HomeMy WebLinkAbout6. EDS Financial Investigation Funding
6,
CITY OF SHAKOPEE
Memorandum
TO: EDA
FROM: Mark McNeill, Executive Director
SUBJECT: EDA Financial Investigation Funding
DATE: April 1, 2005
INTRODUCTION:
The EDA is asked to consider a policy change regarding the $5,000 application fee which
accompanies requests for financial assistance from the EDA.
BACKGROUND:
Currently, any company wishing to make application for TIP or tax abatement completes
an application for financial assistance. With that, a $5,000 fee accompanies the
application. That money is used to offset financial analysis and legal research to
determine whether the company qualifies for financial assistance. In the past, any money
which is not expended is returned to the company.
The City often receives inquiries from companies as to whether there would be financial
assistance for them if they were to locate to Shakopee. Usually, an analysis needs to be
performed by Springsted to determine whether TIF or Tax Abatement is even a
possibility. Some of these prospective companies will qualify, and are then asked to fill
out a financial assistance application. There are others that will not qualify. Either way,
there are costs involved with having Springsted run basic numbers to determine whether
there is merit in proceeding to the next step. Those professional analysis costs are
relatively modest (a typical analysis of possible tax abatement and TIP will be in the
$750 to $1,000 range.).
It has been suggested that rather than return the unused portion of the $5,000 fee to the
companies that apply, that the EDA retain that. Those proceeds could be used to offset
the costs of other non-qualifying inquiries. Those might be termed "pursuit costs". In
the past, those have been funded thru the "professional services" line item ofthe EDA
budget. In discussing this with Economic Development Consultant Jeff Jansen, he felt
that this was a good suggestion. He also suggested that those dollars might be a source of
funding for other economic development promotion or marketing, therefore not drawing
down EDA funds. It is possible that at the end of each year, should there be monies
remaining that are not used for the legal or financial analysis, a decision could be made
by the EDA as to whether to put a portion of that fund balance into marketing or
promotion efforts.
The EDAC is scheduled to meet in April after a hiatus of several months. Rather than
wait to address this first with them, I would like to have the EDA consider this at the
April 5th meeting, as there is currently an application in for financial assistance that has
been accompanied by the $5,000 application fee.
RECOMMENDATION:
I recommend that the EDA policy regarding what to do with unused portions of the
application fee be changed, so that a separate EDA pursuit costs fund be established to
offset financial and legal analyses of prospective companies, which are found to not
qualify for EDA financial assistance.
ACTION REQUIRED:
Ifthe EDAconcurs, it should, by motion, adopt a policy establishing an EDA pursuit cost
fund, to be financed through unused balances of financial application fees from
prospective companies.
~.~
Mark McNeill
Executive Director
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