HomeMy WebLinkAbout5.F.8. Amendment to Tax Abatement Agreement with CertainTeed
City of Shakopee S. 1: ~.
Memorandum
CONSEf~T
TO: Mayor and City Council
Mark MeN eill, City Administrator
FROM: Kris Wilson, Assistant to the City Administrator
SUBJECT: Amendment to Tax Abatement Agreement with CertainTeed
DATE: April 27, 2006
Introduction
The Council is asked to approve entering into the attached contract amendment in order to
correct an error in the 2002 Business Subsidy Agreement between the City, County and
CertainTeed Corporation.
Background
In April of 2002, the City of Shakopee and Scott County both approved a six-year Tax
Abatement for CertainTeed Corporation, a manufacturer of roofing products located in the
Valley Green Industrial Park. Under statelaw, the three parties were required to enter into a
business subsidy agreement that includes job and wages goals to be met by the company in
exchange for the abatement assistance. The company is then required to report annually on its.
progress toward those goals and both the City and County use that information to file reports
required by the state Department of Employrnent and Economic Development (DEED).
The City's report to DEED is due in March of each year for activity the previous year. Last
month, when I collected the job and wage data for 2005 from CertainTeed I noticed a problem.
The Business Subsidy Agreement stated that CertainTeed had until June of2005 to achieve its
goals, one of which was that all employees on the development property would be paid a
minimum of$17 per hour. However, CertainTeed's report stated that only 277 oftheir 286
employees were earning at least $17 per hour. After a conversation with Roland Doerr of
CertainTeed, in which he questioned whether the company had actually agreed to that
requirement, staff did some research into the original discussion and adoption of the tax
abatement deal.
As it turns out, the staff report from the City's Economic Development Coordinator at the time
stated that CertainTeed was committing to creating 44 new jobs as a result of the abatement
assistance and that those new fobs would all pay at least $17 per hour. A review of the minutes
from the Council meeting where the abatement agreement was discussed and adopted makes no
mention of any change in this. Staff at the County also believes that the original understanding
was that the 44 new jobs would pay at least $17 per hour, not that all jobs would pay at least $17
per hour. Staffhas also consulted with our attorney's at Kennedy & Graven and they stated that
the "all employees on the development property" language was part of their standard template
language and speculated that this did not get changed to reflect the specifics of the agreement
with CertainTeed and unfortunately no one caught that error before the contracts were signed.
As a result of this research, it appears that both the City and County expected CertainTeed would
create 44 new jobs as a result of the tax abatement assistance and that those new jobs would pay
at least $17 per hour. As of the June, 2005 deadline, CertainTeed has met this obligation.
However, in order for the City and County to accurately complete our required reporting to the
state, the report from CertainTeed must match up with the language in the Business Subsidy
Agreement.
Requested Action: The Council is asked to authorize the appropriate representatives to enter
into the attached contract amendment clarifying the intended job and wage outcomes from the
CertainTeed abatement agreement.
The County Board will be considering a similar action next week.
Ifthe contract is not amended, we would be forced to find that CertainTeed had failed to meet
their job and wage goals. This would result in a termination of the abatement agreement and
CertainTeed would not receive the remaining 4 years of abatement assistance despite the fact that
they have lived up to the spirit of their agreement with the City and the County.
Budget Impact
None. The value of the abatement provided to CertainTeed by the City is $29,225 per year for a
total of$175,350 over the six-year term of the agreement. This contract amendment does not
change that.
Relationship to Vision: Companies like CertainTeed provide quality employment opportunities
and contribute to the local economy. The City's support of companies such as CertainTeed is
intended to establish a high quality oflife for Shakopee residents (Goal B).
Requested Action: If the Council concurs, it should offer a motion to authorize the appropriate
City officials to enter into the attached contract amendment clarifying the intended job and wage
outcomes from theCertainTeed abatement agreement.
~j\ W~
. s Wilson
Assistant to the City Administrator
FIRST AMENDMENT TO
CONTRACT FOR PRIVATE DEVELOPMENT
THIS First Amendment to Contract for Private Development (the "Amendment"), dated as
of May _, 2006, by and between the City of Shakopee, Minnesota, a Minnesota municipal
corPoration (the "City"), Scott County, Minnesota, a political subdivision ofthe State of Minnesota
(the "County"), and CertainTeed, Inc., a Minnesota corporation (the "Developer").
RECITALS
WHEREAS, pursuant to Minnesota Statutes, Sections 469.1812 to 469.1815, the City and
County are authorized to abate property taxes in order.to increase or preserve tax base and provide
employment opportunities; and
WHEREAS, the City, County, and Developer entered into a Contract for Private
Development dated as of April 2, 2002 (the "Agreement"), in which the Developer agreed to
construct improvements (the "Minimum Improvements") to certain real property (the
"Development Property") and the City and County agreed to abate a portion of real property taxes
on the Development Property; and
WHEREAS, the Agreement contained a business subsidy agreement (the "Subsidy
Agreement") pursuant to Minnesota Statutes, Sections l16J .993 to l16J .995; and
WHEREAS, the Subsidy Agreement required that within two years after the Benefit Date,
defined in the Agreement as the earliest of the date of issuance of the Certificate of Completions for
the Minimum. Improvements or the date the Developer occupied the Minimum Improvements, the
Developer would cause to be created at least 44 new full-time equivalent jobs on the Development
Property and. would cause the wages for all employees on the. Development Property to be no less
than $17.00 per hour, exclusive of benefits; and
WHEREAS, as of the Benefit Date, the Developer has added 44 new full-time equivalent
jobs and has caused the wages for these new jobs to be no less than $17.00 per hour; and
WHEREAS, the parties agree that the wage requirement was intended only to apply to the
new jobs created under the Subsidy Agreement; and
WHEREAS, the parties desire to clarify the Subsidy Agreement to reflect the original
intention oftheparties, and have determined to amend the Agreement as described herein;
NOW, THEREFORE, in consideration of the premises and the mutual obligations of the
parties hereto, each ofthem does hereby covenant and agree with the other as follows:
1. Modification to Section 3.5(b) of the Agreement. Section 3 .5(b) of the Agreement
is modified to read as follows:
289S92vl MNI SH23S-10
(b) Job and Wage Goals. As of the Benefit Date, the Developer has caused to be
created 44 new full-time equivalent jobs on the Development Property {excluding any jobs
previously existing in the State as of the date of the Agreement and relocated to this site) and has
caused the wages for all employees filling said new full-time equivalent jobs on the Development
Property to be no less than $17.00 per hour, exclusive of benefits.
The job and wage goals have been satisfied in full. The Developer's only continuing
obligations under this Section are Developer's five-year commitment under Section 3.5(a)(6) and
Developer's reporting requirement under Section 3.5(d).
2. Miscellaneous, The Agreement remains in full force and effect and is not modified
except as expressly provided herein.
(remainder of page intentionally left blank)
289592vl MNI SH235-10 2
IN WITNESS WHEREOF, the City, County, and Developer have caused this Amendment
to be duly executed by their duly authorized representatives as of the. date first above written.
CITY OF SHAKOPEE
By
Its Mayor
By
Its City Administrator
By
Its City Clerk
STATE OF MINNESOTA )
) SS.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this _ day of , 2006 by
John Schmitt, the Mayor of the City of Shakopee, Minnesota, a Minnesota municipal corporation,
on behalf of the City.
Notary Public
STATE OF MINNESOTA )
) SS.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this _ day of , 2006. by
Mark McNeill and Judy Cox, the City Administrator and City Clerk of the City of Shakopee,
Minnesota, a Minnesota municipal corporation, on behalf of the City.
Notary Public
289592vl MNI SH235-10
SCOTT COUNTY, MINNESOTA
By
Its Board Chair
By
Its County Administrator
STATE OF MINNESOTA )
) SS.
COUNTY OF SCOTT )
The foregoing instrument was acknowledged before me this _ day of ,2006
by and , the County Board Chair and County
Administrator of Scott County, Minnesota, on behalf of the County.
Notary Public
.
CERTAINTEED, INe.
By
Its
STATE OF MINNESOTA )
) SS.
COUNTY OF )
The foregoing instrument was acknowledged before me this _ day of . , 2006
by the of CertainTeed, Inc., a Minnesota
,
corporation, on behalf of the corporation.
Notary Public