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HomeMy WebLinkAbout1B DRAFT Business Subsidy Policy EN HILLS Request for Council Action 1B Prepared By: Ron Moorse &James Lehnnoff Council Meeting Date: November 10, 2008 DRAFT Business Subsidy Policy Budgeted Amount: Actual Amount: Funding Source: Recommendation: Review the draft Business Subsidy Policy Supporting Documents: 1. November 10, 2008, Memo to the City Council 2. Draft Business Subsidy Policy ,ARZEN HALLS MEMORANDUM DATE: November 10, 2008 TO: Mayor& City Council FROM: Ron Moorse, City Administrator James Lehnhoff, Community Development Director SUBJECT: Draft Business Subsidy Policy Requested Action Review the draft Business Subsidy Policy and provide comments and questions. Background In consultation with Stacie Kvilvang of Ehlers and Associates, the Economic Development Commission(EDC) has prepared a business subsidy policy document for the City. The Financial Planning and Analysis Committee (FPAC) reviewed the draft policy and provided comments back to the EDC. The draft policy document has been completed, and the EDC moved to forward the draft policy to the Council for review. Ms. Kvilvang will be in attendance at the meeting to review the document and answer questions. Attachments Draft Business Subsidy Policy City of.4rden Hills City Council Work Session for November 10, 2008 I L4hdocsl tahLAHdataL4dminicommitteeslEconomic Development CommissionW081111008-Business Subsidy Policy review.doc Page 1 of 1 ,- RIZN HILLS City of Arden Hills 40P Business Subsidy Criteria Adopted 2008 PURPOSE AND AUTHORITY 1.1 The purpose of this document is to establish the criteria for the City of Arden Hills/Arden Hills EDA (the Grantor) for granting of business subsidies for private development within the City, with the exception of the Twin Cities Anny Ammunition Plant (TCAAP) - property, which has a separate public financing policy. These criteria shall be used as a guide in the processing and reviewing applications requesting business subsidies. 1.2 The City's/EDA's ability to grant business subsidies is governed by the limitations established in Minnesota Statutes 116J993 through 116J.994 (Statutes). The City/EDA may choose to apply its Business Subsidy Policy to other development activities not covered under this statute. 1.3 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 (T1F), abatement of property taxes, any guarantee of any payment under any loan, lease, or other obligation, or any preferential use of government facilities given to a business. 1.4 These criteria are to be used in conjunction with other relevant policies of the Grantor. 1.5 The City/EDA may deviate from these criteria by documenting in writing the reason(s) for the deviation. The documentation shall be submitted to the Department of Employment and Economic Development with the next annual report. 1.6 The Grantor may amend this document at any time. Amendments to these criteria are subject to public hearing requirements contained in the Statutes. 2 PUBLIC PURPOSE REQUIREMENT 2.1 All business subsidies must meet a public purpose with measurable benefit to the City as a whole. Public purpose may include, but not be limited to, the creation of needed services or facilities not currently available, provide a variety of housing ownership alternatives and housing choices, redevelop and remove blight and encourage redevelopment in the commercial and industrial areas of the City in order to encourage high levels of property maintenance and private reinvestment in those areas, retain local Page 1 of 7 ,jobs, increase the job base, and provide diversity in that job base, enhance existing jobs through increased wages, encourage additional unsubsidized private development in the area, either directly, or through secondary "spin off' development, offset increased costs of redevelopment over and above those costs that a developer would incur in normal urban and suburban development, and meet other uses of public policy, as adopted by the Council/EDA from time to time including the promotion of quality urban design, quality architectural design, energy conservation, decreasing the capital and operating costs of local government, etc. 2.2 Job retention may only be used as a public purpose in cases where job Ioss is specific and demonstrable. The City shall document the information used to determine the nature of the job loss. 2.3 The creation of tax base shall not be the sole public purpose of a subsidy. 2.4 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 I Full Time Equivalent (FTE)job is a minimum requirement for consideration of assistance. 2.5 The wage floor for wages to be paid for the jobs created shall be not less than 150% of the State minimum wage in effect at the time the subsidy is granted. 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. 3. CITY'S OBJECTIVE FOR THE USE OF PUBLIC FINANCING 3.1 As a matter of adopted policy,:the City of Arden Hills may consider using Tax Increment Financing (TIF) and other forms of public financing, such as tax abatement, bonds, and other forms as-appropriate, to assist private development projects when such assistance complies with all applicable statutory requirements to: A. Remove blight and/or encourage redevelopment in designated redevelopment/development area(s) per the goals and visions established by the City Council B. To achieve the following housing-related goals: 1. To provide a balanced and sustainable housing stock to meet diverse needs both today and in the future 2. To ensure all housing is safe and well-maintained 3. To promote neighborhood stabilization and revitalization by the removal of blight and the upgrading of existing housing stock. C. To retain local jobs and/or increase the number and diversity of quality jobs Page 2 of 7 D. To encourage additional unsubsidized private development in the area, either directly or through secondary "spin-off' development. E. To 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). F. To facilitate the development process and to achieve development on sites which could not be developed without this assistance. G. To meet other uses of public policy, as adopted by the City Council from time to time, including but not limited to promotion of quality urban design, quality architectural design, energy conservation, sustainable building practices, decreasing the capital and operating costs of local government. 4. COSTS WHICH MAY QUALIFY FOR PUBLIC FINANCING ASSISTANCE 4.1 Although it is understood that State Statute limits the types of assistance, providing assistance to underwrite some or all of the following costs are consistent with the City of Arden Hills goals to the extent that development could not occur without such assistance: A. Project design fees including utilities, landscape, architectural, and engineering design B. Site-related work, including earthwork/excavation, soil correction, landscaping, utilities, streets and roads, street/parking lot paving, street/parking lot lighting, curb and gutter, and sidewalks C. Land acquisition D. Special assessments E. Soil'tests DRAFT F. Environmental.studies G. Relocation assistance H. Replacement or cleanup of contaminated soils which would otherwise preclude redevelopment 1. Rehabilitation J_ Any other costs allowable by state statute and approved by the City Council 5. PROJECTS WHICH MAY QUALIFY FOR PUBLIC FINANCING ASSISTANCE All new applications for assistance considered by the City of Arden Hills must meet each of the following minimum qualifications and will also be evaluated based on their ability to meet the desired qualifications for assistance. However, it should not be presumed that a project meeting any of the qualifications will automatically be approved for 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. Page 3 of 7 5.1 Minimum Qualifications: A. In addition to meeting the applicable requirements of State law, the project should meet one or more of the Public Financing Objectives outlined in Section 3; but at a minimum shall either: 1. Remove blight and/or encourage redevelopment in the City in order to encourage high quality development or redevelopment and private reinvestment in those areas; OR 2. Facilitate the development process and to achieve development on sites which would not be developed without this assistance. 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 or any other applicable Iand use document. D. Prior to approval of a financing plan, the developer shall provide any 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 proposal. 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 should 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 due to past history, relating to completion of projects, general reputation, and/or bankruptcy, or other problems or issues considered relevant to the City. G. The developer, or its contractual assigns, should retain ownership of any portion of the project long enough to complete it, to stabilize its occupancy, to establish project.management and/or needed mechanisms to ensure successful operation. H. Enter into a Development Agreement crafted to meet the conditions of the actual project. 5.2 Desired Qualifications: DRAFT A. Proposals creating a higher ratio of property taxes paid after redevelopment will receive priority consideration. B. Proposals should not be used to support speculative industrial, commercial, office or housing projects. In general the developer should be able to provide market Page 4 of 7 data, tenant letters of commitment or finance statements which support the market potential/demand for the proposed project. C. Public Financing will not be used in a project that involves an excessive land and/or property price. This will normally be where the acquisition price is more than 20% in excess of market value as determined by an independent appraisal of the property (exclusive of relocation benefits). The City shall commission an appraisal and the cost will be paid from Developer's escrow. D. 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 subsidies. Developers should provide 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. E. TIF and 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. F. Public Financing will not be used for projects that would generate significant environmental problems in the opinion of the local, state, or federal governments. Priority will be given to projects that aim to clean-up existing contaminated sites and would facilitate the location of an industry or business that has an environmentally-sound track record, or that meets a housing need in the City- G. Preference will be given to projects that meet good public policy criteria as determined by the City Council,including: I. High project,quality (e.g. sound architectural design, quality construction Ulm and materials, sustainable building practices) 2. Projects that provide significant improvement to surrounding land uses, the neighborhood, and/or the City 3. Projects that provide a significant increase in tax base 4. Projects that provide significant new, or retained employment 5. Projects that meet financial feasibility criteria established by the City 6. Projects that provide the highest and best desired use for the property 6. PUBLIC FINANCING PRINCIPLES 6.1 General assumptions of redevelopment shall serve as a guide for the public financial assistance policies. These assumptions are as follows: A. All requests for assistance shall be reviewed by a third party financial advisor who will inform the City of its findings and recommendations. Page 5 of 7 B. The City shall establish mechanisms within the 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: 1. Third party review of the"but for" analysis 2. Establishment of"look back provisions" 3. Establishment of minimum assessment agreements C. The City will elect the fiscal disparities to come from inside applicable T1F district(s) to eliminate any impact to the existing taxpayers of the community. D. The City will target up to the maximum allowed by State Statute of tax increment for administrative purposes. E. 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. 7. PUBLIC FINANCING PROJECT EVALUATION PROCESS 7.1 The following four methods of analysis for all Public Financing proposals will be used: A. Consideration of project meeting minimum qualifications B. Consideration of project meeting desired qualifications C. Project meets "but=for' analysis and/or statutory qualifications D. Project is deemed consistent with City's Goals and Objectives Pleasenote that the evaluation methodology is intended to provide a balanced review. Each area will be evaluated individually and collectively and in no case should one area outweigh another in terms of importance to determining the level of assistance. 8. APPLICATION FOR PUBLIC FINANCING ASSISTANCE 8.1 The application process is a two-step process and must be completed in accordance with required application procedures. The purpose of this approach is to give an applicant the opportunity to present a development proposal without expending a great deal of money and time in pursuing a development that may conflict with the City's goals and objectives. 8.2 The City's public financing program will be administered by the City of Arden Hills. The City will require a non-refundable application fee in the amount of $2,000 for its processing of the application. The application fee shall be paid to the City at the time a final Public Financing Application is submitted. 8.3 At the time a final Public Financing Application is submitted, the applicant shall also deposit $10,000 with the City to cover attorney and consultant costs incurred as part of Page 6 of 7 amending or establishing a TIF district or abatement, drafting and negotiating a development agreement, and conducting any fiscal analysis that may be required to meet the requirements of utilizing any public financing. If additional expenses are incurred beyond the $10,000, prior to the execution of a development agreement, the City shall notify the applicant in writing and the applicant will be required to deposit additional funds upon notice. 8.4 If the project is approved and the applicant proceeds with the project, the City shall reimburse the applicant any unused portion of the deposit as of the date of execution of the development agreement. If the applicant does not proceed with the project, the City shall reimburse the applicant for the unused portion of the deposit, less expenses incurred but not yet billed, as of the date that the City is notified in writing that the applicant desires to withdraw its application. 9. SUBSIDY AGREEMENT 9.1 In granting a business subsidy, the Grantor shall enter into a subsidy agreement with the recipient that provides the information, wage and job goals (if applicable), commitments to provide necessary reporting data and recourse for fail to meet goals required by the Statutes. 92 The subsidy agreement may be incorporated into a broader development agreement for a project. 9.3 The subsidy agreement will describe the requirements for the recipient to provide the reporting information required by the Statutes. Adopted by City of Arden Hills Economic Development Authority Adopted by Arden Hills City Council Page 7 of 7