Frequently Asked Questions

Any local and state government agency that signed a business subsidy agreement since January 1, 2008; or represents a population of more than 2,500 persons; or any local and state agencies that are authorized to provide business subsidies; and business assistance that exceeds $150,000.

If the grantor awards both subsidies for the same project, the grantor should report the subsidy base on its total amount (i.e., $150,001).

The definition of "business subsidy" applies to contributions from an individual grantor for an individual project. Therefore, if an individual grantor contributes less than $150,000 to a project, that grantor is not subject to the law's requirements for that project.

Funds that originate from the federal government and are invested by a state or local government agency are subject to the law if they have been repaid to and subsequently reinvested by the state and local government agency. In these cases, DEED views the state or local government agency as having local control over how those funds are invested or who receives them. Federal funds are not subject to the law the initial time they pass through a local government agency.

No, the statute does not exempt any bonds other than those allocated under chapter 474A. However, it is important to note that the statute does provide other conditions which may exempt a given bond project.

No, because the rate commercially available to the recipient will differ for different projects and recipients, DEED does not intend to stipulate a particular rate below which loan are not commercially available. Individual grantors are responsible for making this determination.

If a grantor modifies a pre-existing loan agreement without contributing new funds to the project, DEED views the change as an amendment to an already existing agreement rather than as a new agreement. Grantors should note any amendments to that agreement. However, if a grantor modifies an already existing agreement by contributing new funds to the project, the grantor should treat the modified agreement as a new agreement that may be subject to the law.

No, the value of workers' services should not be included in the subsidy value, but the subsidy value should include all monetary contributions, including payment guarantees and tax and fee reductions and deferrals; the cost of preferential use of government facilities; and the cost of donations of property, equipment, and physical infrastructure.

Grantor means any state or local government agency with the authority to grant a business subsidy.

DEED considers a nonprofit or other entity to have been "created or authorized by a local government" if there is a written, legal agreement with a local government agency explicitly authorizing the entity to provide business assistance with funding received from the local government agency.

Recipient means any for-profit or non-profit business entity that receives a business subsidy.

Compare the hourly wages (excluding benefits) of the lowest and highest paid employees. For example, if the highest paid employee receives an annual salary and the lowest paid employee is paid on an hourly basis, divide the annual salary of the former by 2080 (40 hours X 52 weeks = 2080) to determine an hourly wage that can be compared to the hourly wage of the part-time employee.

Benefit date mean the date that the recipient receives the business subsidy. If the business subsidy involves the purchase, lease, or donation of physical equipment, then the benefit date begins when the recipient puts the equipment into service. If the business subsidy is for improvements to property, then the benefit date refers to the earliest date of either: 1) when the improvements are finished for the entire project; or 2) when the business occupies the property.

The law intends for agencies awarding business assistance to develop wage and job goals for economic development projects. However, if a project has a state public purpose that is unrelated to job creation, the agreement may note that wage and job goals were zero and should describe goals established for that assistance.

DEED suggest that grantors use the following three criteria (excerpted from the 1997 Corporate Subsidy Reform Commission Report) to determine whether job loss is imminent and demonstrable and to provide documentation of that determination: 1) after collecting the necessary documents, is there substantial evidence that the company will have to shut down involuntarily?; 2) after collecting the necessary documents, is there substantial evidence that the company has received an offer to move to another state or community that is attractive enough that a reasonable person would seriously consider a move for business reason?; and 3) what potential negative effect would the subsidy have on other competing businesses and overall area job quality?

Grantors should report on the wage and job goals to be attained in two years from the benefit date and at the same time, report on the tax abatement and or tax increment project for the duration of 10 to 15 years depending what time period is specified in the subsidy agreement.

Yes, even if representatives from the local elected governing body are appointed to the organization, the organization must have all business subsidy agreements approved by the full elected body.

No, upon defaulting on an agreement, recipient must fulfill repayment obligations and should not receive any additional assistance awarded under the agreement that has not yet been administered.

No, if a recipient defaults on an agreement, repayment can be prorated based on the recipient's progress toward goal attainment, but not based on the recipient's progress toward the five-year requirement. Any recipient who fails to fulfill the five-year requirement is considered to have defaulted on the agreement and must fulfill repayment obligations, though that repayment may be prorated to reflect partial goal fulfillment.

The implicit price deflator is an index to gauge the extent of price level change or inflation in the economy. The implicit price deflator (Table 1.1.9) is prepared by the Bureau of Economic Analysis of the United States Department of Commerce.

To determine the implicit price deflator rate for an agreement in default, a grantor should calculate the percentage change in the Implicit Price for government consumption expenditures and gross investment for state and local governments from the quarter subsequent to the benefit date to the quarter prior of default. For example, business ABC defaults on a $1,000,000 loan in the 4th Quarter of 2015 and the default occurred in February of 2020, the calculation would be as follows: 116.287 (2019 4th Quarter Implicit Price Deflator)/104.910 (2016 1st Quarter Implicit Price Deflator) = 1.11. Loan amount outstanding of $1,000,000 x 1.11 = $1,110,000.

Grantors must, at a minimum, require that recipients in default of a business subsidy agreement repay the subsidy at an interest rate set to the implicit price deflator rate. Grantors may require a recipient to pay back the business subsidy at a rate higher than the implicit price deflator rate. Repayment obligations must be specified in the business subsidy agreement.

The MFAF report is required for financial assistance of $25,000 and greater that is excluded from the definition of "business subsidy" by 116J.993 subd. 3, clause (1), and of $75,000 to $150,000 for business loans under 116J.993 subd. 3, clause 21. The report for financial assistance must be completed within one year of granting the financial assistance.

Yes, the four types of financial assistance noted in Minn. Stat. 116J.994 subd. 7(c) are subject to the reporting requirements and penalties for failing to report outlined in that subdivision, and to the reporting requirements for grantors (Minn. Stat. 116J.994 subd. 8), but they are not subject to other requirements that pertain to only to business subsidies (e.g., the requirement to hold public hearing before awarding a business subsidy and the requirement to develop wage and job goals for business subsidies.