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HomeMy WebLinkAbout3. Approve an Amendment to the Contract for Private Development with Rosemount Inc O. SHAKOPEE TO: Economic Development Authority FROM: Mark McNeill, City Administrator DATE: 04/09/2013 SUBJECT: Approve an Amendment to the Contract for Private Development with Rosemount, Inc. Action Sought The EDA and Council should approve an amendment to the Contract for Private Development with Rosemount, Inc., relating to wages to be paid for the job creation goals. Background: As part of the Council /EDA action on April 2nd, the Council and EDA amended the Development Agreement to require that, within 3-4 years, 60% of the jobs created by Rosemount in their proposed development of the ADC II site would pay at least $30 per hour, exclusive of benefits, and 40% would be paid at least $18 per hour, again excluding benefits. After Rosemount was able to fully consider the impacts of those amendment provisions following the meeting, we received word the following day that those numbers would not work for Rosemount. They indicate that they are agreeable to paying the stated ratio of jobs at an average of $30 /hour, and $17 /hour (not $18) after 4 years. However, to specify the amounts discussed at the Council /EDA meetings to be minimums, and also have those rates be exclusive of benefits, is financially unworkable. They are agreeable to an amendment stating that the $30 and $17 shall be average wages (at a split of 60% and 40 %, respectively), exclusive of benefits, and be applicable beginning with the 4th year. As such, City Attorney Julie Eddington has prepared amendments to the applicable paragraphs of the Contract, excerpts of which are attached. Recommendation: I recommend that the Contract for Private Development with Rosemount, Inc., be amended to include a stipulation that 60% of jobs be paid an average of $30 per hour, exclusive of benefits, and that 40% of jobs be paid an average of $17 per hour, exclusive of benefits, beginning in the fourth year of the agreement. This would be in lieu of the language approve as an amendment at the April 2nd meetings. Relationship to Visioning: This supports Goal B, "Positively manage the challenges and opportunities presented by growth, development, and change." Action Required: If the EDA and City Council agree, they should each approve the amendment to the Contract for Private Development between the City of Shakopee, Minnesota; the Economic Development Authority for the City of Shakopee, Minnesota; Scott County, Minnesota; independent School District 191; and Rosemount, Inc. Attachments: Rosemount EDA Resol Wages EDA Wage Changes ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE, MINNESOTA RESOLUTION NO. 0t)13- 3 RESOLUTION APPROVING REVISED CONTRACT FOR PRIVATE DEVELOPMENT (INCLUDING A BUSINESS SUBSIDY AGREEMENT) WITH THE CITY OF SHAKOPEE, MINNESOTA, SCOTT COUNTY, MINNESOTA, INDEPENDENT SCHOOL DISTRICT NO. 191 (BURNSVILLE— EAGAN— SAVAGE), AND ROSEMOUNT INC. BE IT RESOLVED by the Board of Commissioners (the "Board ") of the Economic Development Authority for the City of Shakopee, Minnesota (the "Authority ") as follows: Section 1. Recitals. 1.01. Rosemount Inc., a Minnesota corporation, or any of its affiliates (the "Developer "), has proposed to acquire, construct, and equip improvements (the "Minimum Improvements ") to real property (the "Property") located in the City of Shakopee, Minnesota (the "City "). 1.02. To help pay for the costs of the Minimum Improvements the City has agreed to provide the Developer with property tax abatement in a maximum amount of $590,496, the Board of Commissioners of Scott County, Minnesota (the "County ") has agreed to provide a property tax abatement to the Developer in a maximum amount of $570,608, and the Board of Education of Independent School District No. 191 (Burnsville— Eagan — Savage) (the "School District") has agreed to provide a property tax abatement to the Developer in a maximum amount of $366,925. 1.03. The Board of Commissioners of the Economic Development Authority for the City of Shakopee, Minnesota (the "Authority ") has also agreed to provide the Developer with a forgivable loan in the amount of $350,000 to finance certain equipment to be used within the Minimum Improvements. 1.04. The City has also agreed to provide the Developer with SAC credits for the Minimum Improvements in the amount of up to $304,375, a waiver of the SAC access fee for the Minimum Improvements in the amount of up to $39,900, and a waiver of the trunk sanitary sewer charge for the Minimum Improvements in an amount of up to $112,000 (the "City Development Assistance "). 1.05. The Board approved a Contract for Private Development (the "Contract for Private Development ") containing a Business Subsidy Agreement (the "Subsidy Agreement "), between the City, the Authority, the County, the School District, and the Developer, which set forth the terms of the financial assistance to be provided to the Developer by the Authority. 1.06. Following the Board's approval of the Contract for Private Development, the Contract was revised to include additional wage goals. The Board has been provided such revisions to the Contract for Private Development (the "Revised Contract for Private Development"). Section 2. Findings. 2.01. The recitals set forth above are incorporated into this Resolution. 419503v1 JAE SH155 -290 2.02. The Revised Contract for Private Development and Subsidy Agreement are hereby in all respects authorized, approved and confirmed and the President and Executive Director are hereby authorized and directed to execute and deliver the Revised Contract for Private Development and the Subsidy Agreement for and on behalf of the Authority in substantially the form now on file with the Authority but with such modifications as shall be deemed necessary, desirable or appropriate, their execution thereof to constitute conclusive evidence of their approval of any and all modifications therein. Section 3. Implementation. The President and the Executive Director are authorized and directed to execute and deliver any additional agreements, certificates or other documents that the Authority determines are necessary to implement this Resolution. Section 4. Effective Date. This resolution is effective upon the date of its adoption. Approved by the Board of Commissioners of the Economic Development Authority for the City of Shakopee, Minnesota this 9th day of April, 2013. President ATTEST: Executive Director 419503v1 JAE SH155 -290 2 Section 3.12. Business Subsidy Agreement. The provisions of this Section constitute the "business subsidy agreement" in connection with the business subsidy provided by the City, the Authority, and the County for the purposes of Minnesota Statutes, Sections 116J.993 to 116J.995 (the "Business Subsidy Act "). (a) General Terms. The parties agree and represent to each other as follows: (1) The business subsidy provided to the Developer under this Agreement consists of (i) the City Abatement; (ii) the County Abatement; (iii) the City Development Assistance; and (iv) the Authority Loan. All such payments and grants represent forgivable loans that are repayable by the Developer in accordance with this Section. (2) The public purposes of the subsidies are to provide employment opportunities, increase the tax base of the City and the County and encourage economic development within the City and the County. (3) The goals for the subsidies are to secure development of the Minimum Improvements, to maintain Phase One and Phase Two of the Minimum Improvements as a manufacturing facility for at least five years as described in clause (6) below, and to create the jobs and wage levels in accordance with Section 3.12(b) hereof. (4) If the goals described in clause (3) are not met, the Developer must make the payments to the City described in Section 3.12(c). (5) The subsidies are needed to induce the Developer to locate its operations in the City, thus enhancing job and tax base growth for the City, the County, and the State as a whole. Absent the subsidy provided in this Agreement, the expansion would likely occur in another city. (6) The Developer must continue operation of Phase One and Phase Two of the Minimum Improvements as a manufacturing facility for at least five years after the Compliance Date. (7) The Developer's parent corporation is Emerson Electric Co. (8) In addition to the subsidies described in this Section 3.12(a), the Developer expects to receive financial assistance from the following other "grantors" as defined in the Business Subsidy Act, in connection with the Development Property or the Minimum Improvements: an infrastructure grant in the amount of approximately $550,000, a Minnesota Investment Fund grant in the amount of approximately $1,434,579, and potential sales tax exemptions in the amount of approximately $745,493 from the State of Minnesota. (b) Job and Wage Goals. Within two years after the date the Developer occupies the Minimum Improvements (the "Compliance Date "), the Developer shall cause to be created at least 154 new full -time equivalent jobs on the Development Property and shall cause the wages for all employees on the Development Property to be no less than $14.50 per hour, exclusive of benefits. Notwithstanding the foregoing, within four years after the date the Developer occupies the Minimum Improvements, the Developer shall cause at least forty percent (40 %) of the jobs created pursuant to this Section (62 jobs) to have av-ra.e w..e of ',17.00 .r more -xclusiv- of ben- fits an. ix • rcen .0% of the 'o. rea - . by this Section (92 jobs) to have average wages of $30.00 or more, exclusive of benefits. It is the intent of the Developer to begin hiring employees for the 154 new jobs to be located in the City prior to the completion of construction of Phase One of the Minimum Improvements and those employees may be trained at the Developer's other locations within the State of Minnesota. These jobs shall be considered part of the 154 new jobs required to be created in the City pursuant to this Section 3.12 and Section 3.13. Notwithstanding anything to the contrary herein, if the wage and job goals described in this paragraph are met by the Compliance Date, those goals are deemed satisfied despite the Developer's continuing obligations under Sections 3.12(a)(6) and 3.12(d). The City, the Authority, and the County may, after public hearings held by the respective governing body and approval by all three bodies, extend the Compliance Date by up to one year, provided that nothing in this section will be construed to limit the City's, Authority's, or County's, or legislative discretion regarding this matter. (c) Remedies. If the Developer fails to meet the goals described in Section 3.12(a)(3), the City, the Authority, the County, and the School District may independently determine to terminate this Agreement with respect to the financial assistance provided by each, and the Developer shall repay to the City upon written demand from the City a "pro rata share" of the City Abatement, the County Abatement, and the School District Abatement, if any, as well as a pro rata share of the amounts disbursed to Developer with respect to Authority Loan, and the City Development Assistance. The term "pro rata share" means percentages calculated as follows: (i) if the failure relates to the number of jobs, the jobs required less the jobs created, divided by the jobs required; (ii) if the failure relates to wages, the number of jobs required less the number of jobs that meet the required wages, divided by the number of jobs required; (iii) if the failure relates to maintenance of the manufacturing facility in accordance with Section 3.12(a)(6), 60 less the number of months of operation as a manufacturing (where any month in which the facility is in operation for at least 15 days constitutes a month of operation), commencing on the Compliance Date and ending with the date the facility ceases operation as determined by the City, divided by 60; and (iv) if more than one of clauses (i) through (iii) apply, the sum of the applicable percentages, not to exceed 100 %. Notwithstanding the foregoing, instead of terminating the payment of the City Abatement, the County Abatement, the School District Abatement, the Authority Loan and the City Development Assistance, upon the Developer's failure to meet the goals described in Section 3.12(a)(3), the City, the Authority, the County and the School District may independently determine to continue their respective payments under this Agreement but reduce the amount of such assistance using the pro rata reduction formula set forth above. Any amounts received under this Section by the City and related to payments of the City Abatement, the County Abatement and the School District Abatement shall be distributed between the City, the County and the School District based on the pro rata amount of Tax Abatements that have been paid by each entity to Developer. Promptly upon receipt of any repayment by the Developer, the City will remit to the County and School District a pro rata amount attributable to the Tax Abatements paid by the County and School District. Nothing in this Section shall be construed to limit the City's, Authority's, County's, or School District's remedies under Article IX hereof. In addition to the remedy described in this Section and any other remedy available to the City, Authority, County, or School District for failure to meet the goals stated in Section 3.12(a)(3), the Developer agrees and understands that it may not a receive a business subsidy from the City, the Authority, the County, the School District or any other grantor (as defined in the Business Subsidy Act) for a period of five years from the date of the failure or until the Developer satisfies its repayment obligation under this Section, whichever occurs first. (d) Reports. The Developer must submit to the City, with a copy to the Authority, the County, and the School District, a written report regarding business subsidy goals and results by no later than March 1 of each year, commencing March 1, 2014, and continuing until the later of (i) the date the goals stated in Section 3.12(a)(3) are met; (ii) 30 days after expiration of the five -year period described in Section 3.12(a)(6); or (iii) if the goals are not met, the date the subsidy is repaid in accordance with Section 3.12(c). The report must comply with Section 116J.994, subdivision 7 of the Business Subsidy Act. The City will provide information to the Developer regarding the required forms. As part of the annual compliance reporting required by this Section 3.12(d), the Developer will include a summary of the previous ycr's activity with tho School District in support of the partnership activities between tho - - , . . _ _ .. ! ' • _ . _ • _ _ _ e . . If the Developer fails to timely file any report required under this Section, the City will mail the Developer a warning within one week after the required filing date. If, after 14 days of the postmarked date of the warning, the Developer fails to provide a report, the Developer must pay to the City a penalty of $100 for each subsequent day until the report is filed. The maximum aggregate penalty payable under this Section is $1,000. The City will file, on behalf of the City, the Authority, the County, and the School District, any reports required to be filed with the State under the Business Subsidy Act. As part of the annual compliance repo in rewired b t Se ction 3 12(dl the Developer will •, l •- sir . of h- .r -v'• ' iv'i wi •- 1•• ...•u • •- ..il i :s activities between the Developer and the School District described in Section 10.9. The Developer will continue to provide such reporting until and includine March 1 2024. Section 3.13. Additional Job and Wage Requirements. (a) Additional Job and Wage Goals. In addition to the job and wage requirements set forth in Section 3.12(b) that comply with the requirements of the Business Subsidy Act, the Developer shall cause to be created at least an additional 246 new full -time equivalent jobs on the Development Property and shall cause the wages for all employees on the Development Property to be no less than $14.50 per hour, exclusive of benefits. Notwithstandi g the for oing, within four years after the Developer occupies the Minimum Improvements. the Developer shall cause at least forty percent (40 %) of the 'obs required to be create. • ursuant to this Section to have average wanes of $17.00 or more exclusive of benefits . d six • er ent 60% of the 'o • s re • uired to be create • b this ection t • have avera s e was es of $30,00 or more, exclusive of benefits. The Developer shall cause the additional jobs to be created on or prior to the dates set forth below: Date Number of Additional Jobs Created Three Years after Occupying 75 Minimum Improvements Four Years Fel-l-ewiii-g-Gempliance Datcafter Occupying 93 Minimum Improvements Five Years Folio...:..,. Comp Dateafter Occupying 78 Minimum Improvements Notwithstanding Section 3.12(b) and this Section 3.13(a), it is the intention of the Developer to create a total of 500 full -time equivalent jobs on the Development Property, and the Developer will make every effort to do so. (b) Remedies. If the Developer fails to meet the goals described in Section 3.13(a), the City, the Authority, the County, and the School District may independently determine to terminate this Agreement with respect to the financial assistance provided by each, and the Developer shall repay to the City upon written demand from the City a "pro rata share" of the City Abatement, the County Abatement, and the School District Abatement, if any, as well as a pro rata share of the amounts disbursed to Developer with respect to Authority Loan and the City Development Assistance. The term "pro rata share" means percentages calculated as follows: (i) if the failure relates to the number of jobs, the jobs required less the jobs created, divided by the jobs required; (ii) if the failure relates to wages, the number of jobs required less the number of jobs that meet the required wages, divided by the number of jobs required; (iii) if more than one of clauses (i) through (ii) apply, the sum of the applicable percentages, not to exceed 100 %. Notwithstanding the foregoing, instead of requiring the Developer to repay payments already made, upon the Developer's failure to meet the goals described in Section 3.13(a), the City, the Authority, the County and the School District may independently determine to continue their respective payments under this Agreement but reduce the amount of such assistance using the pro rata reduction formula set forth above. Any amounts received under this Section by the City and related to payments of the City Abatement, the County Abatement, and the School District Abatement shall be distributed between the City, the County, and the School District based on the pro rata amount of Tax Abatements that have been paid by each entity to Developer. Promptly upon receipt of any repayment by the Developer, the City will remit to the County and the School District a pro rata amount attributable to the Tax Abatements paid by the County and the School District. Nothing in this Section shall be construed to limit the City's, Authority's, County's, or School District's remedies under Article IX hereof.