The URL can be used to link to this page

Home My WebLink About13.C.2. Discussion of City's Business Subsidy Policy /3.C.2.. CITY OF SHAKO PEE MEMORANDUM CASELOG NO: NA TO: Honorable Mayor and City Council Mark McNeill, City Administrator FROM: R. Michael Leek, Community Development Director SUBJECT: Discussion of City's Business Subsidy Policy MEETING DATE: June 5, 2007 INTRODUCTION: Council is asked to discuss and provide direction to staff on three issues related to the economic development assistance policy used by the Council and its members sitting as the City's EDA in deciding whether to provide assistance to new, expanding or relocating businesses. The issues are as follows; 1. Whether the Council is interested in considering possible assistance for a new distribution facility if the starting and average wages are in the vicinity of$I1.00 to $12.00 per hour? 2. Whether the Council wishes to revisit the wage standard for assistance in light of the upcoming changes in the federal minimum wage? A related question is whether the Council wants to consider a revision that might provide a sliding scale of assistance based on the breakdown of jobs that would be created by wage levels? 3. Whether the Council wishes to consider a revision to the policy that would make assistance available to businesses that would occupy currently vacant industrial space in the City? DISCUSSION: Following is some background information for the Council on the three issues identified above. Also attached for background information is the current policy. Assistance for New Distribution Facility: Staff was contacted by Gene Goddard of the Minnesota Department of Employment and Economic Development (DEED) about an as-yet unnamed company that it appeared was looking at Shakopee as a ~otentiallocation (NOTE: do we want to share the downsized experience?). On May 30 , the Mayor, Administrator and I met with Mr. Goddard and representatives ofthe firm working with the prospective company. At that meeting, it was shared that the facility would be about 400,000 to 450,000 square feet, involve 75 jobs with H:\CC\2007\06-05\Business Subsidy POlicy Discussion final.doc 1 a likely starting and average rate of pay of approximately $11.00 to $12.00 per hour (with lesser amounts for starting employees). Under the current policy, the jobs created are to be at 275% of federal minimum wage. As of the Summer of 2007, the federal minimum wage will be $5.85 per hour, which means that the jobs created to receive business assistance should be at $16.09 per hour. Based on the nature of the use, its reduced size, number of jobs, and reduced rates of pay, the project would not meet the criteria set forth in the current Policy. It also does not appear to staff (at least without more detailed information) that it is the type of project that the City has preferred to offer assistance to. However, in the course of the discussion, we were asked to explore the Council's level ofinterest in providing assistance to such a project. Increased Federal Minimum Wage: The recently enacted increases in the federal minimum wage, and the respective change in wage level for business assistance are found below; Fed. Min. Wage Subsidy Policy Wage Summer 2007 $5.85/hour $ 16.09/hour Summer 2008 $6. 55/hour $18.01/hour Summer 2009 $7.25/hour $ 19.94/hour In other words the changes in the federal minimum wage over the next two years will have a significant impact on the level of wages required for the Council and EDA to consider offering business assistance. Council is asked whether a) it wants to begin looking at a change in the wage level, or b) some sort of scale where the level of assistance is tied to the numbers or percentage of jobs by the average wages for various job categories. Business Assistance for Existing Buildings: As the Council knows, the City has a significant amount of existing, vacant industrial space. Recently, staff has had a number of inquiries about whether the City is open to providing assistance for companies that would occupy this space, and example being the ADC II building that was never occupied. The City has not provided assistance for existing buildings. To the best of staffs knowledge tax abatement is seldom, if ever, used by other communities for existing buildings. There are at least two issues with using it for existing buildings. First is the question that could arise about why it would be used for industrial buildings, but not other large commercial buildings (e.g. the KmartlRainbow building on Marschall Road). Generally speaking, the second type of building, if used for retail kinds of uses, would not be likely to generate the types of jobs and wage rates the City is looking for. A second, and perhaps more central issue, is that by providing abatement on existing buildings, the City would be taking existing valuable taxable property off the rolls to some extent. A couple of possibilities the Council may wish to discuss are; H:\CC\2007\06-05\Business Subsidy Policy Discussion final.doc 2 . Assuming that once a building is occupied, its value will increase somewhat, providing tax abatement assistance on the increased increment of value; . Phasing in the increase in value once a building is occupied; . Tying assistance to only those jobs created that are at a fairly high rate (e.g. $20 per hour or greater, in other words at or above 275% of the 2009 federal minimum wage). Because of the types of inquiries that the City receives on the significant amoWlt of vacant space in the community, this is an item for policy discussion by the COWlcil. VISIONING RELATIONSHIP: This item relates to City Goal D. Vibrant, resilient and stable, and Goal E. Financially Strong. ACTION REQUESTED: Provide City staff with direction ~~~~~~ R. Michael Leek Community Development Director H:\CC\2007\06-05\Business Subsidy Policy Discussion final.doc 3 CITY OF SHAKOPEE SHAKOPEE ECONOMIC DEVELOPMENT AUTHORITY Business Subsidy Policy S COlvftv1UNITY PRIDE SINCE 1857 129 Holmes Street South Shakopee, MN 55379 Phone (952) 233-3800 Fax (952) 233-3801 EMT -236509vl SH235-14 CITY OF SHAKOPEE SHAKOPEE ECONONUC DEVELOPMENT AUTHORITY BUSINESS SUBSIDY POLICY I. Purpose This document sets forth the business subsidy policy and the specific criteria to be considered by the City of Shakopee ("City") and the Shakopee Economic Development Authority ("EDA") in evaluating requests for business subsidies. In adopting these criteria, it is the intent of the City and EDA to comply with Minnesota Statutes, Sections 1161.993-116J.995 (the "Act"). The City and EDA hereby adopt the definitions contained in the Act for application in the criteria. The City and EDA have each adopted this policy and these criteria after public hearing in accordance with the Act. Henceforth, the term "City" includes the City and EDA unless otherwise designated herein. II. Goals and Objectives It is the City's intent to advance the following goals and objectives in granting business subsidies: a.) All business subsidies must be consistent with Shakopee's comprehensive plan and any other similar plan or guide for development of the community. b.) Recipients must enter into a subsidy agreement with the City that is consistent with the Act. The recipient must meet a public purpose, commit to remain at the site for five years after the benefit date, meet a specific wage floor, and must set and meet wage and job goals, unless the public purpose is not employment, in which case after a public hearing wage and job goals my be set at zero. III. Business Subsidy Criteria Every business subsidy recipient must meet a public purpose, which must include but not be limited to increasing the tax base. The following criteria shall be utilized in evaluating a request for a business subsidy, although meeting these criteria does not create a contractual right to a business subsidy, and the City may later modify these criteria, as permitted by the Act. a.) Increase in Tax Base. While the Act provides that an increase in the tax base cannot be the sole grounds for granting a subsidy, the City requires such increase as a necessary condition for any subsidy. b.) Jobs and Wages. Every business subsidy recipient must create the maximum number oflivable wage jobs feasible for the proposed project and site, and these jobs must pay at least 275% ofthe federal minimum wage exclusive of benefits. The City will take into account the special needs of small or growing businesses with the 'potential to create high paying jobs in the future. The setting of wage goals must be EMT-236509vl 2 SH235-14 sensitive to prevailing wage rates, local economic conditions, external economic forces over which neither the grantor nor the recipient of the subsidy has control, the individual [mancial resources of the recipient and the competitive environment in which the recipient's business exists. The jobs created may include jobs to be retained, but only if job loss is specific and demonstrable. If, after a public hearing, it is determined that creation or retention of jobs is not a goal, wages and jobs may be set to zero. c.) Other Goals. If creation of jobs it is not a goal, the business subsidy must achieve measurable, specific, and tangible goals. d.) Economic Development or Redevelopment. Business subsidies should promote one or more of the following: l. Provide significant economIC impact (multiplier effect) within the community; 2. Encourage economic and commercial diversity within the community; 3. Contribute the establishment or reestablishment of a critical mass of commercial development within an area; 4. Provide basic goods and services, increase the range of goods and services available or encourage fast-growing business; 5. Promote redevelopment objectives and removal of blight, including pollution remediation; 6. Promote the retention or adaptive reuse of buildings of historical or architectural significance; 7. Encourage full utilization of existing or planned infrastructure improvements. The City may deviate from these criteria in granting business subsidies if the reasons for the deviation are documented in writing and reported to the Department of Employment and Economic Development, pursuant to the Act. IV. Compliance and Reporting Requirements. a.) Every business subsidy granted by the City (whether greater or lesser than $100,000) will be subject to the requirement of a public hearing. Any assistance that is excluded from the definition of a "business subsidy" under the Business Subsidy Act is not subject to the hearing EMT .236509v 1 3 SH235-14 requirement or any other portion of these policies. Every business subsidy must be approved by the Shakopee City Council, and by the EDA Board of Commissioners if the subsidy is granted by the EDA. b.) Every recipient of a business subsidy must enter into a business subsidy agreement fulfilling the requirements of the Act. c.) Both the business subsidy recipient and the City must comply with the reporting and monitoring requirements of the Act. d.) If a business subsidy recipient fails to meet the goals set forth in the business subsidy within two years, the business subsidy assistance plus interest must be paid back to the City, provided that repayment may be prorated to reflect partial fulfillment of goals. Interest 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. e.) The City may, after a public hearing, extend the time for compliance with business subsidy job and wage goals by up to one year. V. Application Process for Business Subsidies The applicant will complete the City's Application for Business Subsidies; submit with the application a deposit of $5,200 to cover City administrative costs; and provide other information as requested by the City. a.) City staff or the City's agent shall review the application materials and make preliminary recommendations to the Shakopee Economic Development Authority and City Council as to the compliance of the application and proposed project with the business subsidy policy and the goals and criteria set forth herein. b.) Final evaluation of the application shall include, in addition to items subject to preliminary review, a review of applicable credit analysis, financial structuring and legal compliance. A formal recommendation shall then be made to the Economic Development Authority and the City Council. c.) After a review of the final evaluation and formal recommendation, the Shakopee Economic Development Authority and City Council shall consider final approval of the granting of a business subsidy and hold the appropriate public hearings. d.) All applications and supporting materials and documents shall become the property of the City. EMT-236509vl 4 SH235-14 "::,jii "',>: '.'i.':;'" -'['i>i: .... .>>.;5.;> ..';i' ""YZ;.':!:::;!,i '>i; ',i.:i... ii. i:II~.i~'.~';';' ;'it. ........;[:< ".".,' ~ .'. ../i...'.. '.::; :" ........' ',;i'" ei,; Ie Lit:.;;;.:;:,,;.",.., "., :ii ~:'i ..,;,'.:t ...... ',i, .. .'... .. i; .'.. ~;./ {~~'i i" .....;i ...... ...............:.(':::.x. iC. -ij ,< 1\7';, ".i::: SCOTT COUNTY Belle Plaine 3,789 6,037 1,396 2,248 Belle Plaine Twp. 806 899 266 297 Blakeley Twp. 496 488 166 176 Cedar Lake Twp. 2,197 2,646 719 879 Credit River Twp. 3,895 4,617 1,242 1,506 Elko 472 1,321 155 432 Helena Twp. 1,440 1,668 450 524 Jackson Twp. 1,361 1,413 461 472 Jordan 3,833 5,048 1,349 1,790 Louisville Twp. 1,359 1,399 410 439 New Market 332 1 ,490 131 584 New Market Twp. 3,057 3,557 956 1,132 New Prague (part)2 3,157 4,049 1,160 1,552 Prior Lake 15,917 21,395 5,645 7,855 St. Lawrence Twp. 472 556 144 178 Sand Creek Twp. 1,551 1 ,762 478 533 Savage 21,115 24,662 6,807 8,289 Shakopee 20,568 29,335 7,540 11,122 Spring Lake Twp. 3,681 3,655 1,217 1,242 Scott County Total 89,498 115,997 30,692 41,250 Shakopee Mdewakanton Sioux" 391 181 1Source: Metropolitan Council estimate. 2This community is located in more than one county. 3Shakopee Mdewakanton Sioux population and households are located in cities of Prior Lake and Shakopee. November 17, 2005 Metropolitan Council 230 East Fifth Street St. Paul, Minnesota 55101-1626 Dear Following are the City of Shakopee's comment on the "System Statement" transmitted with Regional Administrator Tom Weaver's letter dated September 12,2005. Because the System Statement serves a critical role in forming the foundation of the local comprehensive plan, we would appreciate the opportunity to discuss the issues and items raised in this letter. I have attempted to organize the comments into the headings provided by the System Statement. Forecasts. It is my understanding that the projections of population, households, and employment found at page 2 ofthe Statement assumes development occurring only within the City's current municipal boundaries. Because of this assumption, the projections for the 2020 and 2030 timeframe may be understated. The City has recently undertaken an update of the transportation chapter of the City's Comprehensive Plan. For purposes of effective long-range planning, that update included an analysis of future needs extending into both Jackson and Louisville townships. Much of both of these townships is in Scott County's Urban Reserve or Commercial Reserve land use classifications, meaning that there is an expectation that they will develop with urban services and become a part of the City of Shakopee. As the City's planning staff looked at possible land use patterns in the township in preparation for drafting the Transportation Plan, it became apparent that the number of people and households in the City could well exceed the current Framework forecasts. In addition, the pressure to accommodate development in the township areas has increased, in large part because several hundred to a thousand acres of land in the center of the City is owned by the Shakopee Mdewakanton Sioux Community (SMSC) or by the federal government in trust for the SMSC. Growth Management. The City of Shakopee understands the need to provide for a minimum density that allow regional infrastructure to be used efficiently and economically, and continues to strive to make sure that the overall residential development in the City of Shakopee is within the density standard of 3- 5 units per acre. Geographic Planning Area. The City of Shakopee understands that it has been designated as a "developing community," even though it is a community with a stand alone history and historic Downtown that go back to the early 1850's. As a developing community, the City continues to pursue plans, policies, and projects that address the items spelled out in the Statement, as well as the Regional Framework. TRANSPORTATION SYSTEM STATEMENT: System Plan Considerations Affecting Your Community 1. Metropolitan Highways While the City understands the timeframe assigned to the construction of a new TH 41 river crossing, it contends that many development decisions that affect the possible corridor for such a crossing are being made today, and will be made in the very near future. For that reason, the City will be working with other interested jurisdictions to 1) get corridor decisions made as quickly as possible, 2) seek earlier funding for the crossing itself, and finally 3) work to see the implementation of that crossing sooner than 2030. 2. Transit Routes and Facilities. The City acknowledges the planning requirements contained in the system statement. 3. Aviation Plan and Facilities The City will continue to take account of the planning requirements related to aviation, particularly as they relate to Flying Cloud Airport. W ASTEW A TER SYSTEM STATEMENT. As was discussed previously in this letter, because of changes in development pressures affecting the township areas, the 2030 demographic projections, which form the basis for the sanitary sewer flow projections, need to be discussed. 2. Management of Individual Sewage Treatment Systems. As is the case for all other cities in Scott County, the City of Shakopee has turned over management ofIST systems to Scott County, and the City assumes that the County's comprehensive plan as it relates to ISTS provides (and will continue) to comply with the requirements set forth in this section of the statement. Advisories: 1. Water Supply Planning As the Council is aware, a separate entity, the Shakopee Public Utilities Commission (SPUC) is responsible locally for planning for and delivery of the City's water supply. The City and SPUC continue to cooperate to insure that their respective plans are consistent. However, presently, SPUC is faced with a 2006 DNR deadline for updating its water supply plan. This deadline is not consistent with the MLP A comprehensive plan deadline, and the Council's assistance may be sought in working out the conflicts between these processes. REGIONAL PARKS SYSTEM STATEMENT CITY OF SHAKOPEE. The City of Shakopee doe not have any specific comment on this section of the System Statement. Please contact me to set up a suitable time to discuss these comments in more detail, and thank you for your consideration. Very truly yours, R. Michael Leek Community Development Director CC. 2005 Correspondence File Shakopee Department Heads July 29,2004 Kathy Johnson, Planning Analyst Metropolitan Council Mears Park Centre 230 East Fifth Street St. Paul, MN 55101 RE: 2003 Population and Household Estimates for Shakopee Dear Ms. Johnson: The estimates were passed on to me for review and response. As you know the Council's estimates of households and population for the City of Shakopee have historically been low, and it appears that the 2003 estimates may be as well. Based on the level of building activity, and the rapidity with which new housing units are being occupied in the City, it would appear to us that a better estimate of April 1, 2003 population would be between 26,000 and 27,500. Also, I noted a downward shift in the estimated household size, and would appreciate receiving further information about how that estimate was arrived at. Very truly yours, R. Michael Leek Community Development Director CC. Mark McNeill, City Administrator Comparison of Population and Households Estimates for Shakopee US Census ..,'iC p(;)PUl~tiQn; '; lIouseh'Ql<fsci: #()fCO'g : #..:iliHQlis~hQld::.". .Additional.P:op;.... 2000 20568 7540 2.73 2001 nla 2002 n/a 2003 n/a 2004 n/a 2005 31233 2006 nla Total MetCouncil Apr-OO 20568 7540 2.73 Apr-Ol 21192 8234 696 2.57 1789 Apr-02 23900 8956 722 2.67 1928 Apr-03 24967 9471 515 2.64 1360 Apr-04 28913 10525 1054 2.75 2899 Apr-05 29335 11122 597 2.64 1576 Apr-06 nla nla n/a nla nla Total 3584 9552 City 2000 20568 7540 n/a 2.73 n/a 2001 21855 8008 468 2.75 1287 2002 23712 8683 675 2.75 1857 2003 25813 9447 764 2.75 2101 2004 27832 10181 734 2.75 2019 2005 30131 11017 836 2.75 2299 2006 31369 11467 450 2.75 1238 (est.) 2007 31,886 11,655 188 2.75 517 Total 31369 nla 3927 nla 10801