Criteria for Granting Business Subsidies in Excess of $25,000
I.Legal Purpose:
Under Minn. Stat. § 116J.993 through § 116J.995, all granting agencies must develop criteria for awarding business subsidies after a public hearing. All business subsidy agreements must indicate a public purpose for issuing the assistance. Increasing the tax base shall not be allowed as the sole reason as serving a public purpose.
Exemptions:
Business subsidies do not include the following:
1.assistance of less than $25,000.
2.assistance that is generally available to all businesses or to a general class of similar businesses, such as a line of businesses, size, location or similar general criteria;
3.public improvements to buildings or lands owned by the City that serve a public purpose and do not principally benefit a single business or defined group of businesses at the time the improvements are made;
4.property polluted by contaminants being redeveloped as defined in M.S. § 116J.552, subd. 3.
5.assistance provided for the sole purpose of renovating old or decaying building stock or brining it up to code and assistance to designated historic preservation sites or districts, provided that the assistance is equal to or less than 50% of the total cost of the development;
6.assistance to provide job readiness and training services;
7.assistance for housing;
8.assistance for pollution control or abatement, including assistance from a TIF hazardous substances subdistrict;
9.assistance for energy conservation;
10.tax reductions resulting from conformity with federal tax law;
11.workers compensation and unemployment compensation;
12.benefits derived from regulation;
13.indirect benefits derived from assistance to educational institutions;
14.funds from bonds allocated under M.S., Chapter 47A refunding bonds and 501(c)(3) bonds;
15.assistance for collaboration between a Minnesota higher education institution and a business;
16.assistance fro a tax increment financing soils condition district as defined under M.S.469.174, subd.19;
17.redevelopment when the Recipients or Qualified Business’ investment in the purchase of the site and in site preparation is 70 percent or more of the assessor’s current years estimated market value;
18.general changes in tax increment financing law and other general tax law changes of a principally technical nature;
Process for Application:
Applicant must fill out application form in its entirety, sign it and submit it to the Economic Development Authority for review.
If the request is for an amount over $100,000, the EDA must hold a public hearing which has been posted and published for at least ten days.
All applicants will be required to enter into a “subsidy agreement” with the EDA, laying out the goals of the assistance. All such agreements shall be available for public inspection.
All applicants will be given two years to meet the goals set forth in the subsidy agreement.
City Council must give final approval for all business subsidies over $25,000 or loans and loan guarantees in excess of $75,000 and are not one of the listed exemptions above.
Economic Development Assistance Guidelines:
The Spring Valley EDA will require applicant to invest equity of 15% of the total cost to ensure “ownership” and to deter benefactors from leaving a project at a later date.
Any Revolving Loan money provided will be done so at a loan to collateral ratio of 1:1. The EDA will assume a first position on items used for collateral purposes. In situations where there are several funding sources, the EDA may take a second position on the appropriate collateral. The typical rate for all loans made by the EDA will be one half percent higher than the average prime interest rate for Spring Valley financial institutions at the time of the application. The rate may be negotiable if it can be demonstrated that a lower rate is required to make the proposed project work.
When the total balance of the Revolving Loan Fund contains a balance of $20,000 or less, the maximum amount loaned for any single business venture will be 20% of the current fund balance or 10% of all financing involved, whichever is lesser. When the RLF balance is greater than $20,000, the amount available for each loan will be 30% of the available balance. This guideline may be deviated from if the circumstances of the business venture so warrant and the EDA approves.
Criteria:
Job Growth
Increasing the number of jobs within the city limits of Spring Valley definitely
serves as a public purpose. However, the number of jobs created must be in proportion with the amount of assistance to be given based upon the following chart:
Up to $16,000 in assistance per job created at a wage of $7/hour or greater
Up to $18,000 in assistance per job created at a wage of $8/hour or greater
Up to $20,000 in assistance per job created at a wage of $9/hour or greater
Up to $22,000 in assistance per job created at a wage of $10/hour or greater
Up to $25,000 in assistance per job created at a wage of $11/hour or greater
Although not required, applicants which show that there is opportunity for new employees to further their careers with education and training shall be given higher regard. Also, applicants which demonstrate that fringe benefits will be offered to new employees (such as child care, health care, and pensions) shall also be given more consideration for assistance.
II.Providing Job Retention, Where Loss is Imminent and Demonstrable
If a company is facing involuntary closure, or if a company has received an offer from another location which is attractive enough to expect that a reasonable person would move the business for financial reasons, then providing assistance to that firm shall be considered serving a public purpose.
If a company is facing a possible shut down, documentation will need to be provided to adequately demonstrate that the closure is imminent. Such documentation may include financial statements, a profit/loss statement prepared by a qualified person, or other paperwork as may be required by the Spring Valley Economic Development Authority. The applicant will be required to submit a plan that is intended to prevent such possible shut downs in the future.
If a company has received an offer to relocate from another location, then the details of that offer must be provided to the Spring Valley Economic Development Authority. The Spring Valley EDA shall confirm the veracity of the offer before awarding assistance to provide job retention.
In serving the purpose of job retention, one full time job at $7/hour, or its equivalent, must be demonstrated to be retained for every $5,000 in assistance.
Stabilizing the Community
Business assistance in an amount of $25,000 or greater will be considered serving
a public purpose if the assistance constitutes an investment in an area that (1) historically has not received similar investments; (2) is a blighted area (determined by resolution of the Spring Valley EDA Board); or (3) is an economically depressed area (also determined by resolution of the Spring Valley EDA Board). Also, if it can be demonstrated that the assistance shall stimulate further investment or spin-off businesses and jobs in the area, the assistance shall be deemed as a stabilizing factor.
Enhancing Economic Diversity
By enhancing economic diversity, a community is protecting itself from the loss
of a dominating industry. Much like a diversified investment portfolio, an economically diverse community is in better position to sustain itself than one that relies on the continued existence of one dominant industry.
Higher consideration will be given to applicants which will;
allow the area to participate in fast-growing industries;
protect the area from adverse economic consequences caused by slow growth or declining areas that are dominant in the area; and
provide essential consumer services or develop a network of local suppliers to businesses within the community where they would not otherwise exist.
Download the business subsidy application by clicking on the link below