11-08-1999 EDA Packet - Laserfiche WebLink

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0 W To: City of Lino Lakes From: Shelly Eldridge, Ehlers and Associates Subject: Business Subsidies Date: October 6, 1999 Beginning August 1, 1999, state and local governments face new requirements for granting business subsidies.' These requirements replace the current wage and job goal reporting. The new law will be codified as Minnesota Statutes, Section 116J.993. The regulation of business subsidies adds new complexities to the development process. Make sure that you understand the statutory requirements before providing direct or indirect assistance to any for -profit or non-profit entity. If in doubt, ask questions. Many of these provisions are subject to interpretation. There appears to be a recognition that the statute contains flaws that should be addressed next year. What does the new business subsidy law mean for your community? The new law applies to any state or local government agency or public entity (including cities, housing and redevelopment authorities, economic development authorities, counties, townships, and potentially school districts) with the power to grant business subsidy. It requires that, in addition to any requirements that may be attached to a particular form of subsidy (e.g. requirements to create a TIF plan and hold a public hearing), the entity must: (1) Determine that the subsidy meets a public purpose -- other than increasing the tax base. Job retention is a public purpose only if job loss is "imminent and demonstrable;" (2) Establish business subsidy criteria. The entity must establish and hold a public hearing to adopt the criteria. The only statutory requirement for contents of the criteria is a policy for wages on jobs created by the subsidies. The statute does not discuss a process for amending the criteria. This provision seems to impose separate requirements for each potential grantor. If, for example, a city, a county and a school district were all abating a business' taxes, all three (including the school district) would need to establish and approve separate criteria. (3) Enter into a subsidy agreement. The statue requires that the subsidy agreement define, among other things enumerated in the statute, wage and job goals, the nature of, the amount of, the reasons for, and the goals for the subsidy. The agreement must also describe what happens if the recipient fails to fulfill its obligations, and must contain a commitment from the recipient "to continue operations at the site where the subsidy is used for at least five years after the benefit date". Failure to meet goals requires partial or full repayment of the assistance with interest. Again, the subsidy agreement requirement seems to apply to each grantor, which in the case of abatement could potentially mean the city, the county and the school district. This agreement must be signed by the local elected governing body. 'Please be aware that we believe this law may even apply to development agreements that were approved before, but executed (signed) after, August 1, 1999.