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7.A.

Public Hearings
TO:

Mayor and City Council

FROM:

Samantha DiMaggio, Economic Development Coordinator

DATE:

08/16/2016

SUBJECT: Business Subsidy Extension Request Shutterfly, Inc., Res. No. 7759 (D)

Action Sought
Shutterfly, Inc. has requested that the City Council hold a Public Hearing to consider the
adoption of Res. No. 7759, a Resolution Approving the Compliance Date Extension with
Respect to the Business Subsidies Provided to Shutterfly, Inc.
Background
On August 7, 2013, the City Council Awarded Business Subsidies to Shutterfly, Inc.
which included a 9-year Tax Abatement totaling $758,771, Sewer Availability Charge
(SAC) credits valued at $174,600 and a Minnesota Investment Fund (MIF) Forgivable
Loan for $1,000,000.
The Contract for Private Development, dated October 8, 2014, required that Shutterfly,
Inc. meet its job and wage goals within 2 years of the benefit date. The Benefit Date for
the Tax Abatement and SAC Credits is May 27, 2014 and SAC Credits and August 1,
2014 for the MIF Loan, giving Shutterfly until May 27, 2016 and August 1, 2016,
respectively, to meet their wage and job goals.
Shutterfly, Inc. was 28 jobs short of their job creation goal therefore they are requesting a
one-year extension. Shutterfly was required to create 258 new full time employees with an
average wage of $18.78/hour (exclusive of benefits) within 2 years of the benefit date.
The City received a payroll report from Shutterfly dated June 30, 2016 which lists 230 full
time employees or 89% of the required number of jobs. The average wage for the new job
created was $24.81 which exceeded the goal outlined in the Contract for Private
Development. The current number of employees at each wage level, as reported by
Shutterfly as of June 30,2016, are identified as follows:
Under

$14.50
3

$14.50 - $17 $17.01-$20 $20.01-$23 $23.01-$28 $28.01-$30 Over $30


101

26

17

20

55

Pursuant to Minn. Stat. 116J.994, subd. 5, for deadlines to be extended, the Council and
EDA must hold a public hearing. The maximum extension allowed is one year.
Under the Remedies portion of the Private Development Contract, if Shutterfly fails to
meet any requirements outlined in the agreement, City would have the options to: a)
terminate the contract and request a repayment based upon a pro rata share; b) leave the
contract active and reduce payments based upon the percentage of jobs created; or, c) do
nothing and continue the payments per the terms of the contract.
Shutterfly currently has numerous full time positions listed on their website and held a job
fair at their Shakopee facility on August 11, 2016. Shutterfly is completing in a tight job
market especially given the current unemployment rate of Shakopee 3.3%.
Since Shutterfly is making the attempt to fulfill the contract requirements, staff is
proposing that the Council choose option b) and authorize staff to pay the 2016 annual
Tax Abatement based upon the pro rata share of positions created. If Shutterfly would
have met all their job creation goals, they would have been eligible for the full Tax
Abatement amount of $61,055. Shutterfly has met 89% of the job creation requirements,
therefore, staff is suggesting a reduced Tax Abatement totaling $54,338.95 which will be
paid to the company in two annual installments.
Recommendation
Staff is recommending a one year extension be granted and that Shutterfly, Inc. be paid a
total 2016 Tax Abatement of $54,338.95, paid in two annual installments of $27,169.48.
Budget Impact
There are no additional impacts to the budget.
Relationship to Vision
This supports Goal D, "Maintain, improve, or create strong partnerships with other public
or private sector entities."
Requested Action
If the Council concurs, it should offer Resolution 7759, A Resolution Approving the
Compliance Date Extension with Respect to the Business Subsidies Provided to

Shutterfly, Inc. and authorize that the 2016 Tax Abatement totaling $54,338.95 be paid to
Shutterfly.

Attachments
Res. No. 7759
Extension Request
Tax Breakdown