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<br />CASE # 1 <br /> <br />Economic Development Assistance Packages <br />By: Sean M. Sullivan, Economic Development Coordinator <br /> <br />Background: <br /> <br />At the September 26, 2006 City Council meeting during the site plan approval for Minnesota <br />Waterjet, questions arose as to how assistance packages are computed for industrial projects. <br />The questions were centered on the percentages of land deeded to the developers and the level of <br />assistance provided. Staff was directed to look into this and provide some insight to these <br />questions. <br /> <br />Observations: <br /> <br />Economic development in the City of Ramsey has focused on the creation of quality jobs and the <br />increase of tax base. Over the past" 5-6 years the dcity has actively pursued manufacturing <br />companies and the high quality jobs they bring with them. The City is limited on the amount of <br />assistance it can provide to prospective businesses. The Minnesota Business Subsidy Act sets <br />minimum requirements on the amount of jobs that must be created and the wage that must be <br />paid to the new hires. Current subsidy laws allows for $75,000 of assistance for a newly created <br />job that pays $14.00. The City Council has set its standard higher requesting that staff negotiate <br />deals that require the businesses to provide 1 job for every $25,000 of assistance. It has also <br />been conveyed to staff to negotiate higher wages that the $14.00/hr when possible. <br /> <br />Staff negotiates every deal differently based on the circumstances of each project. One of the <br />first questions is how many jobs are going to be created and at what pay scale. The second <br />question is how much land is necessary for the project and if there is need any room for <br />expansion. .. The third question is what the taxable market value will be and when it will be built. <br />These questions allow staff to locate a potential site for the business, establish an upper end limit <br />on the amount of assistance that can be provided and determine the potential benefit to the <br />community. These fundamental issues need to be addressed to see if the company is a good fit <br />for Ramsey and if a good business deal can be negotiated. <br /> <br />To this point there is not a set formula on the amount of land a business can purchase and for <br />what cost. The drivers have been the creation of jobs and taxable market value. These factors <br />were conveyed to staff as the highest priority for economic development and are what staff uses <br />to try to maximize the site and the benefit to the community. In addition all deals are made with <br />the premise of generating enough TIF to pay for the up-front assistance. In the past, prior to tax <br />law changes, it was commonplace to sell land for a dollar and to provide the entire package at <br />little or no cost. Tax law has since changed, making the amount of eligible TIF lower, and those <br />deals have become rare. "$1 for the land" deals are possible when, 1) Staff negotiates money- <br />maker deals in prior projects for the City which create surpluses in TIF districts, and 2) the site is <br />used to its maximum and it generates a market value that can create enough TIF to pay for the <br />entire land expenditure. The majority of the deals that are negotiated today fall in the middle <br />where the developer is required to pay for half the land and the city provides the remainder in <br />TIF assistance. <br /> <br />The framework of current negotiating methods is somewhat flexible which makes it easier for <br />staff to get the deals done prior to consulting elected and appointed bodies during that <br />negotiation process. The EDA and City Council still stand as the final decision-makers when it <br /> <br />8 <br />