Wadena Mayor Wayne Wolden credits the state’s job opportunity building zones (JOBZ) program for keeping a long-time local business from leaving his central Minnesota community to locate in China.
Wolden told House and Senate tax committees on Tuesday that a North Dakota businessman bought Homecrest Industries, Inc., and had plans to move the patio furniture business overseas. Tax breaks from JOBZ persuaded him to keep the business in Wadena, and Homecrest now employs 73 people.
“JOBZ was the most important piece of the puzzle that was able to keep Homecrest in Minnesota,” Wolden told the House Taxes Com-mittee.
Wolden and other local officials on Tuesday asked state lawmakers to spare the four-year-old program – GOP Gov. Tim Pawlenty’s signature economic development program – even though some lawmakers have proposed ending it.
“If you eliminate JOBZ, what will be an alternative program? How do we plan on addressing economic development in greater Minnesota?” said Wolden, who is also vice president of the Coalition of Greater Minnesota Cities.
Wolden supports legislation introduced by Sen. Julie Rosen, R-Fairmont, and Rep. Paul Marquart, DFL-Dilworth, that reforms but doesn’t eliminate JOBZ.
Still, JOBZ faced tough questions from both Republicans and DFLers on the tax committees.
Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, suggested the state “should go back to a world before JOBZ.”
“I think the data is overwhelming; it just is not getting the job done,” said Pogemiller, a frequent Pawlenty critic.
Sen. Julianne Ortman, R-Chan-hassen, said she opposes JOBZ because it benefits communities in greater Minnesota while similar areas in her district on the edge of the metropolitan area are ineligible.
“It seems this bill picks winners and losers across Minnesota,” Ortman said.
JOBZ was passed during Pawlenty’s first term in office in 2003.
Since the program took effect in 2004, about 350 businesses have received state and local tax breaks. Participating businesses are supposed to be firms that wouldn’t expand or locate in Minnesota without the incentives. A report by Minnesota’s Legislative Auditor in February, however, found that 50 percent of businesses in JOBZ would have expanded to some extent even if JOBZ didn’t exist.
This session, JOBZ’s future is in doubt with the full Senate voting last week in its omnibus tax bill to end the program effective May 1. A measure in the House to repeal JOBZ is being debated in committee.
Rosen, however, is among greater Minnesota legislators that want to preserve the program by passing a slew of reforms that would require the state Department of Employment and Economic Development (DEED) to tighten its control over the program. Rosen said JOBZ brings employers and their jobs into the state that might have settled in a different location.
“I’m here to fight for jobs, plain and simple,” Rosen said.
Marquart said the bill puts new requirements in place for JOBZ. In particular, businesses in the program would need to produce 10 new jobs. Businesses in economically distressed areas would only need to produce five jobs.
“(The bill) will keep JOBZ viable, which I think is beneficial to rural Minnesota,” Marquart said.
DEED Commissioner Dan McElroy told the Senate Taxes Committee that Rosen’s bill addresses needed reforms like requiring annual business subsidy reports from businesses that address specific criteria raised in the auditor’s report.
Pogemiller, who noted the auditor’s concerns, questioned if JOBZ was achieving its business development goals. The numerous problems highlighted in the auditor’s report casts doubt on any potential fixes to JOBZ, Pogemiller said. “At some point you’ve got to cut bait.”
As an alternative to JOBZ, Pogemiller said direct state grants to businesses might be a better way to subsidize business development.
At the Senate Taxes hearing, John Yunker, who wrote the auditor’s report, said Rosen’s bill differs from the recommendations in his report. In particular, Rosen’s bill doesn’t cap the annual cost of subsidies.
The bill also doesn’t go far enough, he said, in its attempt to limit JOBZ to economically distressed areas of greater Minnesota. The bill allows businesses in economically distressed areas to receive benefits for 12 years. The other parts of Minnesota are limited to 10 years. Yunker said the bill gives areas with the greatest need “a slight advantage but it doesn’t limit the program to economically distressed areas.”
The Senate committee did not vote on the bill, but laid it over for future consideration.
Her JOBZ bill will likely be hashed out by a conference committee later this session, Rosen said.
“I expect it will be heard in conference committee and retain JOBZ. That’s my hope and expectation,” Rosen said after the hearing.
In addition to Wolden, several local government officials with JOBZ projects in their communities testified at the Senate Taxes committee hearing about job creation from the program.
Hutchinson Mayor Steve Cook said two successful JOBZ projects have occurred in his city, including a customer service company that was also looking at locating in Racine, Wis. He said he hopes a European wind energy company decides to settle in Hutchinson with help from JOBZ.
“Instead of eliminating the program, let’s make it better,” Cook said.