CLOQUET — The Cloquet City Council heard a proposal to change its project labor agreement requirement to an incentive for private developers, during a work session on Tuesday, Feb. 7.
Holly Hansen, the city's community development director, brought the proposal forward from the city's Economic Development Authority.
Hansen said the EDA is requesting a timely amendment to the city code, to remove the requirement that private projects receiving city funding enter into project labor agreements.
The city's current project labor agreement requires public projects costing over $175,000 to enter into an agreement.
Hansen said private projects that receive public funding in the amount that meets the threshold are then considered public projects based on the current code, requiring them to enter into an agreement.
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The city or EDA's financial assistance on private projects is gap funding, and Hansen said it is always the minority financing to incentivize and assist private projects.
Hansen said the issue private developers have with PLAs is that it restricts the control that they have on projects.
"Numerous businesses and developers have informed the EDA that they will not sign the PLA because they want full project management," she said.
Rather than just excluding the current provision in the code, Hansen said the proposal is to add it as an incentive for private developers to join a PLA.
The proposal from the EDA would give private developers additional funding, as approved by the city's financial advisers, by up to 15% if they were to enter into a PLA.
Hansen said that by making it an incentive it would not only be business friendly, but the city could also start to see private developers and businesses using the agreements.
"This is a barrier, providing an incentive that could lead to private development using a PLA," she said.
Hansen added that since 2017, when the PLA requirement was adopted by the city, there have been zero private projects that have signed PLAs.
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Councilor Sheila Lamb had some questions about the proposed change, and wanted to know how many projects the city has lost because of the current requirements.
Hansen said she would focus on where she is today, what is on her desk and in the queue.
Hansen added that there are many international or statewide businesses in the city and it is important to treat them well.
"How we treat them and their development teams matters," she said. "There are some examples ... that will simply go away and the opportunity will go somewhere else."
Lamb said she was not sure that an incentive to use an agreement would be useful, as there have not been any since 2017.
Bill Helwig, the city's attorney, said from a legal perspective he isn't sure the private portion of the requirement would hold up.
Helwig said that the funding private projects receives from the city, like tax increment financing or abatement bonds, are not like a grant and needs to be paid back.
However, Helwig said it is unlikely to be challenged as no local business would want to sue the city it is trying to start out in.
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"If it was challenged, I don't know if it would stand up," he said.
Kelly Zink, president of the Cloquet Area Chamber of Commerce, said she believes the city has lost projects over the last few years because of the current requirement.
"Being a small community, next to a very large community like Duluth, if we have an incentive program vs. a requirement that is an incentive for someone to come in," she said.
Zink said Cloquet is small-business friendly, and by making the change it would set itself up to represent that.
Mayor Roger Maki said the issue on PLAs has been circulating around a lot and he believes the proposal is what the city should go with.
"I hope we can make Cloquet a good place to start a business," he said.
The discussion on the topic will continue at the city council's next meeting on Feb. 21.
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