HomeMy WebLinkAbout4.2 Amendment to Business Subsidy Policy
TO: Economic Development Authority
FROM: Christine Costello, Economic Development Director
DATE: December 2, 2019
RE: Amendment to Business Subsidy Policy
Background
In June 2017 the EDA updated the City’s Business Subsidy Policy to reflect the current goals
and objectives of the City of Cottage Grove and the Cottage Grove Economic Development
Authority (EDA) as well as conforming to Minnesota Statutes related to business subsidy law.
The Business Subsidy Policy is still incompliance with State Statue, but the Business Subsidy
Policy currently does not address the opportunity to provide other sources of financing such as a
loan through the EDA.
An important aspect of the City of Cottage Grove’s Strategic Plan (Plan) is to position the City
for growth. By providing various opportunities for project financing this will allow the City to
position for growth but also to remain business-friendly and a potential partner in development
projects that may be of benefit the entire community.
Discussion
Staff is proposing the addition of the word “loan” as one of the public financing tools that the City
may consider for the use of public financing. This would be along with other forms of public
financing that would be appropriate in assisting private development such as tax increment
financing, tax abatement, and bonds. The proposed loan program would still need to follow the
intent of the public financing principles and desired qualifications.
For the consideration of a loan from the City a developer would need to complete an application
form and then negotiations would take place between the City and the developer to determine
the conditions of the loan agreement such as length of loan, dollar amount, interest rate and any
additional qualifying conditions. The City will use the objectives listed in Section 2 of the
Business Subsidy Policy to ensure that a project requesting public financing is meeting the
intent of the City’s objectives for development.
Requested Action:
Motion to approve the amended Cottage Grove Business Subsidy Policy and forward to the
Cottage Grove City Council for formal public hearing and approval.
Attachments
Amended Business Subsidy Policy
Loan Program Application
City of Cottage Grove and
Cottage Grove Economic Development Authority
Public Financing Criteria and Business Subsidy Policy
Modified December 2019
INTRODUCTION:
This Policy is adopted for purposes of the business subsidies act, which is Minnesota Statutes, Sections
116J.993 through 116J.995 (the “Statutes”). Terms used in this Policy are intended to have the same
meanings as used in Statutes. Subdivision 3 of the Statutes specifies forms of financial assistance that
are not considered a business subsidy. This list contains exceptions for several activities, including
redevelopment, pollution clean-up, and housing, among others. By providing a business subsidy, the
City commits to holding a public hearing, as applicable, and reporting annually to the Department of
Employment and Economic Development (DEED) on job and wage goal progress.
1. PURPOSE AND AUTHORITY
A. The purpose of this document is to establish criteria for the City and the City’s Economic
Development Authority (“EDA”) for granting of business subsidies and public financing
for private development within the City. As used in this Policy, the term “City” shall be
understood to include the EDA. These criteria shall be used as a guide in processing and
reviewing applications requesting business subsidies and/or City public financing.
B. The City's ability to grant business subsidies is governed by the limitations established in
the Statutes.The City may choose to apply its Business Subsidy Criteria to other
development activities not covered under the statute. City public financing may or may
not be considered a business subsidy as defined by the Statutes.
C. Unless specifically excluded by the Statutes, business subsidies include grants by state or
local government agencies, contributions of personal property, real property,
infrastructure, the principal amount of a loan at rates below those commercially available
to the recipient of the subsidy, any reduction or deferral of any tax or any fee, tax
increment financing (TIF), abatement of property taxes, loans made from City funds, any
guarantee of any payment under any loan, lease, or other obligation, or any preferential
use of government facilities given to a business.
D. The criteria in this Policy are to be used in conjunction with other relevant policies of the
City.Compliance with thisPublic Finance Criteria and Business Subsidy Policy shall
not automatically mean compliance with such separate policies.
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E. The City may deviate from the job and wage goals criteria outlined in Section 5 D and E
below by documenting in writing the reason(s) for the deviation. The documentation
shall be submitted to the DEED with the next annual report.
F. The City may amend this document at any time. Amendments to these criteria are subject
to public hearing requirements contained in the Statutes.
2. CITY’S OBJECTIVE FOR THE USE OF PUBLIC FINANCING
A.Asa matter of adopted policy, the City mayconsider using public financing which may
include tax increment financing (TIF), property tax abatement, loans, bonds, and other
forms of public financing as appropriate, to assist private development projects. Such
assistance must comply with all applicable statutory requirements and accomplish one or
more of the following objectives:
1. Remove blight and/or encourage redevelopment in designated
redevelopment/development area(s) per the goals and visions established by the City
Council and EDA.
2. Expand and diversify the local economy and tax base.
3. Encourage additional unsubsidized private development in the area, either directly or
through secondary “spin-off” development.
4. Offset increased costs for redevelopment over and above the costs that a developer
would incur in normal urban and suburban development (determined as part of the
But-For analysis).
5. Facilitate the development process and promote development on sites thatcouldnot
be developed without public financing assistance.
6. Increase the number and diversity of quality jobs and/or retain local jobs at high wages
7. Provide the highest and best desired use for the property
8. Improve or add public infrastructure such as roads, utility extensions, storm water
ponding, etc.
9. Establish business interest that add to the diversity of the City’s offerings
3. PUBLIC FINANCING PRINCIPLES
A. The guidelines and principles set forth in this Policy pertain to all applications for City
public financing regardless of whether they are considered a Business Subsidy as defined
by the Statutes. The following general assumptions of development/redevelopment shall
serve as City public financingguidelines:
1. All viable requests for City public financing assistance shall be reviewed by staff, and
a third party municipal advisor who will inform the City of its findings and
recommendations. This process, known as the “But For” analysis is intended to
establish that the project would not be feasible but for the City financing assistance.
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2. The City shall establish mechanisms within a development agreement to ensure that
adequate checks and balances are incorporated in the distribution of financial
assistance where feasible and appropriate, including but not limited to, establishment
of a “look back provision” and other performance criteria deemed necessary by the
City.
3. TIF and property tax abatement will be provided on a pay-as-you-go-basis. Any
request for upfront assistance will be evaluated on its own merits and may require
security to cover any risks assumed by the City.
4.The City will set up TIF districts in accordance with the maximumnumber of
statutory years allowable. However, this does not mean that the developer will be
granted assistance for the full term of the district.
5.The City will electthe fiscal disparities contribution to come from inside applicable
TIF district(s) to eliminate any impact to the existing tax payers of the community.
6. Public financing will not be used to support speculativecommercial, office or housing
projects. In general the developer should be able to provide market data, tenant letters
of commitment or finance statements that support the market potential/demand for
the proposed project.
7. Public financing will not be used in projects that would give a significant competitive
financial advantage over similar projects in the area due to the use of public financing
assistance. Developers shallprovide information to support that assistance will not
create such a competitive advantage. Priority consideration will be given to projects
that fill an unmet market need as determined by the City.
8. Public financing will not be used in a project that involves aland and/or property
acquisition price in excess of fair market value.
9. Public financing will not be used for single-family residential developments or stand-
alone corporate-owned fast food restaurants. In addition, public financing will not be
used for big-box retail that is not part of a redevelopment project or special purpose
project of the City.
10. The developer will pay all applicable application fees and pay for the City’s fiscal and
legal advisor time as stated in the City’s Public Assistance Application.
11. The City will consider waiving fees on a case-by-case basis including, but not limited
to, park dedication fees,waterand/or sewer/storm sewerconnection or area charges.
The City may consider using SAC credits, to the extent they are available, to off-set
a project’s SAC expenses.
12. The developer shall proactively attempt to minimize the amount of public assistance
needed through the pursuit of grants, innovative solutions in structuring the deal, and
other funding mechanisms.
13. All developments are subject to execution and recording of a Minimum Assessment
Agreement and Development Agreement.
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4. PROJECTS WHICH MAY QUALIFY FOR PUBLIC FINANCING ASSISTANCE
A. All new applications for public assistance considered by the City must meet allthe
minimum qualifications in Section 4.1, 4.2 A and B, and as many of the desired
qualifications in Section 4.2 C as feasible. However, it should not be presumed that a
project meeting thesequalifications will automatically be approvedfor assistance.
Meeting the qualifications does not imply or create contractual rights on the part of any
potential developer to have its project approved for assistance.
4.1MINIMUM QUALIFICATIONS/REQUIREMENTS:
A. In addition to meeting the applicable requirements of State law, the project shall meet two
or more of the public financing objectives outlinedin Section 2.
B. The developer must demonstrate to the satisfaction of the City that the project is not
financially feasible “but for” the use of tax increment or other public financing.
C. The project must be consistent with the City’s Comprehensive Plan and Zoning
Ordinances, Design Guidelines and any other applicable land use documents or City
requirements.
D. Prior to approval of a financing plan, the developer shall provide all requested market and
financial feasibility studies, appraisals, soil boring, private lender commitment, and/or
other information the City or its financial consultants may require in order to proceed
with an independent evaluation of the application for public financing.
E. The developer must provide adequate financial guarantees to ensure the repayment of any
public financing and completion of the project. These may include, but are not limited
to, assessment agreements, letters of credit, personal deficiency guarantees, guaranteed
maximum cost contract, etc.
F. Any developer requesting assistance must be able to demonstrate past successful general
development capability as well as specific capability in the type and size of development
proposed. Public financing will not be used when the developer’s credentials, in the sole
judgment of the City, are inadequate. The City’s evaluation of the developer’s credentials
may include, but is not limited to, performance on past projects, general reputation,
project references, bankruptcy and other criteria considered relevant to the City.
G. The developer, or its contractual assigns, shallretain ownership of any portion of the
project long enough to completethe project, stabilize its occupancy, andestablish project
managementand/or needed mechanisms to ensure successful operation.
4.2 DESIRED QUALIFICATIONS:
A. Projects providing a high ratio of private investment to City public investment will
receive priority consideration. Private investment includes developer cash, government
and bank loans, conduit bonds, tax credit equity, and land if already owned by the
developer.
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B. Proposals that significantly increase the amount of property taxes paid after
redevelopment will receive priority consideration.
C.Proposals that encourage the following will receive priority consideration:
1. Implements the City’s vision and values for a City-identified redevelopment areas
in order of priority;
a. Business Park
b. Gateway North District
c. Cottage View District
d. Langdon Village Area (along portion of West Point Douglas Road) including
the Majestic Ballroom
2. Provides opportunities for corporate campus or medical office development
3. Provides opportunity for hi-tech, med-tech, R & D facilities/office or major
manufacturer
4. Provides for development of limited or full-service hotels
5. Provides opportunities for entertainment venues such as movie theater, family fun
center or larger attraction unique to the City
6. Promotes multi-family housing investment that meets the following City goals:
a. Provides housing options not currently available
b. Provides affordable and/or workforce housing that include amenities similar
to those found in market rate housing
c. Provides market-rate housing with high-end finishes and amenity package
7. Redevelops a blighted, contaminated and/or challenged site
8. Attracts or retains a significant employer within the City
9. Provides significant rehabilitation or expansion and/or replacement of existing
office, manufacturingor commercial facility
10. Provides façade improvements (including building facades, signage, landscaping
and parking lots) for commercial/industrial developments
11. Adds needed road, access, multi-modal improvements and or public infrastructure
12. Provides opportunities for small businesses (under 50 employees)
13. Provides significant improvement to surrounding land uses, the neighborhood,
and/or the City
5. BUSINESS SUBSIDY CRITERIA: PUBLIC PURPOSE, JOBS AND WAGE
REQUIREMENT
A. All business subsidies must meet a public purpose with measurable benefit to the City as
a whole.
B. Job retention may only be used as a public purpose in cases where job loss is specific and
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demonstrable. The City shall document the information used to determine the nature of
the job loss.
C.The creation of tax base shall not be thesole public purpose of a subsidy.
D. Unless the creation of jobs is removed from a particular project pursuant to the
requirements of the Statutes, the creation of jobs is a public purpose for granting a
subsidy. Creation of at least one (1)new full time employee (FTE) is a minimum
requirement for consideration of assistance and, it should not be presumed that a project
meeting this minimum requirement will automatically be approved for assistance. The
City may require more jobs be created in orderfor a developer to receive public
assistance. For purposes of this Policy, FTE’s must be permanent positions with set
hours, and be eligible for benefits.
E.The wage floor for wagesto be paid for the jobs created shall be not less than 200%of
the State of MN Minimum Wage. The City will seek to create jobs with higher wages as
appropriate for the overall public purpose of the subsidy. Wage goals may also be set to
enhance existing jobs through increased wages, which increase must result in wages
higher than the minimum under this Section.
F. After a public hearing, if the creation or retention of jobs is determined not to be a goal,
the wage and job goals may be set at zero.
6. SUBSIDY AGREEMENT
A. In granting a business subsidy, the City shall enter into a subsidy agreement with the
recipient that provides the following information: wage and job goals (if applicable),
commitments to provide necessary reporting data, and recourse for failure to meet goals
required by the Statutes.
B. The subsidy agreement may be incorporated into a broader development agreement for a
project.
C. The subsidy agreement will commit the recipient to providing the reporting information
required by the Statutes.
7. PUBLIC FINANCING PROJECT EVALUATION PROCESS
A. The following methods of analysis for all public financingproposals will be used:
1. Consideration of project meeting minimum qualifications
2. Consideration of project meeting desired qualifications
3. Project meets “but-for” analysis and/orstatutory qualifications
4. Project is deemed consistent with City’s Goals and Objectives
Please note that the evaluation methodology is intended to provide a balanced review. Each
area will be evaluated individually and collectively and in no case shouldone area outweigh
another in terms of importance to determining the level of assistance.
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General Applicant/Project Information
Date:
Name of Applicant Business/Organization:
Is Applicant Business/Organization a Certified Minority Business Enterprise, Women’s Business
Enterprise, Disadvantaged Business Enterprise, or similar? If yes, please specify:
Applicant Business/Organization Mailing Address:
City:
State:
ZIP:
Website (if applicable):
Project Address:
Do you own or lease this space? (Pleaseindicate) Own: Lease*:
*If applicant is not the owner of the building, applicant is required to attach a letter, signed and dated, from the
property owner expressing approval of the project application as proposed by the applicant.
Project Parcel Number(s):
Primary Contact Name*:
*Personal financial statements and tax returns are required for those with 20% or greater ownership interest. The
City and/or its agents reserve the right to obtain credit information on any business or individual in connection with
this application.
Title:
Contact Address:
Contact Phone:
Contact E-mail:
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Management Information (owner(s), officer(s), director(s), & shareholder(s) who hold 20% or
more ownership share in company)*
NameTitle% Ownership
*Personal financial statements and tax returns may be required for those with 20% or greater ownership interest. The
City and/or its agents reserve the right to obtain credit information on any business or individual in connection with
this application.
Anticipated Sources and Uses of All Project Funds
Sources include the loan you are requesting from the City plus any other financing that will go into the
project, including but not limited to bank financing and owner cash. Uses can be generalized but should
include all proposed improvements including those that are above and beyond eligible activities for City
funding. The total sources must equal the total uses.
Source(s) AmountUse(s) Amount
City Loan
Bank Financing
Lender name:
Owner(s) Cash
Owner name(s):
Other:
(Please specify)
Total: = Total:
Supplemental Materials
THE FOLLOWING EXHIBITS MUST BE COMPLETED WHERE APPLICABLE AND
PROVIDED AS SUPPLEMENTS TO YOUR APPLICATION. The City reserves the right to
request additional information.
A business plan, as applicable, and projected financials for the next three (3) years.
Scale drawing of proposed interior and exterior building changes, construction schedule, and cost
estimates. Proposed façade renovations should include proposed materials list & color samples.
Business financial statements for the last three (3) years, as applicable.
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Résumés and personal financial statements for all principal business owners/investors
(see page 2) for the past three (3) years, as applicable.
Copies of leases, purchase options or agreements, or other financial agreements related to the
subject property. All applicants requesting more than $5,000 in financing through the program are
REQUIRED to provide verification that the applicant has sought conventional financing (i.e., a bank
loan or line of credit) for the proposed project.
Verification that none of the following conditions exists against the business or principals:
outstanding judgments, state or federal tax lien, past due real estate taxes, past due property
assessments.
Supplemental Questions
YES NO
Has the company, any officer, subsidiary or affiliate of your company
been involved in any bankruptcy or insolvency proceedings in the last
36 months?
If yes, please provide the details as a separate exhibit.
Has the company, any officer, subsidiary or affiliate of your company
been involved in any lawsuits in the last 36 months?
If yes, please provide the details as a separate exhibit.
Does the company, owner(s), or member of Management Team have
a controlling interest in other businesses?
If yes, please provide their names and relationship with your company along with a
current balance sheet and income statement for each as a separate exhibit.
Are any of the individuals listed under “Management” on parole or
probation?
If yes, please provide the details as a separate exhibit.
Have any of the individuals listed under “Management” ever been
convicted of a crime?
If yes, please provide the details as a separate exhibit.
BY SIGNING ON PAGE 4 OF THIS DOCUMENT, THE APPLICANT(S)
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Certifies that to the best of his/her knowledge and belief, the information being submitted to the City is
true and correct;
Certifies that the applicant and proposed project is and will remain in compliance with all laws, regulations,
ordinances, and orders of public authorities applicable to them;
Certifies that he/she is not in default under the terms and conditions of any grant or loan agreement(s),
lease(s), or financing arrangement(s) with other creditors
Certifies that the City is authorized to obtain a credit check on any principal or business associated with
this application for the purposes of determining credit worthiness;
Agrees to reimburse the City for any reasonable expenses made in connection with this loan request,
including, but not limited to, title work, legal fees, appraisals, recording/filing fees, etc;
Certifies that the applicant has disclosed and will continue to disclose any occurrence or event that could
have an adverse material impact on the project. Adverse material impact includes but is not limited to
lawsuits, criminal or civil actions, bankruptcy proceedings, regulatory intervention or inadequate capital to
complete the project;
Understands that unless it qualifies as a trade secret, all information submitted to the City is subject to
Minnesota’s Open Records Law;
Understands that approved interior and exterior changes to buildings must be substantially started within
90 days of closing date, and must be completed within 12 months of closing date; and
Understands that any deviation or disregard for approved project design will result in a stop being placed
on the loan.
In the event credit is extended, the applicant agrees to enroll in the City’s direct payment
program, authorizing loan payments to be electronically debited.
Signature Title
Print Name Date Social Security #
Completed applications will be reviewed within 30 days of submittal. Please submit
completed application to:
Christine Costello, Economic Development Director
Cottage Grove Economic Development Authority
12800 Ravine Parkway South, Cottage Grove, MN 55016
ccostello@cottagegrovemn.gov
(651)458-2824
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