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HomeMy WebLinkAbout5. Public Hearing Date for Business Subsidy Policy & TIF Policy ...- ~~ CITY OF SHAKOPEE Memorandum TO: Mayor and City Council Economic Development Authority FROM: Paul Snook, Economic Development coordinator,$ SUBJECT: Public Hearing Date for Business Subsidy Policy ~ nf- Poll:::'j MEETING DATE: September 2, 2003 Introduction & Background: The City Council and EDA are asked to set a public hearing with for October 7, 2003, regarding updating the Business Subsidy Policy based on amendments to the Minnesota Business Subsidy Act, and regarding updating the Tax Increment Financing Policy. The TIP policy was part of the Business Subsidy Policy when the subsidy policy was adopted in 1999. The revision will separate the two policies (a TIP policy is not required under the TIP act, but Shakopee has developed and adopted one). Cities and Economic Development Authorities must adopt a "business subsidy policy" per mandate by the Business Subsidies Act, Minnesota Statutes, Sections 116J.993 through 116J.995. The 1999 Minnesota Legislature enacted the law regulating business subsidies awarded on or after August 1, 1999. Discussion The enclosed "Summary to the 1999 Business Subsidies Law" from the Economic Development Association of Minnesota outlines changes in the law. The business subsidy policy is intended to cover all "subsidies" as defined in the law. Staff and legal counsel have drafted a revised Business Subsidy Policy that reflects the amendments in the law, and a revised TIP Policy, for consideration and adoption at the September 16th City Council and EDA meetings. The TIP policy has been separated from the Business Subsidies Policy since TIP projects can be created for reasons other than attracting and retaining businesses, and are not business subsidies (examples: redevelopment; housing; etc.) Action Required Offer and pass a motion to set a public hearing for October 7, 2003 regarding the revised Business Subsidy Policy and Tax Increment Financing Policy. subsdrno9-2-03.doc Economic Development Association of Minnesota I News Archive Page 1 of2 E"8fl!$ r~<dp 'JVdfllbd ~"~8Vi;; Archive l09i~?alkm R~solJrciJS feedbock Search . fW:; ~-_-lf' ~' ...~..~ Summary Amendments to the 1999 Business Subsidies Law Section 1. This section makes several changes to the existing exemptions and adds om changes are the following: . Clause 1 is amended to increase the threshold to $100,000. The amendment is pI several state and local government programs that provide less than $100,000 an( intended to create jobs. This change would exclude such projects as those funde, rural redevelopment and micro-enterprise funds and other projects of similar sca . Clause 5 extends the exemption to include designated historic preservation distri . Clause 8 adds a reference to the tax increment financing hazardous substance su intent of this change is to clarify that the existing language specifically includes subdistrict as a pollution control or abatement activity. . Clause 14 is modified to clarify that bonds issued on behalf of a non-profit orgaJ exempt. Current law exempts only those bonds which are subject to the state's bl for private activity bonds issued by a local or state government on behalf of a pr change would extend the exemption to similar bonds not subject to the volume c . Clause 19 is a new exemption. A small business is defined in state law. The refe Minnesota law is included in section 2. Section 2. This change provides a statutory reference to the Minnesota statutory defini business. A small business is defined to be a for-profit entity that has no more than tW( employees or, in the preceding year fiscal year, had no more than $1 million ($2.5 mill or professional services) in annual gross revenues. The small business must not be affi subsidiary of a business that exceeds these thresholds. Section 3. This section includes a change to clarify that increasing the tax base is a leg purpose. Current law is open to the interpretation that increasing the tax base is not a p purpose. This section also includes a change that replaces the word "imminent" with the word" Section 4. The change in Clause 6 would allow a recipient of a business subsidy to mo within the five-year commitment period but only with grantor approval. The change in allows a grantor to structure a grant as a forgivable loan and provides consistency with the following sentence. Section 5. This change will require the grantor to detennine whether a project is desigl and therefore, ifthe subsidy agreement will include job and wage goals. The public W( opportunity to comment on this determination at the required public hearing. Current I http://www.edam.org/1299Jeg_bus_sum.cfm 8/25/03 Economic Development Association of Minnesota I News Archive Page 2 of2 grantor to include job and wage goals in subsidy agreements for projects that are not ir jobs, but rather, have a variety of other legitimate goals, such as reducing crime, imprc workplace, providing equipment, or redeveloping property. This section also includes a change (identical to that in Section 3) that replaces the wo! with the word "specific." Section 6. In many instances the final subsidy agreement is not complete at the time 01 hearing and therefore may not be available at that time. This change would clarify that summary of the subsidy agreement available is sufficient for the purpose of the public summary would include the proposed business points or terms of the agreement. This section also includes a change that would allow a combined public hearing where multiple grantors. The hearing would be held in the local jurisdiction. Section 7. This change has the effect of exempting from any reporting requirements th financial assistance that are excluded from definition of "business subsidy." Instead, re reporting is required in cases where the subsidy agreement includes the creation or rett goal. Section 8. This change is intended to be a technical clarification only. Section 9. This change eliminates the reference to "monthly or quarterly" time categor DTED's summary and compilation report. Igr docs/bus. subs. summary EDAM - Economic Development Association of Minnesota 26 East Exchange Street, 5th Floor, St. Paul, MN 55101 Telephone 651-290-6296 I Fax 651-290-2266 To update your member info, please login to your member account: m€'!mb€'!T?ilH Please email thel"!€'!Qm??t€'!T with any web site related questions. http://www.edam.org/1299Jeg_bus_sum.cfm 8/25/03 .; (G-Vl R 12.t::.~ CITY OF SHAKOPEE SHAKOPEE ECONOMIC DEVELOPMENT AUTHORITY Business Subsidy Policy S CO?v1MUNITY PRIDE SINCE 1857 129 Holmes Street South Shakopee, MN 55379 , Phone (952) 445-3650 Fax (952) 445-6718 CITY OF SHAKOPEE SHAKOPEE ECONOMIC DEVELOPMENT AUTHORITY BUSINESS SUBSIDY POLICY I. Purpose This document includes the criteria to be considered by the City of Shakopee ("City") and the Shakopee Economic Development Authority ("ED A") to evaluate requests for business subsidies. In adopting these criteria, it is the intent of the City and EDA to comply with Minnesota Statutes, Sections 116J.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 these policies after public hearing in accordance with the Act. Henceforth, the term "City" includes the City and EDA unless the context requires otherwise. 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 will be required to enter into a subsidy agreement with the City that 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 job and wage goals established for the project. III. Business Subsidy Criteria The City 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 reserves the right to modify these criteria from time to time and to evaluate each project individually. The following criteria shall be utilized in evaluating a request for a business subsidy: a.) Increase in tax base. While according to the Act an increase in the tax base cannot be the sole grounds for granting a subsidy, the City believes it is a necessary condition for any subsidy. b.) Jobs and Wages. It is the City's intent that the recipient create the maximum number of livable wage jobs at the site. This may include jobs to be retained but only if job loss is imminent and demonstrable. City of Shakopee Business Subsidv Policv Business Subsidy Criteria (continued) c.) Economic Development or Redevelopment. Business subsidies should promote one or more of the following: 1. Provide significant economic impact (multiplier effect) within the community; 2. Encourage economic and commercial diversity within the community; 3. Contribute to 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 businesses; 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. IV. Compliance and Reporting Requirements. a.) Any subsidy granted by the City will be subject to the requirement of a public hearing, if necessary according to the Act, and must be approved by the Shakopee City Council, and by the EDA Board of Commissioners if the subsidy is granted by the EDA. b.) It will be necessary for both the recipient and the City to comply with the reporting and monitoring requirements ofthe Act. V. Tax Increment Financing Program Tax mcrement Financing (TIF) is a financing tool whereby districts are established for development or redevelopment and the increased property tax revenues, or increment, generated by the improvements is captured to pay back the bond debt or other financing provided for the project. TIF is useful for the attraction and retention of businesses by the City of Shakopee. The fundamental principle that makes Tax mcrement Financing viable is that it is designed to encourage development that would not otherwise occur. The City shall consider TIF in cases that serve to accomplish the City's economic development goals, and to assist projects that would not occur "but for" the assistance provided through Tax mcrement Financing. m addition to the general criteria described in Sections III and N above, requests for TIF assistance will be evaluated according to the policies in these Sections. subsdpolicy.doc 2 City of Shakopee Business Subsidv Policv Tax Increment Financing Program (continued) Program Goals 1. To promote development or redevelopment that would not otherwise occur. 2. To promote development or redevelopment that will build a strong tax base. 3. To improve the community's economic vitality through the creation and expansion of employment opportunities. 4. To assure that development projects are constructed and maintained with quality consistent with the goals of the City of Shakopee. 5. To enhance the competitive position of the City of Shakopee regarding new and expanding businesses. Program Eligibility Criteria Qualified projects (applicants) must meet or exceed the following criteria to be eligible for TIF assistance. Meeting the threshold of eligibility does not mean automatic approval for the applicant. The Shakopee Economic Development Authority and City Council shall make final approval of TIF assistance. The applicant must complete an Application for Business Subsidies as one measure of project eligibility. 1. If the project is a manufacturing or warehouse / distribution use, the following criteria apply: a.) The project must be located in an I~l (Light Industry), 1-2 (Heavy Industry), or BP (Business Park) zoning district. b.) The project must occupy a minimum land area of 5 acres. 2. The project must be consistent with the City's Comprehensive Plan. 3. If the project involves redevelopment, the applicant must provide evidence of the building and site conditions needed to evaluate whether the project qualifies for establishment of a redevelopment district or renovation and renewal district. 4. The project must be consistent with environmental regulations and not create an environmental hardship for the community. 5. The applicant must be willing to enter into a developer's agreement approved by the City. 6. The applicant should at all times retain and be assisted by qualified financial consultants and/or underwriters, and by legal counsel. subsdpoJicy.doc 3 City of Shako pee Business Subsidv Policv TIF Program Eligibility Criteria (continued) 7. Construction of the project shall not commence until the City has approved a TIF plan for the project. 8. The City reserves the right to select a third party administrator/consultant to assist in the review and project development process, the cost of which will be paid by the applicant. 9. The applicant must submit preliminary plans of the proj ect and evidence of ability to finance the project. 10. The applicant must provide security to the City to cover all costs paid by tax increment, unless the TIF plan is a "pay as you go" agreement. 11. The City reserves the right to deny any application for TIF financing for any reason at any stage of the proceedings prior to adoption of the final approval of a Developer's Agreement. 12. The developer will provide a minimum of 10% owner and/or developer equity in the project. The City reserves the right to deny projects which substantially comply with the eligibility criteria, but which fail to have a significant positive impact on the community or to accomplish the City's economic development or redevelopment goals as determined by the Economic Development Authority and City Council. The City reserves the right to consider and approve projects which substantially comply with the eligibility criteria, as set forth in the program providing other tangential items such as building materials, building quality, etc., meet or exceed minimum standards and have, in the Council's judgment, a significant positive impact on the community and have accomplished the City's economic development or redevelopment goals. Costs Eligible for Tax Increment Financing Assistance Project costs qualifying for TIF assistance, as defined under the Minnesota TIF Act, include without limitations the following: 1. Acquisition of property 2. Clearing of land 3. Relocation and demolition of existing structures 4. Site preparation 5. Soils correction 6. Removal of hazardous waste or pollution 7. Installation of utilities 8. Construction of public or private improvements 9. Administrative costs directly related to the parcels identified 10. Other similar activities subsdpolicy.doc 4 . City of Shakopee Business Subsidv Policv VI. 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. 1. 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 compliance of the application and proposed project with City goals and eligibility criteria. 2. 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. 3. After a review of the final evaluation and formal recommendation, the Shakopee Economic Development Authority and City Council shall consider final approval of the use of business subsidies and hold the appropriate public hearings. 4. All applications and supporting materials and documents shall become the property of the City. subsdpolicy.doc 5 (fuv\ Se-D) CITY OF SHAKOPEE SHAKOPEE ECONOMIC 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 116J.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 must recipient must create the maximum number oflivable wage jobs feasible for the proposed project and site, and these jobs must pay at least the federal minimum wage. The jobs created may include jobs to EMT-236509vl SH235-14 be retained, but only if job loss is specific and demonstrable. If, after a public hearing, it is determined that creation or retraction 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 ofthe following: 1. 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 will be subject to the requirement of a public hearing, if the subsidy exceeds $100,000 or a hearing is otherwise required by the Act or other laws. 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. EMT-236509vl 2 SH235-14 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 ofthe 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-236509v1 3 SH235-14 (1Z~\<;~~ CITY OF SHAKO PEE SHAKOPEE ECONOMIC DEVELOPMENT AUTHORITY TAX INCREMENT FINANCING POLICY I. Purpose Tax Increment Financing (TIF) districts are established by the City or Economic Development Authority (EDA) to achieve development, redevelopment, or other permissible goals through use of the increased property tax revenues, or tax increment, generated by the project. The fundamental principle that makes Tax Increment Financing viable is that it is designed to encourage development that would not otherwise occur. TIF is often used by the City and EDA as a tool to attract and retain businesses in which case the TIF provided is a business subsidy and must be granted, pursuant to the City's Business Subsidy Policy. However, the Business Subsidy Policy applies to any business subsidy granted, whether or not TIF is involved, and this TIF Policy applies to any TIF project, including those that are created for reasons other than attracting or retaining business, and are not business subsidies. The City shall consider TIF in cases that serve to accomplish the City's economic development goals, and to assist projects that would not occur "but for" the assistance provided through Tax Increment Financing. TIF will be evaluated according to whether projects meet a legitimate public purpose and further the City's development, redevelopment, housing, and related goals. II. TIF Program Goals and Objectives It is the City's intent to advance the following goals and objectives in granting TIP assistance. a.) To promote development or redevelopment that would not otherwise occur. b.) To promote development or redevelopment that will build a strong tax base. c.) To improve the community's economic vitality through the creation and expansion of employment opportunities. d.) To assure that development projects are constructed and maintained with quality consistent with the goals of the City of Shakopee. e.) To enhance the competitive position of the City of Shakopee regarding new and expanding business. EMT-23655I vI I SH235-14 III. TIF Program Eligibility Criteria Qualified project (applicants) must meet or exceed the following criteria to be eligible for TlF assistance. Meeting the threshold of eligibility does not mean automatic approval for the applicant. The Shakopee Economic Development Authority and City Council shall make final approval ofTlF assistance. Ifthe applicant is proposing a project that creates or retains business, an Application for Business Subsidies must be filled out pursuant to the Business Subsidy Policy, and will be one measure ofproject eligibility. a.) Ifthe project is a manufacturing or warehouse/distribution use, the following criteria apply: 1. The project must be locaed in an 1-1 (Light Industry), 1-2 (Heavy Industry), or BP (Business Park) zoning district. 2. The project must occupy a minimum land area of 5 acres. b.) The project must occupy a minimum land area of 5 acres. c.) If the project involves redevelopment, the applicant must provide evidence of the building and site conditions needed to evaluate whether the project qualifies for establishment of a redevelopment district or renovation and renewal district. d.) The project must be consistent with environmental regulations and not create an environmental hardship for the community. e.) The applicant must be willing to enter into a developer's agreement approved by the City. f.) The applicant should at all times retain and be assisted by qualified financial consultants and/or underwriters, and by legal counsel. g.) Construction of the project shall not commence until the City has approved a TlF plan for the project. h.) The City reserves the right to select a third party administrator/consultant to assist in the review and project development process, the costs of which will be paid by the applicant. i.) The applicant must submit preliminary plans of the project ad evidence of ability to finance the proj ect. EMT-236551vl 2 SH235-14 j.) The applicant must provide security to the City to cover all costs paid by tax increment, unless the TIP plan is a "pay as you go" agreement. k.) The City reserves the right to deny any application for TIP financing for any reason at any stage of the proceedings prior to adoption of the final approval of a Developers Agreement. 1.) The developer will provide a minimum of 10% owner and/or developer equity in the project. The City reserves the right to deny projects which substantially comply with the eligibility criteria, but which fail to have a significant positive impact on the community or to accomplish the City's economic development or redevelopment goals as determined by the Economic Development Authority and City Council. The City reserves the right to consider and approve projects which substantially comply with the eligibility criteria, as set forth in the program providing other tangential items such as building materials, building quality, etc., meet or exceed minimum standards and have, in the Council's judgment, a significant positive impact on the community and have accomplished the City's economic development or redevelopment goals. IV. Cost Eligible for Tax Increment Financing Assistance Project costs qualifying for TIP assistance, as defined under the Minnesota TIP Act, include without limitations the following: 1. Acquisition of property 2. Clearing of land 3. Relocation and demolition of existing structures 4. Site preparation 5. Soils correction 6. Removal of hazardous waste or pollution 7. Installation of utilities 8. Construction of public or private improvements 9. Administrative costs directly related to the parcels identified 10. Other similar activities EMT-236551 vI 3 SH235-14