] [Intemational Trade Assistance ] [ CommunitMA__S_s_is_tgn_c_e ] [ Exp!ore.Mi~.spm ] [ Mi~o~..~p.~0~y ] [ New~s.&.Events ] aThe following was excerpted from www.revisor.leg.state.mn.us/slaws/1999/c243.html, July 30, 1999. Minnesota Session Laws - 1999 ~Key: :~gw' 1 a~ngu age_ CHAPTER 243-H.F.No. 2420 ARTICLE 12 BUSINESS SUBSIDIES Section 1. [116J.993] [DEFINITIONS.] S_u_b~i¥i~s_ig_n___l__._ [SCOPE. ] For the p_u_xpos_es.~o~.~s~_ct__i_.o_ns 116J.993 to 116J.995,_ the terms defined in this section have the meaninqs g_iven them. _S__u~d~; 2. [BENEFIT DATE.] "Benefit date" means the date that the recipient receives the business subsidy_:_~I.f__t_h_e_ business subsidy involves the l~urc~a_s_e_~_ l~e_.as._e~__o~[___d~on~a_t_.$o_.n__o~f p_.h_v_s~i_c._al equ_i_p_m_en_t. ...... t_hen th_9~b_~_nef_it__d_a__te .b_eg_i_ns r_e_q~ip_i e_n_ t pu _t $_ _t _h~e _e_ _c~4iP~gn ~t_iD_~_o _ .s_e r~ y_i_c__e S_u_b._s i~.d_l( is for improvements _t_~._r~e__r_t3_~. t__h_e_n~__th~e _b_gge_fi_t__d~t e r e f er s_ ~t_o__t_be__. _e~_r..!_i_ 9_s_t~d_a~t _e.._ 9_f___ei t~h e__.r._;.. (_1_) _ _w_h~e_ _n_ t_h_e p_r_o~ 9_c t3_~o r_ 12) when a business occupies the pr_opert__y_.. If~a business occul%i__e~s__t~he__p_ro_~_e__r.._ty and the subsidy grantor exp_ec_t~s_~th_a_g~_o_t_h_e_r~ bu~sinesses will also occup_y___th~9_~s_a_m~e_pr.o_p__er__t_y~ t_~h_e~a__n_t~o__r__m_a_y ~S_s._i~D_a_s_91~arate benefit date for each business when it first .o_ c c.__up__i.._e ~s_ t h_~ _ p_r_ o_p e_ r t 7_.._ Subd. 3. [BUSINESS SUBSIDY.] "subsidy" means a state or local .~gv__e_rn~__.e_nk~a__c[9.n_cy__~[_an_t_~_ contribution of personal p~o_o~er__r~_yt, re_a_!__prop_e.~ty~_ ig.f_ra~s~t_ru_c_t_ure~_ t_he_D~_i_gc!pa 1 a_m_ou__n_t__o__f__g__l_oa__n___ag_~_a_t__es~..b_e.l_o_w_ _t_.h_o_s_~_C_o__mmer_ci_a._l_~y__a_v_.ail~abl.e___tQ___t_he _r_9_c_i~_i__e__n._t~_~__re_d_uc_t_!__o_n or deferral of any tax or any fee, an¥_~uarantee of any~_ayment under any loa_B~n l_ea~se_~_~or ot._h_e_r ob_l__i_qDgi__o~n~_~o_r__a_n3_~._r~ef_e_r__e_n_g_ia~l_ _u_s_9__o_f__¢Qv~e_r_ ~nm_e_n_t ___f _a__ci_li_t_i e s__q.i__v_e_n__g.~._ b_u_ s_i_ n. _e_s_s_ ._._ __T_h..e_ _ _f_o_l_!gw~i n_g_.f__qr_m_s___o..f_ __f_i_g_a_n_c_i.a! _. _a_s s. i._s t__an_c__e_.a_~9_B_o__t_~ .a_ bus i_n_e_s__s _~u_b_s i_d~f_.' i! )_ ._a __b_u_s__i_n_e_~ s__~_u__b_s.~.dy_ _9. ~_.!_e_s_s~ _t__h_ an _$ _2_.5~_0_0_ _0_L _( 2_ ) __. a s_s_i s g gn c e~t_h_a_t_ _!~ _~ _e.n_ e__r_al_l_z_g.v_ _a_i_l_a_ b_~_e_gp b_u_s_~_n_e~s_es__p_r._ tQ___a.__q_.e_n_e~ra_l__c__l_a~s~_._o_f._s__i_m_i.~l_~_r_b_U_s_i_neg~D~ ..... S_u_ch. as. a_l_i_De_ o~f_b_u_s_i_ge_s__s_~__s_i__zg_,_!ocat_ion, or similar ge__n_e_r_a_!___cri_te_r3g.;. ~http://www.dted.state.mn.us/busasst/1999taw.html 09/22/1999 Minnesota Session Laws 1999, Chapter 243, Article 12, Business Subsidies Page 2 of 6 _(.3~__public improvements to buildinqs_or_lan_ds__gw___n._e_d_by the _.st_~_t~ or 10_G_al_government that serve a public purpose and do not p_r_.i_n_cipally benefit a single business or defined group o___f_ businesses at the time the improvements are made;_ ._(_4_) r_edeve!oI!_m__ent property polluted by contaminants as ~efin_e.d__i_n__s_e_.ct_iQn_ ll_6J__. 552 t subdivision 3 ;_ (~)_. a_ss_i___s_t_a__ncD_/orovided for the sole purpose of renovating o_l__d__o_r_ dec~y_i.n.~ buildinq stock or bring_i_.n__c[_it_up to provided that the assistance is equal_._t_o_~or less th~__5__0.._Dercent~ of the total costa ~6J assistance provided to orqanizations whose pr~imarff mi_s~i_on is to prqsc%_de__job__r_9_a_din_~s__s_ __a_.n_d.__t.__r__a_i_nin_g_ services if the s___o}_e__._purpose of the assistance is to provide those servicesA ~7) assistance for housin~tA ~_8( _as_si_._s_t__a~.c_e____f_o_~__pol lution control or abatement ;_ _(~} a_ssi_sta_n__c_9_ f~Qr_e_ner~y conservation; ~IQ) tax reductions resultin~ from__con~fo_rmit_y with ta~ _!_.a.w__~ (11) _wq~r_k.e_.~.S ' ___cgmpensation and u~ne.m_p_~o_yment compensat~ion.i ( %2~ ~be~n.e_._f__i_~g_.s____~.e_r_ived_ fromregulation~ ~ I__! ~.}.._i~n_di rec-t be~n__e.~_i_~_s__.d_e_r__i_v_e_d__f__~_Q~_~_s_.i_~._t_~.a_D ~c~.__~_~ educational__ _(.l__4)__.f_~D~s_f_rom b@nd__s__a_lloc~_ted u_n__de_r__ ~._ha~p_t~e_r 474~3 _~._1_~_) assistance for a collaboration between a Minnesota ~h_igher education institution and a business£ ~6_)_ assistance for a tax increment financin~ soils c_o n d i _t.j QD_d i s_t r i_c_t_..~_s__.. _.d__e~ _i_n._e_d_ un~d_er~s e c t i on__4 _69. _17_4~ 19; (.17). _redev~elopmeg__t_ wh_e.n__ _tt~_e recipient' s _investment in. the purchase_of the_s._ite_.._and in site jpre~p~at%o~ more_o_f_ _the asses~_o_.r', s current year_'s.. and ( ! 8 ) gene.r._a_%._c_hanges i_n__t__ax__.iD_G.r_e_~_en_t _f_i_n_a_nci_ng 1 aw and other genera_l_ _tax__l_aw c__ha_~qgs__.o_._f__~2_rincipally tech_nical nature. su~d .... ~. [GRANTOR.] "Grantor" means any__s_t_._at__e___o_r..__l__o_~A% gQ.v__~_r__nment _a_ g_ _e. _ .n_ _ _c_ y_ _ wit~ the _a_u__t_h_D__r_.i_tY_ t~o_~rant a business subsidy._ S_ubd_. 5_., [LOCAL GOVERNMENT AGENCY. ] "Local governmg~[ a__genc_y" jB_c__l_u__d_e_~_a s_t_a_t_u&_o_r_z or home rule charter and red_~y_e_~.o_.Rme_nt au_.t_h_.._o_rit_%5~town~ coun_t_ff~__port authority,. e~onomi_c._._d__e_vel_opment authorit¥~ co__mm_un_i__t!f__d~e_lop__ment agencff~ no~prQ~i_t__e_n_.t_i___tff.__c__rea_t_ed b_lf. a local ~ovex_~_m__e.~g__a_g_.e_n__cy,_or anff o~her_enti_~t!~__c.r_e_~ted by~._@_r_.a__u_t_h_orized by__a__%_.o, ca__l__.gQv_ernment with authQKi_~tff ~to~ p_rpy_i__d_e~__bus i_n_es s _s__u_b__s_i._di_e_s. Sub_d ..... _6~. [RECIPIENT.] "R_9_c~ient" means an~ nonpro_f_$__t.___b~u~sine~s_s_e_n_tity that receives a business subsidy_,_ On!lc_~onprofit entities with at least 100 full-time equiva}Dn~_t_ positions and with a ratio of hiqhest to lowest paiJ ~mp%gyee_t _that_.._exce_ed_s ten to onet. determined on the basis of full-time equiY._a l_e_n~t_ pos_i_tj_ons, are__i_nc_ l__u_d_e_d !n__.tb.!_s.___d_e_._f_i_n__i_t~ i~on_ Subd._._7_~. [STATE GOVERNMENT AGENCY.] "State agen_cy!'_._ ~_eans _~y___s_t_at__e_a_q_eD.c_y_~t__h~a~t ha~s_t_he_._a_qg_h_p_r__i_t~ to bu_s_ines s _S ub__s. &di__e s_. Sec. 2. [116J.994] [REGULATING LOCAL AND STATE BUSINESS SUBSIDIES. ] S~u_bd_.i_v_i_s_i_Qn__l~_. [PUBLIC PURPOSE. ] m_.eet_ _a~p_u_bl_ i_c_~ourRQ~9__o_ther t_han~__i_n_9_r~_as_i_n~ the tax base. Job Ke_tenti__o_n__m~y___o_n~ be used as a p_u_kl__i_.._c purpose i_n__~_a...s_.e_s_whe__r_e j_o_b_ 1~ 9_s s__i_s _i m!n_ _i_n eD_t_a_n_d__, demo n s t r_ a_b_l_e_ ._ ._Su.b._d_.~ 2. [DEVELOPING A SET OF CRITERIA[] A__b_us_i_n_9~_s su~s-id_y_ may_~n_Q.t_._b.e_._qr_~anted u~ngi%~.__t_bD. ~ran_t_Qr_.~.s _adopt~e_d t_hat. ~cgm~p_.l.y__ ~i_th_ thi S_ _se_c~ti__o__n ._____T_he~_cri__tD_r__i__a_.~_u_s t__ in_c_l_..u_~9 _a policy~ r_e_ga[~_i.._n_g.....t_._h_e___wages to be pai_d_~gr__t_h_e_j_.o_._b_s_ c_re_ate_d ~o_mm.i~sioner_o_f~__t_rBde___a_nd ecgng__m_%._c___.d__ev_elo]pment ma~__as~i_st lpca~!. http://www, dted.state, mn.us/busasst/19991aw.html 09/22/1999 Minnesota Session Laws 1999, Chapter 243, Article 12, Business Subsidies Page 3 of 6 gQver~nmen._t a~[enc_i_es _in d_e_v~..o_p~Dg Subd. __3_. [SUBSIDY AGREEMENT. ] (..a.) A___req-ip!eD_t.._mus.t_._enter i_nto _a su_b_sidy ag_ree~ent__w_it~h.__th~e g_ran_tor Qf_the _su_bs.%dl( that inc_}ude_s_: ( 1 · a_~d_es_c_r_ipt iQn~ of _th_e_ sub_D__i_dy a~in_c_lud-in.g~t_h_e-_am@unt _and ~ype of subsidy,_._-a_nd__ tlrp_e~of_ di~st__r_i_c_ t _if .t~he~s_u~_si_d_y i~._ ta_x in_cre _men_[ ~ inan_c ~ing_;_ ~_2) .a sta_t_e_men.t_ 9_f ~he_public p_u._rpo__s_e_ss __f_o_r t_he s_ub_si_dy; { 4)_.._a ~e s~r ip_t_i on__9 f~t. he ~i nan__c__i~al_._ob~l~i_cLa_t ! 9_n_ o_~ t ~.9 r_e~$pient_.i__f th~_.goals are not metl (5) a sta~gem~_nt o_~f~h3_ the subsidy is needed~ (_6.1 a _co _mm~i_tmen_t_ _tQ_c_o_n_._ti_nue_ op_erat%_ons ._a_t _t._h_e_ s_}te the sub_sid_v _i,s us.ed .~9_r at__l~e_as~t _~-iv_e._yea_r_.s~ af_t._er _.t_he benef_i_t _d_a t e3 (2k_th_e n_a_me _-an_~_~addKe_ss _o.f t~e_pa_rent corPQr_a_-tion of___the re c ip_i e__n_t_, _-if~ _a._nyj _.an_d (8) _a__l-i_s_t_pf ._a_l! f_ina_n_c_ial as_sisgance_by al_l g_rang0rD_for the P[oJ e~c_.g, _(~) D~siges_.s_ subs~i~ies _ i~n__th_e ~orm._of or_ants_ mus_t b.e s_tructured_ as .forg&vable loans.. !f__a busin_ess subsidy is not st.ructure~ as__.a ~.or~.-i_¥ab_le %pan., .the aer_e_emegt must_ ~tate the fai_r_ma_r~et ._va~l_.ue- ~q~f~ t~h_e__s.~b_,sidy tp.._the_ rec_ipieng, inq%u_diBq the value of. _c .o_ ny_eyi_n_g pr>per_tM Bt l_eRs_~ha_n .a fai~_market_p.r~-i_ce,, or _(c) __If__a_ ~b_u_sines_s. _s~ubs_idy_bene_fi~t~s. more ~than oge_¥ecip%e_nt~ [_h.~ gr__aB~or ~uR.t_ _a~i~n. .a_ p!_opQr._¢%p~_of .t. he_ busines_s subsidy, to each re_c_ip-ieng g_hat ~si~ns .a ~subsidy__agreement. The pr~por~t.-ion assessed~t_o each. recipient., must re_fl~ect_a_ r~ea~pnabl~e~ _e_sti_mate_ of the rec~ipieng'_S _share of the te~tal_b~en, efits_ o__f ..the_proj ect; ~ d) _The ~t_a_~ or !oD_a!_ ~o~xnme_n_g _a~_e2c_y gn.~ g~!e _re_ci_pieng must b_ouh_._sig~ the SU~S}~y 3g_r_eDmeD_t and if ._the graDgor jsa %9C6%_gQ~ern.¢ent ag_enuy,_ ¢h_e agreem._e~t, mu~t }9c_a%__.e_lec_~d qO.v__ern}nq body~___except..~Q! the .St. paul Port Author_i.tff_an~d a se_-away port au~t_h.o¥i_t_V~. Subd~.__4. [WAGE AND JOB GOALS.] The__subs-idff_a~reDmeB~, _-in addit_ion _-to any .other_ gQa_ls=_ mu_8_¢ inclB.de: ._ (1)_ ~oaJ S_ f_ or_ the number_of_jeb_s_ cr_e_at~e_d~ ~__hicb__may_ %~o s s i s immig~n t_ _an_d_ demog~ gr~_b l_e~. ~Q_a.% S .f_ Q.r ~tb~ B_umb_e-_r_ .Q ~_ j~ob~s_ let_a%n_edi__and_ 2(~ w_~e _gqa_ls_f_~r__~he_j~b_s ~r~at_e.d In.. ad~.-itio~ t_o_ pt_h_er._sp~G_$_~%G and Je_b ~@.als ~g~g con.~g~g specif_~ goa.l.~_ two years _ _of _ the_b_e_ne~ i t_ _da~t~e_ .. Su_bd,_ _55._ [PUBLIC NOTICE AND HEARING.] J_a) Befor_e g~ra_n_tin.q a_.bus_~D_es_s subsi.dy~.t_hat_ _exG_e-ed~__$5D_0,0_00~ fo_r_a sg.ate__gover_nm~n_t G_ranger__a_nd_ ~10Q, 0_0~0_ f.or .a 1ocal_.~over__nn_m. ent__Gra_ntQ_r, ~he. must p_royi__de_pu_b._li__c_n_ o_ti~ce .a_nd_ _a hD_ariDq_o_n _the _.su~baidy_, p_ub_ 1 i c__he~a_r_in~.G an_.d no_t i G_e_un.der~ ._ thi___s s_Bbdi_vj s iQn_i_s_ hOC _r~equi. red if _ a_he~_rinc_[_an.._d__n.Q.t~i~e on__ th__e__sg_b_s-i_dy ._i~ ot_herw_is9 r_e_qu-i.re_d__by !_aw_. (b.) Public notice of a pr_o_pQ_sed~b_us_i_nesD_su_bs-idY._Un~_e_r_thi~g sub. d_iv_i.~io_n_ _b_y__a .._stat~Qyer_n.men_t~r_anto_r~_u~k_b_ e ~_ub~%s~ed_ .the _.S_ta~_e__R_eG_-is_t~er_; ~_P._ub~l_i_c__ n_o_t_ '_z c_ _e _o__f. _a__p_rQp.0sed bus-iness _s_.u_b_s_i_~lf__u_nd__e_r _th_is_,s__ubd_-iv_i_s_!on. by._..a l~9_c_~l_~9__vern.megk_ g_rag_t_or_ ..m_us__t __be__~Ub l_i_sh~e~_i_n____a~l_o_c__.a_l__ne__wsp_ap_e_r _Df-- gen~er_..al__circu!a~%.o_n_. The_ p_u._bl-i_c~nQ.ti_c.e m_ust i~den_t~i~fy_t_he_, lQ_cat-ion a._t ~_h_i_ch i_n_ferm~_t_i_o_n_ a. bou.¢__t_h_e~bu_s_ines__s subs_.idy_j i.n._clu_d~.gG _a~_c_o_p_y.~o_f_..t_he_. sub s i dY agr_ e.e_me-_.n__t .... i.s_ aya i_ l a~b 1_ e_ ..... Su_~f_f i_c_ie__nt!y _cpn_~pi~_u_0~u_s_i_n_s_iz_e_ ag_d_ p_laGe_men_t ~t_p_._di_,stingu_i_s_h the ~Ot_-i_c_e ._f_r_o_ln_ th_e. __su~r_ro_u_n_~_i.nG_ text .... T_he_ grantor .mus_t ~_a. ke__gh__e_ i_nf_or¢_at_-i.Q_n_a_va_i!ab!_e_ in_ pr_%n_te__d on th_e .!nt_e_r_ne.t._ .The__~over~nme_nt_a_ge_ncy__mu_st p.rov~i_d_e a_t .!_east_a. _ten~.~.a_y .n_.oti~ for _t..h9 _publ!._c http://www.dted.state.mn.us/busasst/19991aw.html 09/22/1999 Minnesota Session Laws 1999, Chapter 243, Article 12, Business Subsidies Page 4 of 6 _(c)_ T.he _~u_bl_i__c__gQt~i_c_e___m~u~st incl_u_d_.`e_t_.h_e~da__te~__t~!me~__.a_n_d Rlace .~)_ The~pu_b_l_}c h__e_grin_q[ by~ a state government gran__t_o_r_m_u_s_[ b e _ h e 1 d_ i~n__S-t_, ~P_a_u_ _1_. .S__qb_d.~_6_._ [FAILURE TO MEET GOALS. ] The subsidy _agreement rng~ s]~eci_f_y the recipient's obliqation if the recipient does not fulfill the agreement. At a minimum, the agreement must U~qqi~.`e ~_~ecipient failing to meet subsidy__agreement goals to p_~y_.~a.¢~__~b~_~is~gn~ceplus interest to the qrantor p_r~vi~9~ that_~`epa_~r~_eD_t_m~y__be.prorated to reflect partial fulfillment of ~Qals. The interest rate must be set at the implicit price deflator defined under section 275.70_,_ subdivision 2. The g.r__a_n_t__Qr ..... _a._f_te__r___a__public hear_in~q~__rnay extend for up t_o__one__~_ear ~the__period for meeting t__h_e__~Loa_~ls provided in a subsid~_ggreement. A__~r_e~c-ipi_en~t t__hat__fai l_s__t_o___m_9_e_t_the_t_.`e.~.~s~ of _a__~_u_bs idy_ ~gre~m._ent _may___..n_Q_t. receive a busine__ss__s_ubsi__dy_ from any~_gran_t.o~r [Qr_.a_._period of five years from the date of failure or until a r~e.~_i_pient satisfies its repayment obligation under this subdiv_ision~ whichever occurs first. Before_~a g_r_an__t_o...r___s_i_qn~s~a bus_in_`e_.s_~_._s_ubsi_dy__~g_r~eem__e~_,_ the g[ant_o[_~gst._Gh_e__ck__w~it_h the ~mP_i_%a__tio_n and_._~gmmar_y_u?_p~_r~ ~eq_uired~ b~f ~this s_eqt~i_Q.n___t_o.__d~e_ter_mi_n~e~i._f__the rD_c_i_p_ie~nt_i_s e 1 i g.i b 1 e_ _ ~_0_ _.~_e_c_e_i_y_e__a bus i n e_s_ s__s_u_b_s i dff. S_u_~_ 7~.. [REPORTS BY RECIPIENTS TO GRANTORS.] ~us~D`e~s_ subsidY_grantor must monitor the progre_ss~2;__the ~_e._c_~p~ent in achievinq_a.~reement goals. _lb_)_ _k._r_eq-ipient must provide information rega_rding _g_o_al_s a_nd_ _r.`e_su_l_t~__f__o_K__t._w_o._y_ea_rs after_t_h_e_b_`e_Be_~it da_t_e___o_r~un__til~_t._h~e g9 a_ ~1 ~_~r e__me ~_whi_c h e~v~ r___i_~__l~9 r. I f_ _t_h._e_ gp_a 1 s__a r_e__n.@_t ~ met~ t~_e _rg_c-ip_i_`en_t_ __m__u_s._t__~p_n_¢_!n_u_e_t~o provide information on the sub.s-idy_g_n-t_i_l_-the subsidy is~__r.~ep_.a_i__d_.~_T_he in_f`Q.r.__m_a._t~ion m~us_.t___~e_ f i ! ed. on~f_o_r~s dev_e 1 o_p e_d by _th_e_ G_Q_ _ngg_ _-i s s i oner_~.D_ _~99p era t i_o_n__wi th rep re s_gn__t._a..t__i_..v_`e.s__gf~l.o_~c.a_l ~Lovernm~en_.t_.___C_pp_i~qs o f_ th_e_ _c. 9~p 1 e_t~e_d form_s mus-t_ ~`e_ .se.nt. t_o_ t~h_e commis_s_i_Q_n`e_r__a_nd_ the__lg.c_al .. governmeng. agg~c_y__t_h_~.t___Pr_0Y-id.`e~d__.t_.h_e_~_u_s_i_ne~s s _su_bs_i_d_y_ ..... Th_e_ report. _m~s.t ._i.n_ ql_u._d_e_: _(!)_ th_e tffP`e~ _Public Rur_pp_s_ex_gg_d..._a_m_p_unt_9of__s_u_b_S_!_d_i_e_s~an_d_ _typ`e_o~ distr!~ct, if the subsidy[ is tax increment financing; _(~)_ _the h_ou_rly_wag_e of each j_ob created with separate bands _(_3) the sum of the hourly w_ages and cost of health i_n_~an.c_e _pr_ov_$ded _b_~ the emp~l_oy_e_~_w_i__t_h_ separate band~s_Q_f_.w_a_g_es3_ ] 41 __the _d_a t~ e _tke_~ ob~ a_nd _wa~e~a_l_ s~_w_i!._l_.b_e_ r_eached .(~5)_a__s_t~at`em_`ent o_f_go_als_ _i~`en~%.f.i_.`e_d__!n__t~h`e subsidy~ ag r e_e _rn_en_t~a_ n__d_a_n__up~_a-t__e__Qn __a_ch_i_evement _of_ _t_~Q~ ~_sQ_a._ls; .(_6_)___t_be lp_G_gt.!o_n__o_f~th_e~r_ec_i_p_i_e_n__t__pr_ior to r_`e_ceiving_.~.h_e_ b~s~in_e~ s__ _(7~)___why_ ~he ~recipient did not complete the project outlined in__~th_e, s_ub_s_i_~y agreement at their ~rev!_oU_S__!_@_ca_t__i_o_n~ if the _r `e G i_ p _i e_n~_ wa_s._R_r_e_v_iously locate~d a__t (8J__the na_m_e__a_n_d ~ad_~d_r_e_s_s~o_f_ t~he_p_a._r_e__n_t__qprp__o~_at~ion, of ~t_he r e c ipi.`en_~t_~ __if_. _( _9_)_ _a_!~_t___of a 1~ 1 _f !n_anc i al_as s_i ~h_`e_ p_r~j_`e_c_t_; ._ _a.D_d _(.!. 0 )__Q t_h~ r.~-i_n, f_Q ~r_ _m..a_t_i_ _o_n g_h~e__~gr0~m~ -i_ s__~__i_o_n e~r _m_ ay~ ~r_e q~u e s t. _t._h_e_ _~ r.`e ~i_o_ u _s~y_e a r~ mee~t_ing_the j_qb and _wa~_sjoals. .(.~)__F_i n~g_c i_a}_ __a ~s s i ~_t gn c e t ha t_ _i s__exc_!u_cl_eD~f_r 9m _t he ........................... t' ................. 'J definition of business subsi_d3f by section 116J.993, _s. ubdivi_.sio~n_3_~_._c_l_a__u~se~s__(_4D_,___(~J~ , ( 8_J_,___a_nd _(_!__6J__!_S_ su_bj_~_c_~_ go__ th~ i_`epo_r~tin_gj~q_u__i_re_m_eD_t_s~_of_ t_h_is~s~u_bdiv_i_s_i~on~_ e~xcept ghat~the r`eporg .qf_t.h.e__r_ecipie_n-t_mus t include: ..(_!) _gh.e_. gyp~p_ub_l__i~c_pD_r_~_o_s e~ _and amoun__t~o_f_th~e__~f_i_ngg_C__i_a_l_ http://www, dted.state, mn.us/busasst/19991aw.html 09/22/1999 Minnesota Session Laws 1999, Chapter 243, Article 12, Business Subsidies Page 5 of 6 a_ssi__s~tance~_ -aDd_ _typ ,e_ o~fr di_.~s_t_ri_c~t ~f t_he_._s__ubsid7 _is t_ax increment_ f inanc~inq[;. l ~.L~ pro~__r__e_s s__ ..t_o_ward__s m_e_et_i.n_g_ go_al_s_ _s t_at~ed_i!l_ _thee_ s~.~i.d!; -agr_e__eme_n~ _-a_nd t_h_e__DB~l~%__c_ p~pQ_s~e_ Of`_ the. _( 33_ th_e__ ko_u? ly_ _~wage _of_ ~a_ch_. j oD creD t_e.d_w~ th _s_e_pa_r~a t~ _e__ baD_ds of l~)~t_hq_ s_q_m Qf ~he h_ou[ly__w~_e_s__and~ _c~Q_S~ ins_ura__nqe_provided ~5f the em~lo_y_e__r_w.i_gb__s_e~rLar~at_.~e_b~a_nd~_of_~wa~q_es_ (5) _t_he._l_o~c_at_i_on_ of_.._ t_h_9__ r~c~ip_&e_n_t_ pr~i~or _to xeeDiv_$ng, t`he _-as s_is_ta~nc_el and l ~)__ 9g_h_er _i_n_fo..r__mation__th_e~_qrantor requ~.st~._ (dO I~ __t.~hq r~`e__cipie_nt do_es.__no.g~su~._b_m_i_t_ i_t_.s~_r_e_port .... ~h_e__loG_al go_veK_~nme~_t ._age__ncff mu_s_t_mai_l_r_~h,e_ r_e~cip!~_ _a_w~a~n~iDg_ ~week ~o_f__t_h_e r~equired filinq__d__a~t_e .... If, a_f_t_er _l_4~_~ay_s ~,ep_o~t_~ th_e r~ec~pi_e~ m_ust.._pay _~tQ__ th_9 3r_-aDt@r_ _a p~na~ty.__0f fqr ~ch ._su_~_s_e_~qeBt__day_ ung_i! ..the rej2or~t__iS_ fi~,.. Th,e m_-axim_um_ p`en-a~l~ ~h_al_!__.n_o_k- e. xc_e_9_d_ %1 Su_bd. _88. [REPORTS BY GRANTORS.] (al_._Lo_cal _qove_rnm~en_¢_ a~en_ci_e..s --of g l_oca~_geye_rnme_nt_ w~ith a_pQpu!_atien ~of more _th-an 2,~o.Q_~-a_nd.._sgag~e_~gove_rDme_nt a~eBci~es~_ r,eqar~!es_.s 9f_ wh,ether or not theff _.hay_q~_a_war_de.d_gn_y~_bus~n_es.s_ su_bs-i_di~es, .must f.ile, a_.r_.e_po[g by ApKi~l ~ ~of.._e-a_c_h 55ea_r_ with [be_ Gemrg__.i_D~io_g~r. Lo~-a!. go_vern~eeg agen~!e_s~ of__ -a._lQ_c. al_ .gev__erD_men~ w_i_t~ _a~ pop_u__._l~t~en~ Qf`. ~ _5QQ. 1,ess a[,e_e_x..emp_t_~.f__rQm_ f_il!__n_~__thi_s~r.epor_t ..if_ they_ have .not._awarded a b_u. s_in_es~ _subs%dy~ _in_ th_e._ pa._st__fiwe _year~_s_.. ._The.__lo_ca.l_ goyer~meBt agencff__~ust in_c!g~_~a_~l..i_s_t__o__f r_e~c_i.p_ient_s___th~.t_ d~_id_.Bot_, cqeple~ ~h,e. re_D@rt an~ Q~ r.ecip_~,ents_ .t`~a.t_ _h_ay,e nok_m~_t_~he!.r__j_o.~ ~n~ wage._~oa_l~s ~wit_hi_n _tw_o _y,ea~_s.~and t_he..s_t_eps __be~in_g t~aken to b. ring. them__ i_n. to__c_oDpl&_anc_e Q~r t_.o_ r~e,eo_up__~t_h_e _.s_~u_bs.i__dy.._ If_ ~th_e~ c0mmiss.%Qn_er bas ~not_ re.c_eived .the__ ~PQrt. ~!f f~@m. ~n_,e~_t$ty .r_equ.%re._d._¢Q r~pQrt, the _c0r~n_ issio~ner., shal!..issue a ~rn!ng_ ~9_th9 gDyer_n_~eDk.agegc~v.,. !_f the _c_0mmis_s_ioger has still not re.Gei_¥_ed the rep0r% by .J_DDe~! Q~. thak .~am_e.y~a~K f[9.m an ~Dtity_._~qui[._e~ ___tQ..r~p@rt` .... gh~e~ .~b~t gQYe~nme_n_t_ ~ge~,ey may not aw~ar_d~_a_ny__bus_i_ne_ss___s_ub__s_idi_e_s .¢_nt_.i~l _~t_he.. report .has _been _f&led. (_b) _Th_e_ cpmm_iss~i_o_ner q~g.ra_d_e aB~ ,e_conQ~i,e _deye~opmen_.t_ p~o~%de informagi_0D _o_n__r.epe_r__ti_n~ __r._equ. ir~D~_s ~tQ sta.¢~..-a~d 1Qcal 9_ov,e_r_nmen.t_ agencies. S_ub~_.~9_.. [COMPILATION AND SUMMARY REPORT. ] The~__dep~_r__tme_nt` of trade and economic develop_m_e_nt~m_u_s~t_pu_bli~_h a~_c_omp_il_a_tiqn .a_nd yea_r by__._J_ul_y_ l__Df _ e_a c_ _h_ ye a_ r .~ ?_ ~h e_ . r_epor_ts 9f~ the__.~Dve~r_nme_n_t ag enc i e_8 t~o~t_h_e~_depa r t~ _m.eng_ and _ the_ comp i 1.a t i..gn..and s. um~ ary l,ePO~g, o_f__~_h.`e _dep~_a.r_t~m_e~_t_ m_u~g .be .ma__de _ava._i_lable~_ t`0 the _s_o_ g_ha_t_. _u~s_e__fB !_c~@_m.p-a_r~i~o~ns_ ._aG_ro~ s ~ im9 _peri Qds. _and a~c_ro.s_s gra_n~Dr_s__~aB b_e__ m~e_ .... The___Co_n)gji_ss-i-on_er _~_ay_.~dd. 9_thor & B f_ Q_rma_t i0n_~t_0 the_ reDD_r t_ .__a s_~_[t!,e _CO _~mmi s~s~i@.n__er~ _d,eDms _n~`e~e~ s a_r7__ t o ,ev_alu._ate__-b_us__iDes~s.__~su_b_s!..d_i_ e~ .~__~A!Beng_t~_e .inf_o_rmg~ti~9_n__.in_.. t~h_e s .u_ ~mm.-a rff.._ a~B d__~c_omD_i l_a_ t~i_o_.n_ _(Jl.. t_o_~t_a.l~ -a_m_o_u~nt o~f_sD_b_s~.di_es_ _aYa. r_d.e__d _i_n~ e_-ach__d_eve!opm~2t. r_eg~i_o_n___o_~__t_h_e _S t~a_t_e_;_ _(_2~._ _di s_t_r i b~u_t.._i_0~ _0 f _ b_u_ ~_i n~e__s s___s_ub_s &dy_....a_¢Qun ~ S .__by_ ~s i_~ e..o f~_._t _h.~e 1 3 )___d_i__s tr_ib_u_t_!o_n_of`_ b_u_s_in_es.s~_$.u_b~i~y_ _gmog_n_t`S ~7_ time {~ )_ 4is_tri~_tio3 of.~sgbsi.dies ___b.y_.._type_.and__by_ (5)._pe~rcent. 0f~-all__.bu~ing_ss~_su~s~dies__tha.t_ reached ~t_heir go~a!~; GQ.a_ ~__s b~ff ~_wo_ __ye_a_~ s _ fre_m. ~._h_~ _ ¥.ene_ f_ i _t_ ~(7)~_ tQ.ta_l dQ!lar_ -a~mo_uBg_ o.f business subs%~i.q_s _gha_t__.di.d ..not http://www.dted.state.mn.usPousasst/19991aw.html 09/22/1999 Minnesota Session Laws 1999, Chapter 243, Article 12, Business Subsidies Page 6 of 6 m_eet_t__h_D__ir go_a!_s___a_..ft~er_~t_w_o__years from the benefit dateL (81_.3~_ercent of subsidies that did not meet their g~_~ls__.and that did not rece_i_yD. 9~J_ list of reci~_i_e~nts _t_h_at h~a_y_e._f_ai_!__e_d__tQ__mee, t.___~the__~ter__m__s Q~f_ a_ _sub__sidff ~_r_e_e_m__e__n_~_ i~n~th_.e_past five ye_a..~S a~_n_d h~a_¥__e_n_o_~ s a t i s f i ed their rep._a_y_m~__ __e_nt ob__Ii_gat i_o.D_s~ ~10_~_.__number of part-time and full-time jobs within separate b_~B__d_s__o_f_ wages; and ~_lll_~_e__n._e_~_fits~Daid within separate bands of waqes. Sec. 3. [116J.995] [ECONOMIC GRANTS.] ~_n___alDj~_r_oDr__i_ation rider in an aDp_~opriation to the .d__e. partment of trade and economic development that s_pe__c_.i_fig$_ _.t__he_ _ap_prop_r~...a_~_i~9~_be ~r~D_ted t_o_.._~a~_~ar~t_~cul~._r_._._bDs~Des~_.~ c_l_~a_ss. of businesses must contain a statement of the expe___c.~ted_~b_en~._f_~i_t_S a.s_s_o...c_i~ate~d__w_i_th_~the_~qrant. At a minimum,_t_h_~e_ sta~_t__e~me_n~t.._mu_s_t~ in_c.%_.u_~._e~9_al_s_ _f_Q__r_t~he_ n~u_m~_..~r__Qf_j obs created~__w~a~qes..pai~ the tax revenue increases due to the g~__a_n_t. Sec. 4. [REPEALER.] M_in_~n_e_s.._o__ta St_a~t_u_t_e~s 1~99~8_, section l16J. 991, is _r_epealed. Sec. 5. [EFFECTIVE DATE.] _S._.e._~_t ions_ L_t_Q_..4_.__ar _e~_ef_.~_eg_t i~ve_ ~f_@r_ b_us i__n_es s subsi_di_e~ ._ent_ere_d~i~_n_t_o.._~or s~tAt___e.__ _a_pprop_r~i_.a_t_.~ions~__a_u__.t_hori_z..e__d on_._Qr af.~__er~ _A_.u_g~__t E-mail questions or comments to dtcd~state,~n, us, or contact us by ~ai!9!~_.pho~. © 1999 State of Minnesota Department of Trade and Economic Development. All rights reserved. http://www, dted.state.mn.us/busasst/19991aw, html 09/22/1999 F__.,cTrade & . onoTD_IC Devdopment FACT SHEET: 1099 Business Subsidies Law Laws of Minnesota 1999, Chapter 243, Article 12; to be codified as Minn. Stat. {}116J.993 to {}116J.995 What is the 1999 Business Subsidies Law? Minnesota Statutes (Minn. Stat.) §116J.993 through §116J.995 regulate business subsidy agreements signed on or after August 1, 1999, and replace Minn. Stat. §116J.991. Agencies are no longer subject to reporting requirements for agreements signed under Minn. Stat. §116J.991, but businesses must still comply with agreements signed before August 1, 1999. Who does the law apply to, and for what types of subsidies? ~ State and local govemment agencies with the authority to provide business subsidies with state or local government funds, and entities created or authorized by a local government with this authority, are subject to the law. The law gives a complete description of applicable agencies (i.e. "grantors"). V' The law covers buSiness .subsidies to for-profit businesses, and to nonprofits with at least 100 full- time equivalent positions and a ratio of highest to lowest paid employee, determined on the basis of full-time equivalent positions, exceeding 10 to 1. · ~ Types of assistance meeting the definition of a ~business subsidy" include: · state or local government agency grants; · contributions of personal property, real property, or infrastructure; · the principal amount of a loan at rates below those commercially available; · reductions or deferrals of taxes or fees, including tax increment financing (TIF); · guarantees of any payment under any loan, lease, or other obligation; · and preferential use of government facilities. ~' The law explicitly excludes 18 types of assistance from the definition of business subsidies, including all awards of less than $25,000. ~ Four of the types of financial assistance excluded from the definition of business subsidies are subject to different reporting requirements under Minn. Stat. §116J.994, subdivision 7. These types of assistance include: · property polluted by contaminants as defined in Minn. Stat. §116J.552, subdivision 3 (i.e. brownfields); · assistance provided for the sole purpose of renovating building stock or bringing it up to code, if the assistance is 50 percent or less of the total cost; · assistance for pollution control or abatement; · and assistance for a TIF soils condition district as defined in Minn. Stat. ~469.174, subdivision 19. What is required in order to award a business subsidy? ,/ A business subsidy agreement may not be signed on or after August 1, 1999, until the grantor has held a public hearing on, and adopted criteria for, awarding business subsidies. The criteria must include a wage policy for jobs created by a recipient. The law outlines 8 elements that must be included in business subsidy agreements: · a description of the subsidy, including the amount and type of subsidy, and type of district if the subsidy is TIF; · a statement of the public purposes for the subsidy; · goals for the subsidy; · a description of the financial obligation of the recipient if goals are not met; · a statement of why the subsidy is needed; · a commitment to continue operations at the site where the subsidy is used for five years; · the name and address of the parent corporation of the recipient, if any; · and a list of all financial assistance by all grantors for the project. Ail business subsidy agreements must include job and wage goals with specific goals to be attained within two years of the benefit date. The law does not specify minimum criteda for these goals. Depa~ent of Trade and Economic Development Page 1 of 4 July 27, 1999 Fact Sheet: 1999 Business Subsidies Law Business subsidies must meet a public purpose other than increasing the tax base. The law specifies that job retention may be used as a public purpose only where job loss is imminent and demonstrable, but does not otherwise restrict allowable public purposes (see examples on page 4). Grantors must determine that the recipient is eligible to receive assistance by reviewing DTED's list of past recipients ineligible to receive a business subsidy because they failed to meet the terms of another subsidy agreement. (This will not take effect until DTED makes the first list available after receiving the 1999 reports in 2000.) 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 hold a headng on the subsidy unless a headng and notice on the subsidy is otherwise required by law. If a business subsidy benefits more than one recipient, the grantor must assign a proportion of the subsidy to each recipient signing the agreement. If the grantor is a local government agency, the agreement must be approved by the local elected goveming body, except for the St. Paul Port Authority and a seaway port authority. Also, subsidies in the form of grants must be structured as forgivable loans, and agreements for other types of business subsidies must state the fair market value of the subsidy or other in-kind benefits. In addition to any criteda developed in compliance with this law, agencies may be subject to additional cdteria required by specific assistance programs such as the Community Development Block Grant (HUD) and Minnesota Investment Fund programs. Agencies may or may not choose to address specific program cdteda in the cdteria developed in compliance with this law. What happens if a recipient does not meet business subsidy goals? Business subsidy agreements must specify the recipient's obligation if the recipient does not fulfill the agreement. At a minimum, a recipient failing to meet goals must pay back the assistance plus interest, although repayment may be prorated to reflect partial fulfillment of goals. The interest rate must be set at the Implicit Price Deflator rate as defined in Minn. Stat. §275.70, subdivision 2. DTED will provide information on the Implicit Price Deflator on its website. Recipients failing to fulfill business subsidy agreements may not receive business subsidies fi-om any grantor for five years or until they have satisfied their repayment obligation, whichever occurs first. Who is required to report business subsidies, and how? Recipients must provide grantors with information on their progress toward goals outlined in the agreement, and will be subject to a penalty as defined in Minn. Stat. §116J.994, subdivision 7(d) for failing to report. Grantors must submit the annual Minnesota Business Assistance Form (MBAF) to DTED for each business subsidy agreement signed on or after August 1, 1999. DTED will ask grantors to file an MBAF each year for each agreement for two years after the benefit date or until all goals outlined in the agreement have been met, whichever is later. Local government agencies in communities with a population of more than 2,500 and state government agencies must submit an MBAF regardless of whether they have awarded business subsidies. The form will ask agencies whether they have awarded any subsidies. Local government agencies in communities with a population of 2,500 or less are exempt from filing the MBAF if they have not awarded a subsidy in the past five years (i.e. those with a population of 2,500 or less who have not signed an agreement after December 31, 1994, will be exempt fi-om reporting in 2000). DTED will develop a new MBAF in fall 1999. This form will ask grantors to report, at a minimum, the information that Minn. Stat. §116J.994, subdivision 7 requires recipients to provide to them, including: · the type, public purpose, and amount of the subsidy, and type of district if the subsidy is TIF; · the hourly wage of each job created with separate bands of wages; · the sum of the hourly wages and cost of health insurance provided by the recipient, broken down by wage level; - the date(s) by which job and wage goals will be met; · a statement of goals identified in the agreement and an update on progress toward them; · the location of the recipient pdor to receiving the business subsidy; · information on why the recipient did not complete the project outlined in the subsidy agreement at its previous location, if previously located at another site in Minnesota; - the name and address of the parent corporation of the recipient, if any; · and a list of all financial assistance by all grantors for the project. Department of Trade and Economic Development Page 2 of 4 July 27. 1999 Fact Sheet: 1999 Business Subsidies Law With their reports, DTED will ask grantors to include a list of recipients that did not report, as well as a list of those failing to meet any goals outlined in the agreement and a description of the steps being taken to bring them into compliance or recoup the subsidy. DTED will post an MBAF on DTED's website this fall and mail the form in February. If DTED has not received an MBAF by April 1 from an entity required to report, DTED must issue a warning. If DTED has still not received the MBAF by June 1, the agency in default may not award any business subsidies until the report has been filed. State funds passed through local agencies to businesses (e.g. Minnesota Investment Fund awards) are reported by the state grantor. However, local agencies must report on applicable local funds awarded in conjunction with state funds and on state funds which have been repaid to and reinvested by the local agency (e.g. revolving funds). How is non-business subsidy financial assistance reported? Recipients of the four types of financial assistance with different reporting requirements must provide grantors with the information outlined in Minn. Stat. §116J.994, subdivision 7(c), and will be subject to a penalty as defined in Minn. Stat. §116J.994, subdivision 7(d) for failing to report. DTED will ask grantors to report, at a minimum, the information that Minn. Stat. §116J.994, subdivision 7(c) requires recipients to provide to them on these four types of financial assistance. DTED will determine this fall whether to develop a separate form or ask grantors to use the MBAF for reporting on these agreements. The form(s) will be posted on DTED's website this fall and mailed to agencies in February. As with their business subsidy reports, grantors will have until April 1 to file these reports with DTED. How will information reported by agencies be used? DTED is required to publish a report summarizing information reported through the MBAF each year by July 1. DTED's report must include a 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 obliga, tions. Copies of the report will be submitted to the Legislature and posted on DTED's website. Where can I find the law? The business subsidies law can be found on DTED's website at http:llwww.dted.state.mn.uslbusasst /bareport. html and may be printed from your web browser. Clarifications to the law The following clarifications are in response to commonly asked questions about the law: · Regarding Minn. Stat. §116J.994, subdivision 7(b), the statute's author agrees that recipients should continue reporting to the granting agency, not to DTED. The granting agency will be responsible for reporting to DTED. · DTED will be collecting information only on public funds originating in Minnesota; therefore, DTED will not ask agencies to report on federal funds they administer unless the funds have been repaid to the agency and reinvested according to local policies. This fact sheet is intended to help agencies understand the 1999 business subsidies law, and does not serve as a substitute for statute language. Agencies are responsible for complying with the law and should view the law for questions and specific details and requirements that are not outlined in this fact sheet. Questions about the law can be directed to DTED: Minnesota Department of Trade and Economic Development Analysis and Evaluation Office 500 Metro Square 121 7~ Place East St. Paul, MN 55101-2146 Phone: (651) 296-3646 1 Fax: (651) 215-3841 I E-mail: caryn.mohr@state.mn.us www.dted.state.mn.us Department of Trade and Economic Development Page 3 of 4 July 27, 1999 Fabt Sheet: 1999 Business Subsidies Law Developing Criteria and Stating Public Purposes for Business Subsidies Under Minn. Stat. {}116J.993 through {}116J.995, granting agencies must develop criteria for awarding business subsidies after a public hearing. In addition, each business subsidy~l]~eement must indicate a public-purpose. The law allows grantors flexibility in stating public purposes appropriate for their communities, but requires that agreements meet a public purpose other than increasing the tax base and that job retention be used as a public purpose only when job loss is imminent and demonstrable. Although the law does not require public purposes to be addressed in the criteria, grantors may want to refer to the public purposes below for cdteria ideas. The following public purposes and criteria were recommended by the legislatively established Corporate Subsidy Reform Commission. Enhancing Economic Diversity In what ways does the project improve the mix of businesses in the area so as to: (1) allow the area to participate in fast-cjrowing industries; (2) protect the area from adverse economic consequences caused by slow growth or declining industries that are dominant in the area; and (3) provide essential consumer services, or develop a network of local suppliers to businesses within the community where they otherwise do not exist? Creating High-Quality Job Growth v' How many new jobs will be created, and what will they pay? V' How do wages proposed to be paid compare to community wage levels? ~ How many jobs will be created with opportunities for career advancement, educational opportunities, or occupational training? V' What are the projections for job growth at the project over the nest period of two to' five years? · /' What are the fringe benefits that are payable for the jobs (particularly, is there child care, health care, and pension coverage)? Providing for Job Retention, Where Loss is Imminent and Demonstrable Note: Under the 19~.~w, job retention can be used as a public purpose only in cases where job loss is imminent and demon--Effl~ble. After collecting the necessary documents, is there substantial evidence that the company will have to shut down involuntarily? After collecting the necessary documents, is there substantial evidence that the company has received an offer to move to another state or community that is attractive enough that a reasonable person would seriously consider a move for business reasons? What potential negative effect would the subsidy have on other competing businesses and overall area job quality? Stabilizing the Community How will the project constitute a significant investment in an area that (1) has not historically received similar investments; (2) is a blighted area; or (3) is an economically depressed area? How will the project stimulate other investment or create spinoff businesses and jobs in the area? Increasing the Tax Base Note: The law requires business subsidies to meet a public purpose other than increasing the tax base, but grantors may use increasing the tax base in conjunction with another public purpose. How will the project uniquely affect the property tax base for all taxing jurisdictions, both short term and long term and both directly and indirectly? How will the project affect other local business and individual property tax bills? SOURCE: Corporate Subsidy Refbrm Comrhission, f997 Corporate Subsidy Reform Commission Report, February 6, 1998. Department of Trade and Economic Develol)ment Paae 4 of 4 Julv 27. 199§ Memorandum From: Date: Re: Chanhassen City Council Ron Batty, EDA Attomey 09/22/1999 Business Subsidy Criteria Enclosed for consideration by the city council at its meeting on September 27, 1999 is proposed criteria for granting business subsidies. The city council must adopt the criteria, following a public hearing, in order to comply with a law that became effective August 1, 1999. After that date, no subsidy may be granted until the criteria have been adopted. The new statute applies to virtually any kind of subsidy that may be granted by governments. There are, however, significant exceptions. For example, any subsidy of less than $25,000 or involving housing is exempt from the criteria. Every grantor of subsidies must adopt criteria. This includes the EDA and the City if it wishes to be in the position to grant subsidies as well, (for example, tax abatement). The statute gives the grantor broad discretion in establishing its criteria. I have drafted criteria which I think broadly define the types of goals the EDA and City may wish to pursue. These should be reviewed and amended as appropriate. The statute imposes some limitations on the criteria. For example, an increase in tax base cannot be the only basis for granting a subsidy. This may be significant because Chanhassen, like most communities that have used tax increment financing, generally considers an increase in tax base as a significant goal in granting subsidies. Also, it is necessary for the criteria to address jobs and wages. The criteria do so broadly. However, every subsidy must be formalized by an agreement that must include specific job and wage goals. It will also be necessary for the recipient of the subsidy to agree to stay in business at that site for a minimum of five years after receipt of the subsidy. Failure to comply with any of these terms will require a repayment of the subsidy with interest. The repayment may be prorata if there is partial compliance. Any subsidy of over $100,000 will have to be subject to a public heating before the EDA. In addition, all subsidies must be approved by the Chanhassen city council. There are also extensive reporting and monitoring requirements for both the grantor and grantee of the subsidies. RHB-169157 CH 130-66 CITY OF CHANHASSEN BUSINESS SUBSIDY CRITERIA II. Purpose This document includes the criteria to be considered by the Chanhassen City Council to evaluate requests for business subsidies. It is the intent of the council in adopting these criteria is to comply with Minnesota Statutes, Sections l16J.993-116J.995 (the "Act"). The city council hereby adopts the definitions contained in the Act for application in the criteria. Goals and Objectives It is the city's intent to advance the following goals and objectives in granting business subsidies: a) Ail projects must be consistent with Chanhassen's comprehensive plan and any other similar plan or guide for development of the community. b) Business subsidies must be justified by evidence that the project cannot proceed without the benefit of the subsidy. If tax increment financing is used to grant a subsidy, the grantee must demonstrate compliance with all statutory requirements of the TIF Act, including the "but for" test. The grantee will be required to provide all documentation necessary for the city council to make the requisite fundings under the TIF Act and the Act. c) Grantees will be required to enter into an agreement with the city council which is consistent with statutory requirements, including a commitment to remain in business at the site for a minimum of five years after the benefit date and compliance with the specific jobs and wages goals established for the project. III. Business Subsidy Criteria The city council recognizes that every proposal is unique. Nothing in these criteria shall be deemed to be an entitlement or shall establish a contractual right to a subsidy. The city council reserves the fight to modify these criteria from time to time and to evaluate each project as a whole. The following criteria shall be utilized in evaluating a request for a business subsidy: a. Increase in tax base. While an increase in the tax base cannot be the sole grounds for granting a subsidy, the city council believes it is a necessary condition for any subsidy. b. Jobs and Wages. It is city council's intent that the grantee create the maximum number of livable wage jobs at the site. This may include jobs to be retained but only if job retention is imminent and demonstrable. c. Economic Development. Projects should promote one or more of the following: RHB-169153 CH 130-66 1. Encourage economic and commercial diversity within the community; 2. Contribute to the establishment of a critical mass of commercial development within an area; 3. Provide basic goods and services, increase the range of goods and services available or encourage fast-growing businesses; 4. Promote redevelopment objectives and removal of blight, including pollution cleanup; 5. Promote the retention or adaptive reuse of buildings of historical or architectural significance; 6. Promote additional or spin-off development within the community; 2 7. Encourage full utilization of existing or planned infrastructure improvements. Compliance and Reporting Requirements. a) Any subsidy granted by the city council will be subject to the requirement of a public hearing. b) It will be necessary for both the grantee and the city council to comply with the reporting and monitoring requirements of the Act. RHB-169153 3 CH 130-66 CITY OF CHANHASSEN TAX INCREMENT FINANCING POLICY Approved October 26, 1998 CITY OF CHANHASSEN TAX INCREMENT FINANCING POLICY Policy and Criteria Regarding Review of TIF Usage Application GENERAL POLICY The City Council of the City of Chanhassen has the power, should it deem necessary, to use Tax Increment Financing (TIF) based on Minnesota Statutes. The fundamental purpose of TIF in Chanhassen is to encourage desirable and affordable housing, senior housing, and assisted living that would not otherwise occur "but for" the assistance provided through TIF. This policy shall be used as a guide in processing and reviewing applications requesting TIF assistance. PROJECT SELECTION CRITERIA TIF can benefit the community by providing a broad range of housing opportunities such as affordable housing, senior housing and assisted living. The Council reserves the right to approve or reject tax increment financing on an individual basis. Highest Priority Shall Be Given to Projects Which Include: I. Compatibility of the proposed project with the City's overall development plans and objectives. 2. Broad range of housing opportunities such as affordable housing, senior housing and assiste, d living. 3. Minimal impact on City service needs. 4. High quality of the facility to be built. PROJECT REQUIREMENTS 1. Applicant at all times should retain and be assisted 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 right to deny any application for financing at any stage of the proceedings prior to adoption of the final approval authorizing issuance of the bonds. 4. The City reserves the right to select a third party administrator 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; Hennepin County, 3-1; Gateway, 6-1; and Entertainment District, 4). 6. Development must be of the highest quality with high quality building materials and landscaping 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 the district. 8. Local requirements may be more stringent than State statute as applies to TIF. 9. Project meets "but for" analysis and statutory qualifications (Exhibit A). ACTIVITES TO BE CONSIDERED FOR FINANCING 1. Land write down 2. Costs of streets and utilities 3. Demolition and relocation costs 4. City costs such as trunk utility costs, street costs, and MSA reimbursement 5. Extraordinary landscaping and lighting 6. Soil corrections APPLICATION PROCESS 1. The application process must be completed 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): o A. Statement of Public Purposes B. Description of Project C. Plans and Drawings of Project D. Description of Company E. Legal Opinions F. Investment Bank Letter of Feasibility G. Market Analysis H. Pro Forma Analysis I. Financial Statements J. Zoning and Planning Analysis K. Application Fee L. Demonstration of past successful general 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 tax increment financing program will be administered by the City of Chanhassen Economic 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 Chanhassen EDA at the time a final TIF application is submitted. At the time a final TIF application is submitted, the applicant shall also deliver to the City a deposit in the amount of $10,000. The purpose of this deposit is to reimburse the City for costs and expenses incurred in connection with preparation of the development agreement and the carrying out of ali actions necessary in the fulfillment or the City's obligations. Any part of the deposit not needed for those purposes shall be promptly returned to the Redeveloper not later than the date of issuance of the Certificate of Completion, or within 15 days following the termination 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 written request to 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 criteria/Strategic Plan. 5. Formal evaluation of the application will include, in addition to items subject to preliminary review, review of applicable credit analysis, credit enhancement and legal compliance. Formal recommendation will then be made to the City Council. 6. After evaluation of the formal recommendation, the City Council will consider final approval of the establishment of the TIF District and hold the appropriate hearings. 7. All applications and supporting materials and documents shall become the property of the City. CITY OF CHANHASSEN APPLICATION FOR TAX INCREMENT FINANCING Business Name: Address: Location of Proposed Development: Type(Partnership, etc.):. Telephone: Nature of Business: HISTORY OF APPLICANT Have you ever filed bankruptcy? Yes No__ If yes, provide details on separate sheet. Have you ever defaulted on any loan commitment? Yes If yes, provide details on separate sheet. No Have you ever applied for conventional financing for the project? Yes If yes, provide details on separate sheet. If no, why not? Project Cost Breakdown: $ $. $ $ Total: $. Date: No 4. List financial references: Name/Address/Contact a. bo 5. Other information pertinent to your application: 6. Name of Counsel: INFORMATION CONCERNING APPLICANT'S PROPOSED PROJECT FOR EXISTING INDUSTRIAL DEVELOPMENT LOCATED IN TIF DISTRICTS(National Weather~ 2-2; Hennepin County~ 3-1; Gateway~ 6-1; and Entertainment Districh 4). 1. Is the proposed project a new facility or rehabilitation and/or expansion of existing facility? 2. Industrial/Commercial: 3. What is the present employment of your finn? 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 arrangements? INFORMATION CONCERNING APPLICANT'S PROPOSED HOUSING PROJECT 1. Is the proposed housing project a new facility or rehabilitation and/or expansion of existing facility? 2 Housing Type(single family, multi-family, apartments, condominiums, etc.):. 3. Number of units: 5. 6. 7. Number of bedrooms in each unit: Sale price of the units: or Rental price of the units: Estimated total project cost and breakdown of overall 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 Chanhassen businesses? Please explain(Reason: To see if you are meeting the local business needs.) 12. What are the proposed financing arrangements? 13. How are you proposing to meet alternate transportation needs? EXHIBIT A SAMPLE "BUT-FOR" ANALYSIS WITH NO TAX INCREMENT WITH TAX INCREMENT Sources and Uses Sources and Uses SOURCES SOURCES Mortgage 9,600,000 8,667,000 Equity 2,400,000 2,400,000 Tax Increment 0 933,000 TOTAL SOURCES 12,000,000 12,000,000 USES USES Land Sitework :Soil Correction Demolition Relocation 1,500,000 300,000 468,000 100,000 65,000 1,500,000 300,000 468,000 100,000 65,000 Subtotal Land Costs 2,433,000 2,433,000 Construction Finish Manufacturing Subtotal Construction Costs 6,750,000 250,000 7,000,000 350,000 35,000 850,000 542,000 540,000 250,000 6,750,000 250,000 Soft Costs Taxes Finance Fees Project Manager Developer Fee Contingency Subtotal Soft Costs 7,000,000 350,000 35,000 850,000 542,000 540,000 250,000 2,567,000 2,567,000 TOTAL USES 12,ooo,oooI 12,ooo,ooo[ Rent-Space 1 Rent-Space 2 Rent-Space 3 Other Income Statement Income Statement Sq. Ft. Per Sq. Ft. I00,000 $8.00 800,000 25,000 $8.00 212,000 25,000 $9.00 225,000 0 $0.00 0 1,237,500 Sq. 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 1,237,500 Mortgage 20 Term 9.00% Interest 9,600,000 1,051,646 20 Term 9.00% 8,667,000 949,439 Net Income 288,0611 12.00% Total Return on Equity 185,854 7.74% "BUT-FOR" ANALYSIS WORKSHEET l WITH NO TAX INCREMENT WITH TAX INCREMENT Sources and Uses Sources and Uses SOURCES SOURCES Mortgage Equity Tax Increment TOTAL SOURCES USES USES Land Sitework Soil Correction Demolition Relocation Subtotal Land Costs Construction Finish Manufacturing Subtotal Construction Costs Soft Costs Taxes Finance Fees Project Manager Developer Fee Contingency Subtotal Soft Costs TOTAL USES I I Income Statement Income Statement Rent-Space I Rent-Space 2 Rent-Space 3 Other Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft Mortgage Net Income Total Return on Equity I hereby certify the above financial information is true and accurate. Signature Title Date EXHIBIT B CITY OF CHANHASSEN APPLICATION PROCEDURES FOR TIF ASSISTANCE 1. Applicant shall meet with City staffto 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 TIF application. The completed application shall be submitted to the Executive Director of the Economic Development Authority. 3. The application shall be reviewed by City staff on a preliminary basis as to the feasibility of the 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 time. 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 Background Material h. Letter of Feasibility i. Market Analysis j. Pro Forma Analysis k. Financial Statements 1. Zoning and Comprehensive Plan Analysis m. Other Pertinent Information Following the necessary analysis of the application by City staff, a report shall be prepared and presented 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 EDA and the Developer; b. Prepare or modify the redevelopment plan and TIF plan if required. 7. If zoning amendments or Planning Commission action is required as part of the project, the appropriate actions shall be taken prior to final consideration of the redevelopment agreement. 8. Applicant must follow all city development review processes (e.g. site plan, platting, rezoning, PUD, etc.) before final TIF application may be approved. If you have any questions concerning the Tax Increment Financing application process, please contact: City of Chanhassen EDA Executive Director 690 City Center Drive PO Box 147 Chanhassen, MN 55317 (612)937-1900 ext. 119 9