7.4. EDSR 10-19-2020 - Laserfiche WebLink

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Offices in 470 U.S. Sixth Kennedy Sixth Street 200 South SiStreet Minneapolis Minneapolis MN 55402 Saint Paul (612)337-9300 telephone Graven (612)337-9310 fax St.Cloud www.kennedy-graven.com C H A R T E R E D Affirmative Action Equal opportunity Employer MEMORANDUM TO: Colleen Eddy, Economic Development Specialist Cal Portner, City Administrator FROM: Gina Fiorini, Kennedy & Graven, Chartered DATE: October 15, 2020 RE: Use of EDA funds for Gift Card Rebate Program You have requested our analysis regarding whether the Economic Development Authority of the City of Elk River ("EDA") may use general fund revenues raised under the EDA's tax levy authorized under Minnesota Statutes, Section 469.107 (the "EDA Levy") to pay a portion of a gift card rebate program. Under the proposal, the EDA would reimburse local businesses for the cost of half of a 20% gift card discount in order to spur holiday shopping at businesses located within the City of Elk River, Minnesota (the "City") who may be struggling due to the COVID- 19 pandemic (the "Gift Card Program"). Generally speaking, a government entity can only expend public funds when it is for a public purpose authorized by specific statutory authority. Economic development authorities are governed by Minnesota Statutes, Sections 469.090 to 469.1081, as amended (the "EDA Act"). Under the EDA Act, the EDA is authorized to undertake and expend funds for various activities for economic development purposes. For example, the EDA can expend funds to buy land, "join an official, industrial, commercial, or trade association, or another organization," "carry out other public relations activities to promote the city and its economic development," and provide loans to businesses. See Minnesota Statutes, Sections 469.101 and 469.192. Providing assistance for the Gift Card Program does not fit clearly into any of the enumerated powers provided to economic development authorities under the EDA Act. The EDA could argue that expenditures for the Gift Card Program are authorized to "carry out other public relations activities to promote the city and its economic development." Minnesota Statutes, Section 469.101, subd. 16. Public relations activities are not defined in the EDA Act. In the past, we have concluded that attendance at trade shows, billboards and general advertising to attract new businesses to the City fit under this category. The Gift Card Program does not include a marketing component for new development or expansion and presents an expansion of what we have traditionally viewed as "public relations." Rather than a public relations activity, we view the Gift Card Program as akin to a subsidy because it is providing direct financial assistance to a business rather than promoting the City as an attractive place to locate a business. The Gift Card Program is not structured as a loan like the EDA's other business subsidy programs as directly authorized under Minnesota Statutes, Section 469.192. Moreover, the EL185-13-680890.vl