1.1                          A bill for an act
  1.2             relating to economic development; adding to the powers 
  1.3             and duties of the commissioner of trade and economic 
  1.4             development; changing reporting requirements for 
  1.5             business subsidies; penalizing municipalities that 
  1.6             induce businesses to relocate from other Minnesota 
  1.7             municipalities; appropriating money; amending 
  1.8             Minnesota Statutes 1996, sections 116J.61; 116J.991; 
  1.9             and 270.067, subdivision 4; proposing coding for new 
  1.10            law in Minnesota Statutes, chapter 116J; repealing 
  1.11            Minnesota Statutes 1997 Supplement, sections 469.1813; 
  1.12            469.1814; and 469.1815. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 1996, section 116J.61, is 
  1.15  amended to read: 
  1.16     116J.61 [ADDITIONAL POWERS AND DUTIES.] 
  1.17     The commissioner shall: 
  1.18     (1) have control of the work of carrying on a continuous 
  1.19  program of education for business people; 
  1.20     (2) publish, disseminate, and distribute information and 
  1.21  statistics; 
  1.22     (3) promote and encourage the expansion and development of 
  1.23  markets for Minnesota products; 
  1.24     (4) promote and encourage the location and development of 
  1.25  new business in the state as well as the maintenance and 
  1.26  expansion of existing business and for that purpose cooperate 
  1.27  with state and local agencies and individuals, both within and 
  1.28  outside the state; 
  1.29     (5) advertise and disseminate information as to natural 
  2.1   resources, desirable locations, and other advantages for the 
  2.2   purpose of attracting business to locate in this state; 
  2.3      (6) aid the various communities in this state in attracting 
  2.4   business to locate therein; 
  2.5      (7) advise and cooperate with municipal, county, regional, 
  2.6   and other planning agencies and planning groups within the state 
  2.7   for the purpose of promoting coordination between the state and 
  2.8   localities as to plans and development in order to maintain a 
  2.9   high level of gainful employment in private profitable 
  2.10  production and achieve commensurate advancement in social and 
  2.11  cultural welfare; coordinate the activities of statewide and 
  2.12  local planning agencies, correlate information secured from them 
  2.13  and from state departments and disseminate information and 
  2.14  suggestions to the planning agencies; and encourage and assist 
  2.15  in the organization and functioning of local planning agencies 
  2.16  where none exist; and may provide at the request of any 
  2.17  governmental subdivision hereinafter mentioned planning 
  2.18  assistance, which includes but is not limited to surveys, land 
  2.19  use studies, urban renewal plans, technical services and other 
  2.20  planning work to any city or other municipality in the state or 
  2.21  perform similar planning work in any county, metropolitan or 
  2.22  regional area in the state.  The commissioner shall not perform 
  2.23  the planning work with respect to a metropolitan or regional 
  2.24  area which is under the jurisdiction for planning purposes of a 
  2.25  county, metropolitan, regional or joint planning body, except at 
  2.26  the request or with the consent of the respective county, 
  2.27  metropolitan, regional or joint planning body.  The commissioner 
  2.28  is authorized to receive and expend money from municipal, 
  2.29  county, regional and other planning agencies; and may accept and 
  2.30  disburse grants and other aids for planning purposes from the 
  2.31  federal government and from other public or private sources, and 
  2.32  may utilize moneys so received for the employment of consultants 
  2.33  and other temporary personnel to assist in the supervision or 
  2.34  performance of planning work supported by money other than state 
  2.35  appropriated money, and may enter into contracts with agencies 
  2.36  of the federal government, units of local government or 
  3.1   combinations thereof, and with private persons that are 
  3.2   necessary in the performance of the planning assistance function 
  3.3   of the commissioner.  The commissioner may assist any local 
  3.4   government unit in filling out application forms for the federal 
  3.5   grants-in-aid.  In furtherance of their planning functions, any 
  3.6   city or town, however organized, may expend money and contract 
  3.7   with agencies of the federal government, appropriate departments 
  3.8   of state government, other local units of government and with 
  3.9   private persons; and 
  3.10     (8) adopt measures calculated to promote public interest in 
  3.11  and understanding of the problems of planning and, to that end, 
  3.12  may publish and distribute copies of any plan or any report and 
  3.13  may employ other means of publicity and education that will give 
  3.14  full effect to the provisions of sections 116J.58 to 116J.63; 
  3.15  and 
  3.16     (9) assist municipalities in implementing preferred 
  3.17  economic development practices by carrying out the provisions of 
  3.18  section 116J.991. 
  3.19     Sec. 2.  Minnesota Statutes 1996, section 116J.991, is 
  3.20  amended to read: 
  3.21     116J.991 [PUBLIC ASSISTANCE TO BUSINESS; WAGE AND JOB 
  3.22  REQUIREMENTS.] 
  3.23     A business that receives state or local government 
  3.24  assistance for economic development or job growth purposes must 
  3.25  create a net increase in jobs in Minnesota within two years of 
  3.26  receiving the assistance. 
  3.27     The government agency providing the assistance must 
  3.28  establish wage level and job creation goals to be met by the 
  3.29  business receiving the assistance.  A business that fails to 
  3.30  meet the goals must repay the assistance to the government 
  3.31  agency. 
  3.32     Subdivision 1.  [DEFINITIONS.] (a) The definitions in this 
  3.33  subdivision apply to this section and section 116J.995. 
  3.34     (b) "Benefit date" means the date that the recipient 
  3.35  receives the business subsidy.  If the business subsidy involves 
  3.36  the purchase, lease, or donation of physical equipment, then the 
  4.1   benefit date begins when the recipient puts the equipment into 
  4.2   service.  If the business subsidy is for improvements to 
  4.3   property, then the benefit date refers to the earliest date of 
  4.4   either: 
  4.5      (1) when the improvements are finished for the entire 
  4.6   project; or 
  4.7      (2) when a business occupies the property.  If a business 
  4.8   occupies the property and the government agency expects that 
  4.9   other businesses will also occupy the same property, the 
  4.10  government agency may assign a separate benefit date for each 
  4.11  business when it first occupies the property. 
  4.12     (c) "Business subsidy" means any grant, contribution of 
  4.13  property, infrastructure, or services, any loan at rates below 
  4.14  those commercially available to the recipient, any reduction or 
  4.15  deferral of any tax or any fee, any guarantee of any payment 
  4.16  under any loan, lease, or other obligation, or any preferential 
  4.17  use of government facilities given to a business. 
  4.18     (d) "Government agency" means any government body or 
  4.19  nonprofit corporation created by statute that has the authority 
  4.20  to award a business subsidy. 
  4.21     (e) "Local government agency" means any government agency 
  4.22  that is not a state government agency. 
  4.23     (f) "Municipality" means a statutory or home rule charter 
  4.24  city for properties located in an incorporated area or county 
  4.25  for properties located outside of incorporated areas. 
  4.26     (g) "Poverty level wage" means compensation on an hourly 
  4.27  basis equivalent to 110 percent of the federal poverty threshold 
  4.28  for a family of four.  Compensation includes wages, scheduled 
  4.29  bonuses, health and dental insurance, child care, training 
  4.30  programs certified by the commissioner of trade and economic 
  4.31  development, and pension benefits. 
  4.32     (h) "Recipient" refers to any business entity that signs a 
  4.33  subsidy agreement irrespective of legal ownership.  This 
  4.34  includes a for-profit corporation, a partnership, a limited 
  4.35  liability company, or sole proprietorship. 
  4.36     (i) "State government agency" means any state agency or any 
  5.1   nonprofit corporation that is created by statute.  State 
  5.2   government agencies must have the authority to award business 
  5.3   subsidies. 
  5.4      Subd. 2.  [SUBSIDY AGREEMENT] (a) The government agency and 
  5.5   the recipient must enter into a subsidy agreement that includes: 
  5.6      (1) a description of the subsidy; 
  5.7      (2) a statement of public purpose for the business subsidy; 
  5.8      (3) goals for the business subsidy; and 
  5.9      (4) a description of the financial obligation if the goals 
  5.10  are not met. 
  5.11     (b) Both the government agency and the recipient must sign 
  5.12  the subsidy agreement. 
  5.13     Subd. 3.  [GOALS] The subsidy agreement must include a set 
  5.14  of goals to be attained by no later than two years from the 
  5.15  benefit date and to be maintained after the benefit date.  These 
  5.16  goals must include: 
  5.17     (1) goals for the number of jobs created, which may include 
  5.18  separate goals for the number of part-time or full-time jobs, 
  5.19  but which must not allow for a decrease in the number of jobs, 
  5.20  excluding construction jobs; and 
  5.21     (2) wage goals for the jobs created.  For recipients who 
  5.22  are large employers as defined by section 177.24, subdivision 1, 
  5.23  and for business subsidies exceeding $25,000, 90 percent of all 
  5.24  new jobs created as a result of the assistance must pay a 
  5.25  poverty level wage. 
  5.26     Subd. 4.  [PUBLIC NOTICE AND HEARING.] (a) Before granting 
  5.27  a business subsidy that exceeds $500,000 for a state agency 
  5.28  project and $100,000 for a local government agency project, the 
  5.29  agency must provide public notice and a hearing on the subsidy. 
  5.30     (b) Public notice of proposed subsidies must be published 
  5.31  in a local newspaper of general circulation and must identify 
  5.32  the location at which information about the business subsidy, 
  5.33  including a copy of the subsidy agreement, is available. 
  5.34  Published notices should be sufficiently conspicuous in size and 
  5.35  placement so as to distinguish the notices from the surrounding 
  5.36  text.  The agency must make the information available in printed 
  6.1   paper copies and, if possible, on the internet.  The government 
  6.2   agency must post the newspaper notice on a date that allows for 
  6.3   at least a 30-day period before the public hearing. 
  6.4      (c) Notice of the hearing must be published with the public 
  6.5   notice.  The public notice must include the date, time, and 
  6.6   place of the hearing.  For business subsidies by local 
  6.7   government agencies, public hearings shall be held by the 
  6.8   elected body of the municipality.  For any business subsidy 
  6.9   proposed by the state, the commissioner of the state agency 
  6.10  granting the subsidy shall hold the public hearings. 
  6.11     Subd. 5.  [REQUIRED TERMS OF AGREEMENT.] (a) The subsidy 
  6.12  agreement must state the obligation of the recipient upon 
  6.13  noncompliance with the agreement.  At a minimum, the agreement 
  6.14  must provide that if a recipient fails to meet the goals stated 
  6.15  within the subsidy agreement, the recipient must pay back the 
  6.16  assistance plus interest.  The interest rate must be set at the 
  6.17  rate under section 270.75.  The penalty may be prorated to 
  6.18  reflect partial fulfillment of the agreement. 
  6.19     (b) The terms of the agreements must follow these 
  6.20  guidelines: 
  6.21     (1) grants must be awarded as forgivable loans; 
  6.22     (2) if a business subsidy cannot be structured as a 
  6.23  forgivable loan, the subsidy agreement must state the fair 
  6.24  market value of the subsidy to the recipient, including the 
  6.25  value of conveying property at less than a fair market price, or 
  6.26  other in-kind benefits to the recipient; and 
  6.27     (3) if a business subsidy benefits more than one recipient, 
  6.28  then the government agency must assign a proportion of the 
  6.29  business subsidy to each recipient that signs a subsidy 
  6.30  agreement.  The proportion assessed on each recipient must 
  6.31  reflect a reasonable estimate of the recipient's share of the 
  6.32  total benefits of the project.  Interest is to be calculated 
  6.33  separately on these amounts.  If the subsidy agreement does not 
  6.34  specify a proportion of the business' benefits, then the 
  6.35  recipient owes 75 percent of the value of the benefits. 
  6.36     (c) In addition to the obligation to repay the benefits, a 
  7.1   recipient that fails to meet the terms of its subsidy agreement 
  7.2   may not receive other business subsidies from the state or any 
  7.3   local government agency for at least a period of five years. 
  7.4      Subd. 6.  [REPORTS BY RECIPIENTS.] (a) Each government 
  7.5   agency that provides a business subsidy must prepare a form for 
  7.6   each recipient to fill out which will help monitor the progress 
  7.7   by the recipient in achieving the goals. 
  7.8      (b) Each recipient shall provide information regarding 
  7.9   goals and results on the form, provided by the government, that 
  7.10  includes: 
  7.11     (1) the type, public purpose, and amount of subsidies; 
  7.12     (2) jobs created by job title; 
  7.13     (3) hours worked and hourly wage of each job created; and 
  7.14     (4) description of benefits provided for each job created. 
  7.15     (c) Local government agencies may require recipients to 
  7.16  provide additional information to fulfill state reporting 
  7.17  requirements or to properly monitor progress in the business 
  7.18  subsidy. 
  7.19     (d) The recipient shall file the following reports on the 
  7.20  following dates: 
  7.21     (1) goals for the business subsidy before the benefit date; 
  7.22     (2) a progress report by January 10 of each year for the 
  7.23  previous year; and 
  7.24     (3) a progress report within 30 days after the deadline of 
  7.25  meeting the goals provided for in subdivision 3.  If the 
  7.26  recipient does not submit its report, the local government 
  7.27  agency must mail the recipient a warning on January 10.  If 
  7.28  after 14 days of the postmarked day of the warning, the 
  7.29  recipient fails to provide a report, then a penalty of $100 per 
  7.30  day applies until the report is filed. 
  7.31     Subd. 7.  [LOCAL GOVERNMENT REPORTS.] (a) Each local 
  7.32  government agency must report the wage and job goals and the 
  7.33  results for each project in achieving those goals to the 
  7.34  department of trade and economic development. 
  7.35     (b) At a minimum, the items in each report must include: 
  7.36     (1) the name of the recipient and local government agency; 
  8.1      (2) the amount of subsidies by type and public purpose; 
  8.2      (3) the number of part-time and full-time jobs created by 
  8.3   separate occupational categories; 
  8.4      (4) the number of full-time and part-time jobs created 
  8.5   within separate bands of wages; 
  8.6      (5) the benefits paid, separate from wages paid, and listed 
  8.7   by separate bands of wages; 
  8.8      (6) the date when the goals will be reached; 
  8.9      (7) whether the goals have been reached; 
  8.10     (8) whether or not the financial obligation for 
  8.11  noncompliance with the business subsidy is being enforced; 
  8.12     (9) the person filling out the form; and 
  8.13     (10) a contact person with a telephone number and the date 
  8.14  in which the form was completed. 
  8.15     (c) The commissioner of trade and economic development must 
  8.16  facilitate the production of these reports so that any 
  8.17  individual can make useful comparisons across time periods and 
  8.18  across local government agencies.  At a minimum, the 
  8.19  commissioner must specify categories and definitions for public 
  8.20  purpose, type of business subsidy, part-time versus full-time 
  8.21  jobs created, occupational categories, bands of wages, and 
  8.22  noncompliance.  The bands of wages must be consistent between 
  8.23  the number of jobs and benefits paid.  The commissioner shall 
  8.24  consult other researchers from government agencies and academic 
  8.25  institutions before selecting a set of statistical measures, 
  8.26  definitions, and categories.  The commissioner may add other 
  8.27  information to the report as the commissioner deems necessary to 
  8.28  evaluate business subsidies. 
  8.29     (d) The commissioner of trade and economic development must 
  8.30  provide information and training on reporting requirements to 
  8.31  local units of government.  Local government agencies, 
  8.32  regardless of whether they awarded any business subsidies or 
  8.33  not, must file a report by February 1 of each year with the 
  8.34  commissioner.  If the commissioner has not received the report 
  8.35  by that date, the commissioner shall issue a warning to the 
  8.36  local government.  If the commissioner has not received a report 
  9.1   by May 1 of the same year, then the government agency may not 
  9.2   grant any business subsidy until it complies with the law. 
  9.3      Subd. 8.  [REPORTS BY STATE GOVERNMENT AGENCIES.] The 
  9.4   department shall compile and must publish a compilation and 
  9.5   summary of the results of the reports for the previous calendar 
  9.6   year by June 1 of each year.  The reports of the local agencies 
  9.7   to the department and the compilation and summary report of the 
  9.8   department shall must be made available to the public. 
  9.9      For the purpose of this section, "assistance" means a grant 
  9.10  or loan in excess of $25,000 or tax increment financing. 
  9.11     Among the information in the summary and compilation 
  9.12  report, the commissioner must include: 
  9.13     (1) total amount of subsidies awarded in each region of the 
  9.14  state; 
  9.15     (2) distribution of business subsidy amounts by size of the 
  9.16  business subsidy; 
  9.17     (3) distribution of business subsidy amounts by time 
  9.18  category, such as monthly or quarterly; 
  9.19     (4) distribution of subsidies by type and by public 
  9.20  purpose; 
  9.21     (5) percent of all business subsidies that reached its 
  9.22  goals; 
  9.23     (6) percent of business subsidies that did not reach the 
  9.24  goals by two years from the benefit date; 
  9.25     (7) total dollar amount of business subsidies that did not 
  9.26  meet its goals after two years from the benefit date; 
  9.27     (8) percent of subsidies that did not meet the goals and 
  9.28  that were not enforced; 
  9.29     (9) number of full-time and part-time jobs within separate 
  9.30  bands of wages; and 
  9.31     (10) benefits paid within separate bands of wages. 
  9.32     Subd. 9.  [AUTHORITY TO AUDIT REPORTS.] The commissioner 
  9.33  may audit individual recipients and local governments to verify 
  9.34  that the reports have been filled out properly.  Notwithstanding 
  9.35  data privacy restrictions under chapter 13, the commissioner has 
  9.36  access to data on jobs and wages. 
 10.1      Sec. 3.  [116J.993] [ECONOMIC GRANTS.] 
 10.2      An appropriation rider in an appropriation to the 
 10.3   department of trade and economic development that specifies that 
 10.4   the appropriation be granted to a particular business or class 
 10.5   of businesses must contain a statement of the expected benefits 
 10.6   associated with the grant.  At a minimum the statement must 
 10.7   include the number of jobs created and the tax revenue increases 
 10.8   due to the grant. 
 10.9      Sec. 4.  [116J.995] [PENALTY FOR BIDDING BETWEEN LOCAL 
 10.10  GOVERNMENT AGENCIES.] 
 10.11     Subdivision 1.  [DEFINITIONS.] (a) The definitions in this 
 10.12  subdivision apply to this section. 
 10.13     (b) "Enterprise" means any business entity irrespective of 
 10.14  legal ownership, including a for-profit corporation, a 
 10.15  partnership, a limited liability company, or sole 
 10.16  proprietorship.  Enterprise does not include businesses of the 
 10.17  same legal affiliation that are located in a different place, or 
 10.18  are not induced to move to another municipality. 
 10.19     (c) "Induce" means to induce an enterprise to relocate 
 10.20  outside the boundaries of a municipality by offering grants and 
 10.21  loans from another municipality. 
 10.22     (d) "Expected payroll" means the average payroll of the 
 10.23  enterprise paid in the ... years before the relocation to the 
 10.24  new municipality.  If the enterprise was not in operation at the 
 10.25  site in question for more than ... years, then the expected 
 10.26  payroll shall equal the annual average payroll over the time 
 10.27  period that the enterprise resided at the site. 
 10.28     Subd. 2.  [PENALTY.] Any municipality that induces an 
 10.29  enterprise to relocate from one municipality in Minnesota to 
 10.30  another municipality in Minnesota must pay the municipality from 
 10.31  which the business relocated.  For purposes of this section, the 
 10.32  payment obligation equals ... percent of expected payroll for a 
 10.33  period of ....  If the enterprise does not disclose its payroll, 
 10.34  then the municipality from which the business relocated may 
 10.35  estimate the loss in payroll with a survey.  Businesses that are 
 10.36  induced to leave a municipality are subject to any financial 
 11.1   obligations under an agreement in compliance with section 
 11.2   116J.991. 
 11.3      Subd. 3.  [ARBITRATION.] If the municipalities are unable 
 11.4   to agree on the existence of, or amount of, an obligation under 
 11.5   this section, the municipalities must submit the matter to 
 11.6   binding arbitration in accordance with sections 572.08 to 572.30 
 11.7   and the rules of the American Arbitration Association.  Within 
 11.8   30 days, each municipality must select an arbitrator or agree 
 11.9   upon a single arbitrator.  If the parties each select an 
 11.10  arbitrator, the two arbitrators shall select a third arbitrator 
 11.11  within 45 days after the demand for arbitration.  Each party 
 11.12  must pay the fees and expenses of the arbitrator it selected and 
 11.13  the parties must share equally the expenses of the third 
 11.14  arbitrator or an arbitrator agreed upon mutually by the parties. 
 11.15     Sec. 5.  Minnesota Statutes 1996, section 270.067, 
 11.16  subdivision 4, is amended to read: 
 11.17     Subd. 4.  [CONTENTS.] The report shall detail for each tax 
 11.18  expenditure item the amount of tax revenue foregone, a citation 
 11.19  of the statutory or other legal authority for the expenditure, 
 11.20  and the year in which it was enacted or the tax year in which it 
 11.21  became effective.  The report may contain additional information 
 11.22  which the commissioner considers relevant to the legislature's 
 11.23  consideration and review of individual tax expenditure items.  
 11.24  This may must include, but is not limited to, statements of the 
 11.25  intended public purpose of the tax expenditure, analysis of 
 11.26  whether the expenditure is achieving that objective, and the 
 11.27  effect of the expenditure device on the distribution of the tax 
 11.28  burden and administration of the tax system.  
 11.29     Sec. 6.  [STUDY OF TAX EXPENDITURES.] 
 11.30     The commissioner of revenue shall conduct a study of 
 11.31  selected tax expenditures evaluating each program for its public 
 11.32  purpose and effectiveness. 
 11.33     Sec. 7.  [APPROPRIATION.] 
 11.34     $....... is appropriated from the general fund to the 
 11.35  commissioner of trade and economic development to carry out the 
 11.36  provisions of Minnesota Statutes, section 116J.991, in fiscal 
 12.1   years 1998 and 1999. 
 12.2      Sec. 8.  [REPEALER.] 
 12.3      Minnesota Statutes 1997 Supplement, sections 469.1813; 
 12.4   469.1814; and 469.1815, are repealed.  Tax abatements granted 
 12.5   under authority of those repealed sections may continue 
 12.6   according to the terms of those sections but no new abatements 
 12.7   may be granted on or after the effective date of this section.