ECONOMIC DEVELOPMENT POLICY GUIDELINES

Introduction
It has been the practice of the City of Mankato to provide economic assistance to business and industry locating or expanding in the city. Types of assistance includes, but is not limited to: tax increment financing, low interest loans, deferred loans, land sales below market or appraisal rates, and space rental rates below market rates. Economic incentives have been instrumental in developing Mankato's regional diversified economy. Until now, such incentives were considered and awarded on a casebycase basis and always in reaction to a specific proposal. This, in part, has led to conflicting precedents requiring redress through policy. The development and adoption of formal economic development policy guidelines will ensure a uniform and coordinated approach to economic development activities and incentive awards.

Moreover, the development of economic development policy is a continuation of the formalization of city program practices and is consistent with recent adoption of city policies governing housing strategies and business subsidies.

1.0 Purpose
The purpose of these guidelines is to establish policies and procedures for the regulation and coordination of economic development funds. These policies and procedures shall be used as a guide for the orderly review and disposition of applications requesting economic development incentives.

2.0 Mission
The mission of the City of Mankato's economic development policy is four fold: 

1. To ensure the long-term well-being of Mankato citizens and the community by ensuring the City's ability to expand its diversified economy well into the future.
2. To create employment opportunities for its citizens by retaining and expanding the existing business base and attracting new businesses to the City.
3. To build a diverse tax base.
4. To sustain orderly growth and development in and around Mankato.

3.0 Guiding Principles
In carrying out its mission, the City of Mankato will adhere to the following guiding principles for economic development activities. Through its economic development policy the City of Mankato is committed to:

3.01 Retaining, expanding and attracting businesses that provide jobs, sustain investment and bring new wealth to the community.

3.02 Maintaining a top-tier workforce through coordination among community institutions including: economic development organizations, employment and training agencies, technological colleges and vocational schools, colleges and universities and the business community.

3.03 Ensuring growth areas continue to receive infrastructure improvements necessary to attract major new business investment.

3.04 Strengthening the ability of older commercial and industrial areas to support new and expanded business activity.

3.05 Nurturing small and startup businesses.

3.06 Promoting the development of technology-based products and services.

3.07 Promoting high quality design in expansion and renovation of facilities.

3.08 Promoting and encouraging environmentally sound planning and development standards for the community.

3.09 Fostering the successful redevelopment of vacant and under utilized commercial and industrial properties.

3.10 Addressing identified housing needs of the community.

4.0 Incentives
Incentives are provided to fill gaps in private development project financing that make the project improbable without public support to fill those financing gaps. Under state laws, tax increments are subject to a "but for" clause that requires a TIF recipient to certify that the development would not take place without the incentive assistance. The City requires security against the provision of incentives in the forms or tax levies, mortgages (primary and secondary positions are used) against real estate or capital equipment, or Letters of Credit.

The following economic development incentives are available for use by the City of Mankato for certain economic development projects. Not all incentives are available for each project and projects may be offered more than one incentive. The type and number of incentives is the sole discretion of the Mankato EDA. Incentives are as follows:

4.01 Tax Increment Financing–A development tool whereby the taxes generated by a development or redevelopment project are used to pay the costs of the project incurred by the city. The additional taxes generated by development are used to reimburse the city's costs in the project. Four types of Tax Increments Districts are used for different projects:

4.01.1 Economic Development District–for new industrial expansion and job creation purposes. Increments are limited to 10 years (8 years of increment production) and must be matched by a 10% public contribution to avoid LGA reduction penalties.

4.01.2 Redevelopment District–to redevelop or reuse previously developed land and/or buildings. Usually used for building code issues, base value purchase, demolition and/or infrastructure purposes.

4.01.3 Soils Condition District–used to make land with unstable soils usable for development. Also used to address situations involving pollution.

4.01.4 Housing District–used to develop affordable housing by acquiring land, buildings and or funding infrastructure.

4.02 City Loan Fund–Provides lowinterest loans to small and medium size businesses for economic development projects requiring public
assistance but that also provide added value.

4.03 DTED loans/grants–Numerous grant and loan programs are available from the Minnesota Department of Trade and economic development for the purpose development and redevelopment. The city must serve as the applicant in partnership with a company or developer.

4.04 Conduit Bonds–City issued bonds on behalf of a private developer. Liability of the bonds is solely that of the developer. Conduit feature is used to obtain rates in the taxexempt market. City charges 1% fee for service provided and pays its costs from that fee. Any remainder after payment of fees is used to promote the City's housing program goals. Issues for nonprofit entities may be charged a discounted fee under section 5.05.C of these policy guidelines.

4.05 Land Sale Writedowns–Land owned by the City, acquired either through purchase or through property tax default, is occasionally sold at less than what an appraisal determines to be is estimated market value. This can be done either because of unique conditions on a site, such as soils, rock, pollution, wetland, or it can be done purely as an incentive.

4.06 Special assessment–The levying of a charge for public costs against property that has received a benefit from a particular project or activity undertaken by the city. The special assessment becomes a part of the funding mechanism to defray the cost of the project.

4.07 Small Cities Development Program (SCDP)–The SCDP program, which requires that an application be prepared and administered by the City, provides grants to cities to undertake housing development or rehabilitation to eliminate slum and blight.

4.08 Downtown land leases–income generated from numerous city land leases are placed in the Economic Development Revolving Loan Fund for redistribution. The formula generally used for determining lease values expects a fixed rate of return for the City on the value of the land investment.

4.09 Riverfront 2000–Funding stream generated by half percent city sales tax. Funds may be used to fund improvements and development in the downtown.

4.10 Incubator space writedowns–Below market lease rates available to qualifying companies or tenants in cityowned incubator space. Other options include trading or graduating incubator rents in exchange for stock, future dividends, or deferred payments.

4.11 Economic Development Revolving Loan Fund–Provides gap financing through low interest loans to low to small and medium size businesses for a variety of economic development activities.

4.12 Downtown Redevelopment Fund–Capitalized through revenues generated from the downtown tax increment finance district. Funds may only by used within the boundaries of the TIF district for TIF eligible activities including public infrastructure.

4.13 Industrial Revenue Bonds–Bonds issued by the City, the proceeds from which are used to construct facilities for private business enterprise. Lease payments made by the business enterprise to city government are used to service the bonds.

4.14 Tax Abatement–Abatement is a relatively new concept in which property taxes are redirected to pay for public infrastructure improvements beyond the amounts assessable on a project.

4.15 JOBZ –A tax free development program for companies that start up, expand in, or relocate to Greater Minnesota.

5. Domains
There are numerous domains under the auspices of economic development for which public funds may be awarded for the various economic development activities. For each domain there are different goals, incentives and eligible activities. The City of Mankato will consider using incentive funds for projects proposed under one of the following domains.

5.01 Manufacturing:

1. Profile: Companies in the manufacturing domain typically produce a finished product or engage in a value added production process.
2. Goal: Expand the city's industrial base by using incentives to assist expanding businesses or to attract new manufacturing businesses.
3. Incentives: Tax increment financing, DTED loans/grants, City loan fund, industrial development and conduit bonds, special and deferred assessments and JOBZ.
4. Eligible activities: Funds may be used for landwrite downs, equipment and infrastructure costs.
5. Priority: expand existing industries and create jobs within existing companies, promote wireless technology development and applications industries, promote technology based processes, distribution.

5.02 Retail and Service:

1. Profile: A company or individual whose primary business is the direct selling of merchandise or service to consumers.
2. Goal: Utilize incentives to assist blighted retail and commercial businesses in City designated redevelopment zones as part of a redevelopment project.
3. Incentives: Small Cities grants, tax increment financing, city loan fund, special assessments, DTED grants/loans and JOBZ (only applies to certain service uses as approved by EDA).
4. Eligible activities: Facade and store front restoration, energy efficiency and code compliance issues.
5. Priority: Priority will be given to projects in the Downtown Core, along the South Front Street and North Riverfront/Old Town corridors in downtown Mankato.

5.03 Redevelopment:

1. Profile: Developing an existing vacant or blighted property again at a higher use.
2. Goal: Utilize incentives to redevelop vacant and underutilized commercial and industrial properties.
3. Incentives: Tax increment financing, downtown redevelopment funds, downtown land leases, city loan funds, Small Cities grants, brownfield grants, special assessments, parking fund, Riverfront 2000 funds and JOBZ.
4. Eligible activities: Slum and blight in the downtown, downtown streetscape, and infrastructure improvements for underutilized industrial and commercial sites, and contamination investigation and cleanup funds.
5. Priority: Patterson Street area redevelopment district including reuse of public works buildings after move to MnDOT building, core downtown redevelopment, Third Avenue and Riverfront Drive areas

5.04 Housing:

1. Profile: Develop single family owneroccupied housing units, multi family units for owner occupied or rental markets, and senior transition housing that are affordable to individuals and families with incomes between 80%115% AMI (Adjusted Median Income for Blue Earth County).
2. Goal: Utilize incentive funds to address community housing needs identified in the Mankato Housing Study in coordination with city housing strategy principles. Sustain and encourage single family use of neighborhood housing.
3. Incentives: Tax increment financing, SAC/WAC fee waiver, deferred assessments, city loan fund, tax credits, Small Cities grants, MHFA grants/loans, Greater MN Housing fund grants/loans.
4. Eligible activities: Deferred loans, repayable upon change of ownership or forgivable after ten years, to homeowners, infrastructure, interim construction financing, and leveraging other funds.
5. Priority: Priority will be given to project addressing needs classified by the Mankato housing Study as a high priority such as affordable owneroccupied single family home development and increasing percentage of homeowner households vs. renter households.

5.05 Nonprofit Agencies:   

1. Profile: A nonprofit agency is one whose primary business is service to the community with a public purpose.
2. Goal: Utilize incentive funds to assist nonprofit agencies fulfill their public purpose.
3. Incentives: Conduit bonds, certain fee waivers¹, inkind contributions, grants, and city loan fund.
4. Eligible activities: Leveraging other funds and mortgaging facility construction
5. Priority: Nonprofit agencies with a clearly defined public purpose and an established record of service to the community will receive priority over nonprofit agencies that are part of a larger private for profit corporation.

5.06 Emerging Small Business: 

1. Profile: Technology related industries doing research on applications of technology or manufacturing products and services applying technology to process and products.
2. Goal: Providing both incentive funds for startups and assisting in the recruiting and training processes for workers in technology related industries.
3. Incentives: Grants through DTED, loans through MIF and City revolving funds, training partnerships with local institutions, incubator space and services through Technology Plus and JOBZ.
4. Eligible activities: Technology incubator at Technology Plus, loans for attachable capital facilities and equipment.
5. Priority: Startup companies in technology application fields.

5.07 Soils Conditions: 

1. Profile: Sections of Mankato that are more difficult to access for development because of soils conditions, rock, access to infrastructure or transportation routes.
2. Goal: Develop infrastructure, assessing those costs normally associated with development to the benefiting properties and supplementing extraordinary costs for rock excavation and infrastructure extension through other revenue sources.
3. Incentives: Tax increments, DTED funds.
4. Eligible activities: Infrastructure expansion to serve industrial and housing expansion.
5. Priority: Third Avenue area

6.0 Evaluation Criteria
In addition to meeting basic funding parameters cited above in Section V, projects submitted to the Mankato EDA for funding incentives will also be subject to review against certain quantitative and qualitative measures and criteria. These measures and criteria will be used to judge the soundness of the project, fiscal solvency of the company requesting incentives, probability of success, impact on the community, and return on investment. Criteria that will be used to measure these attributes include but are not limited to:

6.01 Optimal Development. All proposals should optimize the development or redevelopment of a site.

6.02 Financial Statements. Proforma financial statements that accurately represent company revenues, expenditures, and fund balances.

6.03 Wage Stipulations. Concurrence with wage stipulation requirements set forth in City of Mankato business subsidy guidelines.

6.04 Job Creation. Concurrence with job creation requirements set forth in City of Mankato business subsidy guidelines.

6.05 City contribution vs. total project costs. Total combined financial incentives shall not exceed 30 percent of total project costs.

6.06 Equity Share. A minimum ten percent (10 percent) equity investment by developer or company is required.

6.07 Tax base. To the greatest extent possible, the project should increase in the city's tax base.

6.08 Planning and Zoning. Projects must conform to all City of Mankato ordinances and plans.

6.09 Gap Financing. Incentive funds shall not be used as a primary funding source but only as gap financing.

7.0 Application Procedures
7.01 Premeeting. Interested parties shall meet with appropriate city staff to discuss the scope of the project, amount of incentive funds to be requested, timetable, and other pertinent project information.

7.02 Preapplication. All parties seeking incentive funding for economic development projects must submit a pre application for review by city staff. Preapplication forms may be obtained from the Community Development Division.

7.03 Initial Review. The preapplication form will be reviewed by city staff on a preliminary basis to assess project feasibility. Staff may approve the preapplication or request additional information.

7.04 EDA Agenda. The staff approved preapplication will be placed on the EDA agenda for preliminary concept review. The EDA may approve or deny the preapplication or request additional information. If the EDA approved the pre application the applicant may file a formal application and project proposal.

7.05 Denial. If the EDA denies the preapplication applicants will receive written notice of the denial of the preapplication and the reason(s) for the determination within fourteen (14) days of the denial of the preapplication. Applicants aggrieved by the Board's decision may submit another preapplication after 30 days if the reasons given for the denial have been adequately and appropriately addressed.

7.06 Zoning and Planning. If the proposed project plan requires Zoning and Planning Commission action, the applicant is responsible for meeting all Commission requirements and assuring compliance with all city ordinances and plans.

8.0 Other Economic Development Criteria
8.01 Assistance Agreement: Terms of assistance granted, whether Direct Benefit or Indirect Benefit, will be delineated in an "Assistance Agreement" which will conform in all respects to M.S. 116J.994, Subd. 3.

Included in such conformance will be stipulations that grants must be forgivable loans, amortized over a period not to exceed 15 years. Such forgivable loans must be repaid on a prorated basis calculated to include a five year commitment beyond the amortization period.

In addition a monitoring mechanism for compliance with goals and guidelines will be created with each agreement contemplated under the Act.

8.02 Wage Stipulations: The City's goal in this area is to assist in the creation of jobs at wage and benefit levels that will support families. The minimum job creation requirement is one (1) full time position. "Livable" wages are expected to be strongly considered in any job creation portion of an assistance project. Primary wage stipulations (wages plus benefits) for Direct Benefit Assistance will be based on a range established between 80% of the median household income for Blue Earth County, as determined by the U. S. Census Bureau, and 110% of the federal poverty level for a family of four, as determined annually by the U. S. Department of Health and Human Services.

Secondary wage stipulations, in projects where the assistance will be provided by another agency, will involve the use of wage guidelines set by that agency, such as the State of Minnesota or federal government.

8.03 Housing Opportunities: Businesses receiving Direct Benefit Assistance shall, during the job creation period of the assistance, demonstrate the existence of a program to meet the needs of employees for affordable, appropriate housing. This assistance may be in the form of advances for down payments or closing costs, grants for house or property acquisition, or other program reviewed and approved by the EDA. The amount of this assistance will be at least 5% of the assistance value and may be administered by either the City or the employer. Funds must be available to the general employee population.

8.04 Failure to meet goals: The Assistance Agreement must specify the recipient business' obligation if the recipient does not fulfill the agreement. At a minimum, the Agreement must require a recipient failing to meet Assistance Agreement goals to pay back the assistance plus interest to the City of Mankato provided that repayment may be prorated to reflect partial fulfillment of the goals. The interest rate must be set at the implicit price deflator defined under Section 275.70, Subdivision 2. The City may, after a public hearing, extend the period for meeting the goals provided for in the Assistance Agreement for up to one year. A recipient failing to meet the terms of the Assistance Agreement may not receive economic development assistance from the City of Mankato for a period of five years from the date of failure or the date the recipient fulfills its payment obligation, whichever occurs first.

8.05 Public Hearing Requirements: Under Minnesota Statutes 116J, award of assistance in excess of $25,000 in value must be subject to a public hearing held at the EDA or City Council level after proper notification.

8.06 Job Opportunity Building Zones (JOBZ): Proposals and agreements for Job Opportunity Building Zone designation for a qualified business shall conform to the standards of this policy and the applicable sections of Minnesota Statutes 469 as amended from time to time.

Adopted: 10 April 2000

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¹ Only nonprofit agencies whose primary business is service to the community for a public purpose will be eligible for fee waivers.