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Home My WebLink About6.A. EDA and Council Open Public Hearing on Business Subsidy Policy-Council Res. No. 7187; EDA Res. No. 12-6 6• �I CITY OF SHAKOPEE Memorandum TO: Mayor and City Council/Economic Development Authority (EDA) Mark McNeill, City Administrator/EDA Executive Director FROM: R. Michael Leek, Community Development Director SUBJECT: Revision to City of Shakopee Subsidy Policy MEETING DATE: May 15, 2012 INTRODUCTION: The City Council and EDA are asked to convene in joint session, conduct a joint public hearing on proposed revisions to the City's Business Subsidy Policy, and after conducting the public hearing, adopt the proposed revised policy. The City Council and EDA will remain in joint session for the combined public hearing on the Trident TIF request. DISCUSSION: The City of Shakopee has operated for some years under the attached Business Subsidy Policy. At the time the policy was put in place,the federal minimum wage was $5.15 per hour, so 275%of the minimum wage was $14.16 per hour. This wage level addressed the then-Council's concern that City assistance be given to projects which created livable wages. In 2007 Congress passed a bill that resulted in the minimum wage increasing over time. It is currently$7.25 per hour. Applying the 275% standard, jobs created (exclusive of benefits) are to pay about $19.94 per hour. For some business segments that is no longer realistic. This was the case in the SanMar project, where typical wages for warehouse positions are apparently between $12 and $14 per hour, which nonetheless is significantly higher than the minimum wage. In the attached draft that was prepared in early 2011, staff attempted to address this by a) excepting retained jobs and b) allowing the Council to establish different wage goals from project to project. In light of the recent SanMar proposal and after further discussions with City's counsel the draft has been revised to have a wage floor (exclusive of benefits) of 175% of the federal minimum wage ($12.69 per hour). RELATIONSHIP TO CITY GOALS: The proposed action on the request relates to City Goals; H:ACC\2012\5-15-12\Business Subsidy Policy_rpt_05152012.docx 1 B. Positively manage the challenges and opportunities presented by growth, development and change, and to D. Maintain, improve and create strong partnerships with other public and private sector entities. ECONOMIC DEVELOPMENT ADVISORY COMMISSION (EDAC) RECOMMENDATION: The EDAC reviewed the proposed revised policy on March 21, 2012, and unanimously recommended approval. REQUESTED ACTION: EDA: The EDA is asked to approve Resolution No. 12-6, a resolution of the EDA approving the revised Business Subsidy Policy. City Council: The City Council is asked to approve Resolution No. 7187, a resolution of the City Council approving the revised Business Subsidy Policy. � � R. Michael Leek Community Development Director H:ACC\2012\5-15-12\Business Subsidy Policy_rpt_05152012.docx 2 CITY OF SHAKOPEE,MINNESOTA RESOLUTION NO. 7187 RESOLUTION APPROVING REVISED BUSINESS SUBSIDY POLICY BE IT RESOLVED By t11e City Council (the "Council") of the City of Sllakopee, Minnesota (the "City")as follows: Section 1. Recitals. 1.01. Before awarding ai�y "business subsidy" as defined ii1 Minnesota Statutes, Section 116J.993 to 116J.994, as amended (tlle "Business Subsidy Act"), the City is required to adopt criteria regarding such subsidies after holding a public hearing. 1.02. The Council previously approved business subsidy criteria and has now determined to amend and restate the criteria in accordance with requirements of the Business Subsidy Act. 1.03. The Council has reviewed the amended and restated Business Subsidy Policy on file in City Hall, and has ou the date hereof l�eld a duly uoticed joint public hearing with the Board of Commissioners of the Economic Development Authority for tl�e City of Shakopee (the "Authority"), at which all interested persons were given an opportunity to be heard. Section 2. Business Subsidv Policv Approved. 2.01. The Council approves the amended a��d restated Busii7ess Subsidy Policy on file in City Hall,which criteria supersede any prior business subsidy policy or criteria adopted by the City. 2.02. City staff are authorized to transmit a copy of the amended and restated Business Subsidy Policy to the Minnesota Department of Employment and Economic Development in accordance with the Business Subsidy Act. Approved by the City Council of the City of Shakopee, Minnesota this 15`�'day of May,2012. Mayor ATTEST: Finance Director/City Clerk 403468v1 JAG SH155-23 ECONOMIC DEVELOPMENT AUTHORITY FOR THE CITY OF SHAKOPEE RESOLUTION NO. 12-6 RESOLUTION APPROVING AMENDED BUSINESS SUBSIDY POLICY BE IT RESOLVED By the Board of Commissioners (the `Board") of the Economic Development Authority for tl�e City of Shakopee(the"Authority")as follows: Section 1. Recitals. 1.01. Before awardiug any "business subsidy" as defined in Minnesota Statutes, Section 116J.993 to 116J.994, as amended (the `Business Subsidy Act"), the Authority is requii-ed to adopt criteria regarding such subsidies after holding a public hearing. 1.02. Tl1e Board previously approved business subsidy criteria and has now determined to amend and restate the criteria in accordance with requirements of the Business Subsidy Act. 1.03. The Board has reviewed the amended and restated Business Subsidy Policy on file in City Hall, a»d has on the date hereof I�etd a duly noticed joint public hearing with the City Council of the City of Shakopee,Minnesota(the"City"),at wllich all interested persons were give�l an opportu»ity to be lleard. Section 2. Business Subsidy Polic��proved. 2.01. Tl�e Board approves the amended aud restated Business Subsidy Policy on file in City Hall, wl�icl�criteria supersede any prior business subsidy policy or criteria adopted by the Authority. 2.02. Autllority staff are autllorized to transmit a copy of the amended and restated Business Slibsidy Policy to the Minnesota Department of Einployment and Economic Developinent in accordance with the Business Subsidy Act. Approved by the Board of Commissioners of tl�e Economic Development Authority for the City of Shakopee this 15`�'day of May,2012. President Executive Director 403466v1 JAE SH15�-23 CITY OF SHAKOPEE/ SHAKOPEE ECONOMIC DEVELOPMENT AUTHORITY(EDA) BUSINESS SUBSIDY POLICY (Revised May 2012) 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 as amended (the Act). The City and EDA hereby adopt the definitions contained in the Act for application of the criteria, and they are incorporated herein by reference. The City and the EDA have each adopted this policy and these';;criteria after a public hearing in accordance with the Act. Henceforth in this document the term "City" includes both the City and the EDA unless otherwise designated. ,� \��' � y� � II. Goals of this Policy It is the City's intent to advance the following goals and objectives in granting business subsidies: a. It is the goal of the City to provide business subsidies that are consistent with the City of Shakopee's comprehensive plan and other plans and guides adopted by the City to guide development of the community. b. It is the goal of the City to provide business subsidies that are consistent with the Act, including; i. The project for which the business sul�sidy is being provided must have a "public r �� purpose, including, but not limited to, the public purposes stated in Section III � below." �� i. The recipient must enter into a business subsidy agreement with the City that is ' consistent with the Act; iii. ° The recipient must commit to remain in the site for which the business subsidy was granted for at least five (5)years from the benefit date (as defined in the Act); iv. The business subsidy agreement sets forth the findings relative to the criteria contained herein, and any specific job, wage, property valuation or other goals established with respect to the business subsidy. III. Business Subsidy Criteria The following criteria shall be utilized in evaluating a request for a business subsidy. However,that an applicant meets these criteria does not create a contractual right to a business subsidy. The City may at any time and at its own discretion modify these criteria as permitted by the Act. H:\CC\2012\5-15-12\revised business subsidy policy draft_clean copy.docx 1 a. Increase in Tax ease. The Act provides that an increase in tax base cannot be the sole basis for granting a business subsidy, however, the City considers an increase in tax base is a critical factor in granting a business subsidy. The City may consider a specific goal for tax base increase in connection with a specific request for assistance. b. lob Creation. The applicant will be required to demonstrate that the proposed project will create the maximum number of jobs feasible in light of the project type and site. Jobs to be created may include jobs that will be retained within the City of Shakopee, but only with a demonstration by the applicant that, absent the business subsidy, the job loss would be specific and demonstrable. If,after the public hearing, the City determines that the creation or retention of jobs is not a goal of the specific project,the job creation goal may be set at zero (0). c. Wages. New jobs to be created by the project must pay at least 175%of the federal minimum wage exclusive of benefits. Jobs to be retained may,not be required to meet the above wage standard. After the public hearing the City may establish wage goals for new jobs to be created that vary from the standard above, and which take into account of the following additional factors; i. The size of the business, and its potential to create higher paying jobs in the future; ii. Prevailing local wage rates; iii. Local economic conditions; iv. External economic factors over which neither the City nor the recipient of the business subsidy has control; v. The individual financial resources of the recipient; and vi. The competitive environment in which the recipient's business exists. d. Other Economk or Redevelopment Goals. If creation of jobs is determined not to be a goal of a,project (and by extension wages) the proposed business subsidy must achieve specific, tangible and measurable goals related to one or more of the following; ` i. Provides a significant economic impact by means of a multiplier effect within the �: �": community; 'ii. Results in greater economic or commercial diversity within the community; iii. Contributes to the establishment or reestablishment of a critical mass of commercial/industrial development within an area of the City; iv. Provides goods or services that are not currently available in the community; v. Increases the range of goods or services that are available in the community; vi. Encourages the growth of fast-growing businesses; vii. Encourages private investment or reinvestment that results in the removal of blight or remediation of pollution; viii. Supports the retention and/or adaptive re-use of buildings of historical or architectural significance; ix. Encourages the full utilization of existing or planned public infrastructure improvements. H:\CC\2012\5-15-12\revised business subsidy policy draft_clean copy.docx 2 In granting business subsidies, the City may deviate from the criteria outlined above if a) the reasons for the deviation is documented in writing and b) reported to the Minnesota Department of Employment and Economic Development (DEED) pursuant to the Act. IV. Application Process for Business Subsidies The applicant will complete and submit the City's Application for Business Subsidy; submit with the application a deposit of XXXX (dollars) to cover the City's administrative review costs; and provide other information which may be requested by the City. All materials submitted to the City in connection with a business subsidy application shall become the property of the City. The review process shall involve at least the following steps; a. City staff or the City's agent shall review the application materials and make a preliminary recommendation to the City Council and EDA regarding 1) the completeness of the application, 2)whether the application meets the goals of this policy, and 3)whether the application complies with the criteria established in this policy. b. In the event that the City Council and EDA concur with the recommendation in a. above, a public hearing will be set at which the City will consider a final recommendation related to the application. The final review and recommendation by City staff or the City's agent shall take into account at least the following; i. Applicable credit analysis, ii. Financial structure of the proposed praject/application; iii. Legal compliance of the project/application. c. At the time of the scheduled public hearing, City staff or the City's agent will make a final recommendation to the City Council and EDA regarding the application. The City Council and 'EDA may adopt the recommendation or direct City staff or the City's agent to develop alternative information and/or alternatives for action by the City Council and EDA. V. Compliance and Reporting Requirements. a. Any assistance that does not meet the definition of a "business subsidy" will be excluded from the requirement of holding a public hearing prior to granting a business subsidy. All assistance that meets the definition shall be subject to the requirement of a public hearing. b. Every recipient of a business subsidy must enter into a business subsidy requirement agreement with the City, which agreement must fulfill the requirements of the Act. c. Both the recipient and the City must comply with the reporting and monitoring requirements of the Act. d. In the event that a recipient fails within two (2)years of the benefit date as defined in the Act to meet the job and wage goals set forth in the business subsidy agreement,the recipient or its successors and assigns shall be liable to repay to the City the assistance plus interest. The City may prorate repayment to reflect partial fulfillment of the goals set forth in the business subsidy agreement. The rate of interest charged must be set at no less than the implicit price deflator for government consumption expenditures and gross investment H:\CC\2012\5-15-12\revised business subsidy policy draft_clean copy.docx 3 for state and local governments prepared by the bureau of economic analysis of the Unites States Department of Commerce. e. The City may, after holding a public hearing, extend the time for compliance with business subsidy agreementjob and wage goals by up to one (1)year. �; ;`:�< � ��- �� x � ;i�i y��.��;, �f ;� xY �`i� 5 �.r H � •. . \�i; ^�.:� � . '�.�'�. YF�. �� ; � �� .�: �� ,'�i; e�� x� i� , �:� ��` ��> � ��, � �� a �� s:< � � � � ��,„� � �.: �� '' � ��T� � �� : 'S � 2�'F �:� .�.; � ��k� � /lJ �:'Rx`�'! '� / ..S�F. � n,�'r" � M'� : �� .. , \\. k� E „Y �� ,�s. , ��:. ��,t '��u. f,'r'; ' � �' ��>� �� r�s' rr, �'iY �� ' y % y �� ,�, H:\CC\2012\5-15-12\revised business subsidy policy draft_clean copy.docx 4 CITY OF SHAKOPEE SHAKOPEE ECONOMIC DEVELOPMENT AUTHORITY Business Subsidy Policy C4 Y PRIDE SINCE 1857 129 Holmes Street South Shakopee,MN 55379 Phone (952) 233-3800 Fax (952) 233-3801 EMT-236�09v I SH23�-14 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. IIL 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.) Irrcrease ira 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 arrd Wages. Every business subsidy recipient must create the maximum number of livable wage jobs feasible for the proposed project and site, and these jobs must pay at least 275%of the 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-236509v 1 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 financial 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 Redevclopment. 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. Pro►note 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-236�09v I 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-236�09v I 4 SH235-I 4