Agenda - Economic Development Authority - 08/10/1999

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Fact Sheet: 1999 Business Subsidies Law Business subsidies must meet a public purpose other than increasing the tax base. The law specifies that job retention may be used as a public purpose only where job loss is imminent and demonstrable, but does not otherwise restrict allowable public purposes (see examples on page 4). Grantors must determine that the recipient is eligible to receive assistance by reviewing DTED's list of past recipients ineligible to receive a business subsidy because they failed to meet the terms of another subsidy agreement. (This will not take effect until DTED makes the first list available after receiving the 1999 reports in 2000.) Before granting a business subsidy that exceeds $500,000 for a state government grantor and $100,000 for a local government grantor, the grantor must provide public notice and hold a hearing on the.subsidy unless a headng and notice on the subsidy is otherwise required by law. If a business subsidy benefits more than one recipient, the grantor must assign a proportion of the subsidy to each recipient signing the agreement. If the grantor is a local government agency, the agreement must be approved by the local elected governing body, except for the St. Paul Port Authority and a seaway port authority. Also, subsidies in the form of grants must be structured as forgivable loans, and agreements for other types of business subsidies must state the fair market value of the subsidy or other in-kind benefits. In addition to any cdteda developed in compliance with this law, agencies may be subject to additional cdteda required by specific assistance programs such as the Community Development Block Grant (HUD) and Minnesota Investment Fund programs. Agencies may or may not choose to address specific program criteda in the criteria developed in compliance with this law. What happens if a recipient does not meet business subsidy goals? Business subsidy agreements must specify the recipient~s obligation if the recipient does not fulfill the agreement. At a minimum, a recipient failing to meet goals must pay back the assistance plus interest, although repayment may be prorated to reflect partial fulfillment of goals. The interest rate must be set at the Implicit Price Deflator rate as defined in Minn. Stat. §275.70, subdivision 2. DTED will provide information on the Implicit Price Deflator ot~ its website. Recipients failing to fulfill business subsidy agreements may not receive business subsidies from any grantor for five years or until they have satisfied their repayment obligation, whichever occurs first. Who is required to report business subsidies, and how? ,/ Recipients must provide grantors with information on their: progress toward goals outlined in the agreement, and will be subject to a penalty as defined in Minn. Stat. §116J.994, subdivision 7(d) for failing to report. Grantors must submit the annual Minnesota Business Assistance Form (MBAF) to DTED for each business subsidy agreement signed on or after August 1, 1999. DTED will ask grantors to file an MBAF each year for each agreement for two years after the benefit date or until all goals outlined in the agreement have been met, whichever is later. Local government agencies in communities with a population of more than 2,500 and state government agencies must submit an MBAF regardless of whether they have awarded business subsidies. The form will ask agencies whether they have awarded any subsidies. Local government agencies in communities with a population of 2,500 or less are exempt from filing the MBAF if they have not awarded a subsidy in the past five years (i.e. those with a population of 2,500 or less who have not signed an agreement after December 31, 19.94, will be exempt from repo~ting in 2000). DTED will develop a new MBAF in fall i999. This form will ask grantors to report, at a minimum, the information that Minn. Stat. §I16J.994, subdivision 7 requires recipients to provide to them, including: · the type, public purpose, and amount of the subsidy, and type of district if the subsidy is TIF; · the hourly wage of each job created with separate bands of wages; · the sum of the hourly wages and cost of health insurance provided by the recipient, broken down by wage level; · the date(s) by which job and wage goals will be met; · a statement of goals identified in the agreement and an update on progress toward them; · the location of the recipient prior to receiving the business subsidy; · information on why the recipient did not complete the project outlined in the subsidy agreement at its previous location, if previously located at another site in Minnesota; · the name and address of the parent corporation.of the recipient, if any; · and a list of all financial assistance by all grantors for the project. Department of' Trade and Economic Development Page 2 of 4 July 27, 1999