By Sarah Kirchner and Mia Simpson, staff writers

Ten Minnesota companies are suing the state of Minnesota claiming they suffered harm from the tax breaks given to their competitors through JOBZ.

Locally, Durben Mack Service in Austin and Interstate Motor Trucks in Albert Lea are involved in the suit.

This is the second time Minnesota companies have sued the state to challenge the constitutionality of the Job Opportunity Building Zones program. The first, in 2005, was dismissed by the judge and is pending appeal.

&8220;Can you imagine that if you own a business and your competitor doesn&8217;t have to pay taxes?&8221; said Rob Leighton, former Austin legislator and a lawyer in the case. &8220;That&8217;s an economic disadvantage.&8221;

The intent of JOBZ was to bring jobs and industry to areas often deprived of economic incentives found in metropolitan areas and surrounding states. Applicants that qualify for JOBZ are exempt from corporate, sales, income and certain property taxes for up to 12 years.

Terry Kvenvold, owner of Interstate Motor Trucks in Albert Lea and a plaintiff in the suit, said Trail&8217;s Travel Center&8217;s truck service area expanded when it received JOBZ benefits in 2004, and due to his competitor&8217;s expansion he had to downsize his staff of mechanics.

&8220;I felt the JOBZ approval of Trail&8217;s service center was detrimental to those of us in the community that are already in the business,&8221; he said. &8220;They&8217;re a tax-free entity doing the same type of work that we do.&8221;

Since Trail&8217;s Travel Center expanded Kvenvold said he has seen a reduction in business.

&8220;It&8217;s just more competition and less work because they&8217;re taking some of it away from us,&8221; he said. &8220;I don&8217;t mind the competition, that&8217;s just fine. What I do mind is that they don&8217;t have to pay any taxes and I have to compete with them on the work field.&8221;

Don Durben of Durben Mack Service in Austin said a repair shop owner in Albert Lea persuaded him to participate in the lawsuit. He said he&8217;s had to reduce his staff from five to one in the last years. He declined to comment further.

The Minnesota Constitution says taxes should be equal among similar tax cases and the plaintiffs in the recent suit are claiming JOBZ is violating this clause.

The official complaint claims JOBZ is unconstitutional under the Minnesota Constitution by &8220;contracting away the state&8217;s taxing power, surrendering the state&8217;s taxing power, imposing taxes on plaintiffs on a non-uniform basis, imposing taxes by a process that violates due process and providing the JOBZ recipients the equivalent of a prohibited special-law tax exemption.&8221;

Leighton said the lawsuit, which was served Wednesday to the Department of Revenue and the Department of Economic Development, challenges the program&8217;s constitutionality. The previous lawsuit, which was recently dismissed, failed because the judge ruled that the plaintiffs lacked legal standing.

&8220;That had nothing to do with the merits of the case,&8221; Leighton said. &8220;The whole issue is, do they have the right plaintiffs?&8221;

Court papers of the 2005 lawsuit claim JOBZ is unconstitutional under the Minnesota and U.S. constitutions. The papers say the power of taxation cannot be &8220;surrendered, suspended or contracted away.&8221; JOBZ, it claims, violates the plaintiffs&8217; rights by &8220;arbitrarily exempting favored businesses from taxation while leaving plaintiffs subject to the full coercive force of the government in meeting their tax obligations.&8221;

The previous suit also called the Bioscience Zone Program unconstitutional, but it was dismissed because the plaintiffs of the case could not prove harm was done.

A press release from lawyers in the case states plaintiffs suffer &8220;distinct and personal harm&8221; from JOBZ. The complaint asks for JOBZ to be completely dissolved. If not dissolved, the complaint wants taxes refunded for two of the plaintiffs during the time their competition had JOBZ tax breaks.

Recent plaintiffs claim the taxes they had to pay were &8220;unlawfully discriminatory and invalid,&8221; according to the press release, when compared to similar companies that received JOBZ benefits.

&8220;If the JOBZ program is not struck down in its entirety, the request for a refund of taxes may be expanded to a class action, asking that all Minnesota taxpayers receive the same refund of state and local taxes,&8221; said the press release.

Kvenvold said he isn&8217;t completely against the JOBZ program, and he sees the benefits it has for the community. At the same time JOBZ allows tax breaks to companies coming into the area, he said those taxes have to be covered somewhere. Less taxes paid by companies means less taxes going to help fund schools, social services and the community and in turn are paid by high taxation on everyone else.

&8220;I don&8217;t think the JOBZ program is bad, it&8217;s just that the city council needed to do better due diligence when they decided to grant the approval,&8221; he said, adding city leaders need to evaluate the consequences of JOBZ.

&8220;We need something like the JOBZ program to compete with the business climate in Wisconsin, Iowa, South Dakota and North Dakota,&8221; Kvenvold said. &8220;The program is probably beneficial to the community, but when it creates a direct competitor to tax-paying individuals that are already in town and servicing the need, then I have a problem with that.&8221;

Dan Dorman, who will be the executive director of the Albert Lea Economic Development Agency on July 1, said that these same claims can be applied to a lot of the finance breaks Minnesota gives companies, such as tax-increment financing.

&8220;In individual cases I understand how people would feel that way,&8221; he said.

The Albert Lea Economic Development Agency has been one of the top users of JOBZ in the state.

&8220;It&8217;s been a huge economic development tool for us,&8221; Dorman said, adding it would not be a good thing for the area if it were to be dissolved.

Austin Community Development Director Craig Hoium said JOBZ can bring more local jobs by leveling the playing field for rural areas.

&8220;My opinion is that it&8217;s not a negative. To me it&8217;s a good program,&8221; Hoium said. &8220;The question is have we fully utilized it.&8221;

Overall, Kvenvold said he wants the lawsuit to change the way the JOBZ program is administered statewide.

Other plaintiffs in the suit include Osvold Company, MME Group, ARI Systems, Meyers Printing Companies, Roith Enterprises, Union Resource Guide, R & R Truck Repair and Steven Schaeffel.

Leighton said he didn&8217;t expect any major activity in the case until August.