Agenda - Economic Development Authority - 11/30/2006

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Economic Development Coordinator Sullivan reviewed that at the September 26, 2006 City Council meeting during the site plan approval for Minnesota Waterjet, questions arose as to how assistance packages are computed for industrial projects. The questions were centered on the percentages of land deeded to the developers and the level of assistance provided. Staff was directed to look into this and provide some insight to these questions. Mr. Sullivan explained, generally speaking, economic development assistance packages have. been set. forth by the Minnesota Business Subsidy Act, which sets minimum requirements on the amount of jobs that must be created and the wage that must be paid to new hires. Current subsidy laws allow. for $75,000 of assistance for a newly created job that pays $14/hour. The City Council has set the standard higher requesting that staff negotiate deals that require the business to provide one job for every $25,000 of assistance. It'has also been conveyed to staff to negotiate higher wages than the $14.00/hr when possible. The goal of the higher standard was to target companies such as manufacturers that have starting positions that would be considered living wages. This is one reason he has focused on these types of businesses. Economic Development Coordinator Sullivan explained'staff.negotiates every deal differently based on the circumstances of each project. One of the first questions is how many jobs are going to be created and at what pay scale. The second question is how much land is necessary for the project and if there is any room for expansion. The third question is what the taxable market value will be and when it will be built. These questions allow staff to locate a potential site for the business, establish an upper end limit on the amount of assistance that can be provided, and determine the potential benefit to the community. These fundamental issues need to be addressed to see if the company is a good fit for Ramsey and if a good business deal can ,be negotiated. Mr. Sullivan explained to this point there is not a set formula on the amount of land a business can purchase and for what cost. The drivers have been the creation of jobs and taxable market value. These factors were conveyed to staff as the highest priority for economic development and are what staff uses to try to maximize the site and the benefit to the community. ' In addition, all deals are made with the premise of generating enough TIF to pay for the up-front assistance. However, sometimes there will be a TIP district that is very successful and has generated enough funds within the district to spend on these subsidy projects. Mr. Sullivan indicated in the past, prior to tax law changes, it was commonplace to sell land for $1 and to provide the entire package at little or no cost. Tax law has changed, making the amount of eligible TIP lower, and those deals have become rare. The deals to give land at zero or low cost are possible when, 1) staff negotiates money-maker deals in prior projects for the City which create surpluses in TIF districts, and 2) the site is used to its maximum and it generates a market value that can create enough TIF to pay for the entire land expenditure. Mr. Sullivan advised the majority of the deals that are negotiated today fall in the middle where the developer is required to pay for half the land and the City provides the remainder in TIF assistance. Chairperson Riley asked if staff attempts to negotiate similar deals. Economic Development Coordinator Sullivan replied the similarity is in the guideline of 1 job for every $25,000 of assistance. Beyond this each project is based on its own merits. Economic Development Consultant Mulrooney explained the basis for subsidies in Ramsey grew out of the City of Anoka's practice at an earlier stage in the Anoka Enterprise Park where the City of Anoka provided 3 square feet of land for every square foot of building. If more land was Economic Development Authority/October 19, 2006 Page 2 of7 2