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Q: Can repayment for recipients in default be prorated to reflect the length of time a recipient accumulated toward the requirement to continue operations at the site for at least five years after the benefit date? A: 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. Q: How should agencies calculate the Implicit Price Deflator rate for agreements in default? A: To determine the Implicit Price Deflator rate for an agreement in default, a grantor should calculate the percent change in the Implicit Price Deflator for government consumption expenditures and gross investment for state and local governments from the quarter subsequent to the benefit date to the quarter prior to the date of default. For example, if a recipient defaulted on a $100,000 loan in the fourth quarter of 2000 and the loan was entered into in 1998, then the calculation would be as follows: 112.20 (2000 3`tl Quarter Implicit Price Deflator) / 104.28 (1998 Implicit Price Deflator) _ approximately 1.08 (Loan amount $100,000 X 1.08 = $107,595). The Implicit Price Deflator is prepared by the Bureau of Economic Analysis of the United States Department of Commerce. Grantors will not be able to calculate a specific Implicit Price Deflator rate until a recipient has defaulted and the figure for the quarter prior to default is available. Q: If a recipient defaults on a loan given at an interest rate higher than the Implicit Price Deflator rate, can the grantor require that the recipient pay back the loan at that higher interest rate, or must they require that the loan be paid back at the lower Implicit Price Deflator rate? A: 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 subsidy agreement This sheet is intended to inform agencies of DTED's responses fo frequently asked questions about the business subsidies law, and does not serve as a substitute for statute language. Questions about the law can be directed to DTED: Minnesota Department of Trade and Economic Development Analysis and Evaluation Offce 500 Metro Square 121 7" Place East St. Paut, MN 55101-2146 Phone: (651) 296-0580 Faz: (651) 2153841 E-mail: Ed.Hodder@state.mn.us www.dtedstate.mn.us Department of Trade and Economic Development Page 5 of 5 February 20, 2001