01-0241R

RESOLUTION AMENDING RESOLUTION 00-0731 RELATING TO BUSINESS SUBSIDY CRITERIA.

BY COUNCILOR STEWART:

        WHEREAS, the Duluth City Council passed Resolution 00-0333(a) on May 22, 2000, which was amended by Resolution 00-0522 on July 31, 2000 and by Resolution No. 00-0731 on October 23, 2000, adopting criteria that apply to a business that requests a business subsidy from the city of $25,000 or more (Resolution 00-0333(a), Resolution 00-0522 and Resolution 00-0731 herein after referred to as the "business subsidy resolution"); and

        WHEREAS, the Duluth City Council desires to further amend the business subsidy resolution in order to exempt certain federal and state housing program assistance from said resolution.

        NOW, THEREFORE, BE IT RESOLVED, that the business subsidy resolution is amended to read as follows:

        "BE IT RESOLVED, that the Duluth City Council adopts, effective May 22, 2000, the following mandatory and preferential criteria for businesses receiving assistance from the city of $25,000 or more. The following assistance shall be exempt from the requirements of this resolution:

        (a)     Federal community development block grant program assistance until the assistance has been repaid to, and reinvested by, the city;

        (b)     Federal emergency shelter grant (ESG) and HOME investment partnership program assistance until the assistance has been repaid to, and reinvested by, the city;

        (c)     Minnesota housing finance agency - community revitalization fund and innovative housing loan program;

        (d)     Assistance for housing in the form of a loan at an interest rate not generally available to the borrower in the commercial lending market for the extension of streets and utilities received by the borrower pursuant to authorization under Chapter IX of the Duluth City Charter.

        Mandatory criteria. All projects receiving assistance of $25,000, or more, must satisfy the following seven criteria:

        (a)     Public purpose criteria. The project must meet two of the following five public purpose criteria:

                (1)     High quality jobs. If the project results in the creation of new jobs, then the jobs must be predominantly full-time jobs that pay at least a living wage (as defined by Duluth 's living wage ordinance) and provide health insurance and other benefits;

                (2)     Job retention. If the recipient can demonstrate that job loss is imminent without a business subsidy, then the recipient must present a plan which shows that a significant number of the existing jobs will be retained for at least five years after completion of the subsidy;

                (3)     Economic diversity. The project must contribute to the economic diversity of the city by reducing dependency upon declining industries, participating in fast growing industries, or supporting existing industries of manufacturing, education, health care, retail sales, tourism and service and technology;

                (4)     Quality of life. The project must enhance the quality of life of the city's residents by investing in neglected neighborhoods or business areas, utilizing in-fill areas rather than contributing to urban sprawl, benefitting the environment, or redeveloping blighted or polluted areas;

                (5)     Tax base. The city must realize a reasonable rate of return on its public investment in the project in the form of an increase in tax base or other monetary return;

        (b)     Specific goals. The project will have measurable, specific and tangible goals as they relate to the stated public purpose;

        (c)     Equal opportunity. The recipient will abide by all local, state and federal laws prohibiting discriminatory hiring and employment practices and agree to affirmatively seek out participation in the project by members of protected classes;

        (d)     Project feasibility and disclosure. The recipient must demonstrate to the satisfaction of the city that it has adequate financing for the project and that the project will be completed in a timely fashion;

        (e)     Wage policy. If the project results in the creation of any job, the wage for each part-time and full-time job created must be in compliance with Duluth's living wage ordinance and at least equal to the prevailing wage for like or similar projects within the area or such greater amount as required by the city for a specific project;

        (f)     Report to the council. At the time the city council reviews a project development agreement calling for assistance of $25,000 or more, a report shall be submitted to councilors summarizing the information necessary for them to exercise their due diligence, as determined by the city council;

        (g)     Applicable laws. The recipient will agree to satisfy all requirements of Minnesota's business subsidy law as defined in Minnesota Statutes §116J.993-§116J.995 and Duluth's living wage ordinance, as amended, in Article 26, Chapter 2 of the Duluth City Code.

        Preferential criteria. Businesses that meet any or all of the following criteria shall be given preference for receiving assistance over other businesses that meet the mandatory criteria but not any of the preferential criteria.

        (a)     Locally owned businesses. Preference shall be given to locally owned businesses or to projects that make extensive use of local businesses for support;

        (b)     Hiring low-income people. Preference shall be given to businesses with a commitment and plan to hire people earning at or below 200 percent of the poverty line;

        (c)     Protected class business owners. Preference shall be given to businesses owned in whole or in part by members of protected classes;

        (d)     Quality of life businesses. Preference shall be given to businesses that are environmentally responsible and enhance the overall quality of live in the city."


STATEMENT OF PURPOSE: The purpose of this resolution is to amend the business subsidy resolution to exempt from the requirements of the business subsidy resolution assessments for streets and utilities undertaken pursuant to the Charter.

Under the State Business Subsidy Act, any transaction which results in a below-market interest rate loan to a "Recipient" as the statute defines "Recipient" is a "Business Subsidy". Because the petitioners under our assessment process usually pay an interest rate lower than they could ordinarily borrow for themselves, assessments become "business subsidies".

The State avoided this problem by adopting a definition of Recipient and by exempting all "assistance to housing". The City instead made the business subsidy criteria effective as against "businesses" and chose not to exclude "assistance to housing" from the impact of its criteria. This the benefits of assessments related to residential projects undertaken by developers becomes a"business subsidy".

This amendment modifies the City's criteria to exclude assessments at below-market interest rates related to housing from the class of assistance which is subject to the City's Business Subsidy Criteria.