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HomeMy WebLinkAbout11-08-1999 EDA PacketAGENDA ECONOMIC DEVELOPMENT AUTHORITY MONDAY NOVEMBER 8, 1999 6:00 P.M. 1. Call to Order and Roll Call 2. Consideration of Minutes of Monday, April 12, 1999 3. Public hearing on the Adoption of Business Subsidy Criteria 3A. Consideration of Resolution No. 99-01 adopting Lino Lakes Economic Development Authority Business Subsidy Criteria 4. Consideration of Resolution No. 99-02 calling for a public hearing at 6 p.m. on Monday, December 13, 1999 regarding a proposed business subsidy to H&L Mesabi, Inc. 5. Adjourn AGENDA ITEM 3 STAFF ORIGINATOR: Brian Wessel DATE: 11/8/99 TOPIC: Public Hearing on the Adoption of Business Subsidy Criteria BACKGROUND: The legislature has set up new requirements for any local public entity that has the power to grant business subsidies. This is not a part of Tax Increment Financing legislation, but applies to any type of subsidy, and is in addition to any requirements attached to tax increment financing law. The new legislation requires that any entity granting a subsidy must determine that the subsidy meets a public purpose other than increasing tax base. It also requires the public entity establish criteria that includes a policy for wages on jobs created by subsidies. Each business receiving a subsidy will need to establish how many jobs it will create and at what wage. In this criteria proposed tonight, the city establishes that those guaranteed jobs created will be at 110% of the federal minimum wage requirements plus benefits. The major impacts of this legislation on public subsidies are: 1. Each project that will receive a subsidy of more than $25,000 will need to meet stricter standards for eligibility. 2. Any project receiving assistance must commit to continue operations at the site where the subsidy is used for at least five years 3. A company receiving a subsidy must pay 110% of the federal minimum wage, plus benefits for the jobs they have guaranteed. 4. A separate public hearing process will be required if the subsidy exceeds $100,000. OPTIONS: 1. Open the public hearing 2. Continue the public hearing RECOMMENDATION: Option 1 AGENDA ITEM 3A STAFF ORIGINATOR: Brian Wessel DATE: 11/8/99 TOPIC: Resolution No. 99-01 adopting the Lino Lakes Economic Development Authority Business Subsidy Criteria BACKGROUND: This resolution establishes that the city has met the requirements of the business subsidy law and adopts the criteria attached. OPTIONS: 1. Adopt Resolution No. 99-01 2. Return to staff for further consideration RECOMMENDATION: Option 1 Member adoption: introduced the following resolution and moved its LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. 99-02 RESOLUTION ADOPTING BUSINESS SUBSIDY CRITERIA WHEREAS, Minnesota Statutes, Sections 116J.993 through 1161995 (the "Statutes") require the adoption of criteria for the granting of business subsidies as defined in the Statutes; and WHEREAS, The Economic Development Authority (the "Authority") of the City of Lino Lakes (the "City") has determined that it is necessary and appropriate to adopt business subsidy criteria pursuant to the Statutes; and WHEREAS, The Authority has performed all actions required by law to be performed prior to the adoption and approval of the proposed business subsidy criteria, including the holding of a public hearing upon published notice as required by law on November 8, 1999. NOW, THEREFORE, BE IT RESOLVED by the Authority of the City of Lino Lakes, Minnesota, that the business subsidy criteria, contained in Exhibit A of this resolution are hereby approved, ratified, established, and adopted and shall be placed on file at the City Hall. Dated: November 8, 1999 President ATTEST: Executive Director The motion for the adoption of the foregoing resolution was duly seconded by member and upon vote being taken thereon, the following voted in favor thereof and the following voted against same: ATTACHMENT A LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY BUSINESS SUBSIDY CRITERIA Purpose This document includes the criteria to be considered by the Lino Lakes Economic Development Authority (EDA) to evaluate requests for business subsidies. It is the intent of the EDA in adopting these criteria to comply with Minnesota Statutes, Sections 116J.993-116J.995 (the "Act."). The EDA hereby adopts the definitions contained in the Act for application in the criteria. II. Goals and Objectives It is the EDA's intent to advance the following goals and objectives in granting business subsidies: a) All projects must be consistent with Lino Lakes' comprehensive plan and any other similar plan or guide for development of the community. b) Business subsidies must be justified by evidence that the project cannot proceed without the benefit of the subsidy. If tax increment financing is used to grant a subsidy, the grantee must demonstrate compliance with all statutory requirements of the TIF Act, including the "but for" test, and any TIF policy adopted by the EDA. The grantee will be required to provide all documentation necessary for the EDA to make the requisite fundings under the TIF and the Act. c) Grantees will be required to enter into an agreement with the EDA which is consistent with statutory requirements, including a commitment to 1 remain in business at the site for a minimum of five years after the benefit date and compliance with the specific jobs and wages goals established for the project. III. Business Subsidy Criteria The EDA 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 EDA reserves the right to modify these criteria from time to time and to evaluate each project as a whole. The following criteria shall be utilized in evaluating a request for a business subsidy: a. Increase in tax base. While an increase in the tax base cannot be the sole grounds for granting a subsidy, the EDA believes it is a necessary condition for any subsidy. b. Jobs and Wages. It is the EDA's intent that the grantee creates the maximum number of livable wage jobs at the site. Guaranteed jobs created must meet, as a minimum, 110 percent of the federal minimum wage requirements plus benefits. This may include jobs to be retained but only if job retention is imminent and demonstrable. c. Economic Development. Projects should promote one or more of the following: 1. Encourage economic and commercial diversity within the community; 2 2. Contribute to the establishment of a critical mass of commercial development within an area: 3. Provide basic goods and services, increase the range of goods and services available or encourage fast-growing businesses; 4. Promote redevelopment objectives and removal of blight, including pollution cleanup; 5. Promote the retention or adaptive use of buildings of historical or architectural significance; 6. Promote additional or spin-off development within the community; 7. Encourage full utilization of existing or planned infrastructure improvements. IV. Compliance and Reporting Requirements a) Any subsidy granted by the EDA will be subject to the requirement of a public hearing, if necessary, and must be approved by the Lino Lakes City Council. b) It will be necessary for both the grantee and the EDA to comply with reporting and monitoring requirements of the Act. 3 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. (4) Hold a public hearing on the subsidy if it exceeds $100,000 (or, if the grantor is the state government, $500,000). The statutes contains specific criteria for the notice of hearing. The notice must be published at least 10 days prior to the hearing. What is a business subsidy? The statute is important for both the definition and the specific exclusions. Business subsidy are defined as "grant, contribution of personal property, real property, infrastructure, the principal amount of a loan at rates below those commercially available to the recipient, any reduction or deferral of any tax or any fee, any guarantee of any payment under any loan, lease, or other obligation, or any preferential use of government facilities given to a business". The statute specifically excludes certain items from the definition. The following are not business subsidies: . • . • business subsidy of less than $25,000. assistance generally available to all business or to a similar class of business. public improvements to buildings or land owned by state or local government that serve a public purpose and do not principally benefit a single business or a defined group of businesses at the time the improvements are made. polluted redevelopment property (M.S. 116J.552) renovating old or decaying building stock or bringing it up to code if not more than 50% of the total cost. assistance to job training/readiness organizations to assist with those services. housing. pollution control or abatement. energy conservation. tax reduction from conformity with federal tax law. workers and unemployment compensation. benefits derived from regulations. funds from bonds allocated under Chapter 474A. collaboration between Minnesota higher education institution and a business. soils condition TIF district. redevelopment when recipient's investment in the purchase of the site is 70% or more of the current assessor's estimated market value. general changes in TIF law and other general tax law for a principally technical nature. Reporting The statute establishes a set of subsidy reporting procedures. The recipient of the assistance is required to provide information to the grantor for two years after the benefits date or until the goals are met, whichever is later. The information shall be reported on forms developed by DTED. The statute creates penalties for failure to provide the appropriate reports. AGENDA ITEM 4 STAFF ORIGINATOR: Brian Wessel DATE: 2/10/97 TOPIC: Resolution No. 99-02 setting a date for the public hearing for the proposed subsidy granted by the EDA to H&L Mesabi, Inc. VOTE REQUIRED: 3/5 BACKGROUND: This resolution sets a public hearing for Monday, December 13, 1999 for public comment regarding the proposed Tax Increment Financing subsidy the EDA will be considering to assist H&L Mesabi. The company is proposing to build a facility in the Apollo Business Park and has requested TIF assistance. According the new Business Subsidy Law, a public hearing is required for any proposed subsidy over $100,000. OPTIONS: 1. Adopt Resolution No. 99-02 calling for a public hearing to be held on Monday, December 13, 1999 at 6:00 p.m. 2, Return to staff for further consideration RECOMMENDATION: Option 1 Member introduced the following resolution and moved its adoption: LINO LAKES ECONOMIC DEVELOPMENT AUTHORITY RESOLUTION NO. 99-02 RESOLUTION ESTABLISHING PUBLIC HEARING FOR A PROPOSED BUSINESS SUBSIDY WHEREAS, the Lino Lakes Economic Development Authority (the "EDA") established Tax Increment Financing District No. 1-9 ("TIF District No. 1-9") and adopted a tax increment financing plan (the "TIF Plan") on December 14, 1998; and WHEREAS, the EDA intends to authorize financial assistance to H&L Mesabi, Inc.; and WHEREAS, the financial assistance the EDA intends to offer to H&L Mesabi, Inc., is in an amount exceeding $100,000; and WHEREAS, Minnesota Statutes, Sections 116J.993-116J.995 entitled Business Subsidies require a local government grantor to provide public notice and a hearing on a subsidy exceeding $100,000. NOW, THEREFORE BE IT RESOLVED by the Lino Lakes Economic Development Authority as follows: 1. A public hearing shall be held at 6:00 p.m. on the 13th day of December, 1999 in order to consider granting a public subsidy to H&L Mesabi, Inc. 2. The executive director is hereby authorized and directed to cause notice of the public hearing to be published in the official newspaper at least 10 days but not more than 20 days prior to the hearing. 3. Staff is authorized and directed to take all actions necessary and appropriate in order to bring this item before the EDA at its meeting on the 13th day of December, 1999. Dated: Monday, November 8, 1999 President ATTEST: Linda Waite Smith, Executive Director The motion for the adoption of the foregoing resolution was duly seconded by member and upon vote being taken thereon, the following voted in favor thereof and the following voted against same: Whereupon said resolution was declared duly passed and adopted.