Column: JOBZ program is essential for Greater Minn.
Published 12:00 am Monday, May 12, 2008
By Dan Dorman, Guest Column
Recently, both the Minnesota House and Senate passed bills that would eliminate a bedrock economic development tool in Greater Minnesota: the Job Opportunity Building Zone, or the JOBZ program.
In part, the legislative action was taken because of a negative report card from the Office of the Legislative Auditor. The auditor&8217;s report contained a laundry list of complaints about JOBZ.
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While the report has provided fodder for JOBZ opponents, its negative findings are more technical than substantive and certainly not universal. A review of the substantive economic benefits of JOBZ far outweighs the costs of a few bad apples. The implementation of JOBZ Albert Lea/Freeborn County provides a shining example of how to successfully run this program.
JOBZ was developed primarily as a program to create jobs, but substantial additional benefits have also resulted from JOBZ, including increased capital investment and expansion of the local tax base.
The Albert Lea/Freeborn County JOBZ program alone boasts nearly $50 million in capital investments. When the current batch of JOBZ projects hits our local property tax roles, other property taxpayers will shoulder a smaller cumulative tax bill of at least $380,000 per year.
The figure does not include the state&8217;s new revenue stream that results from these new businesses. Expanding the local tax base is the purest form of property tax relief.
In today&8217;s legislative battlefield, all levels of government are fighting over how much of the pie is allocated to each program.
In contrast, JOBZ actually makes the pie bigger in the form of NEW local and state revenue and an increased tax base.
Marjorie Priceman observed in the popular children&8217;s book &8220;How to Make an Apple Pie and See the World&8221;: &8220;Making an apple pie is really very easy. First, get all the ingredients at the market.
Mix them well, bake and serve.&8221; Communities in greater Minnesota have proven they know how make pie. But trial, error and some failures accompany any new program. The answer is not to quit trying, but to keep working.
In 2001, a fire destroyed the second largest employer in Albert Lea, leaving our city with 700 fewer jobs. Tax rates, sewer and water rates and unemployment increased, while school enrollment decreased.
Since 2001, the community has been fighting to add back jobs, one at a time. The Legislature and Gov. Tim Pawlenty hit the mark when they targeted this area.
Minnesota&8217;s southern tier counties struggle to prevent business expansions from crossing into Iowa where the tax climate is better. Without JOBZ, these areas will continue to be the bridesmaid, rather than the bride.
Even with JOBZ, ethanol plants, Target warehouses, enzyme manufacturers and other employers have crossed the border. As one recent editorial commented, &8220;Wisconsin and Iowa are licking their chops&8221; hoping that JOBZ goes away.
The legislative auditor&8217;s suggestion that JOBZ missed the mark does not apply to counties in south central and southwest Minnesota. While these areas certainly do not have the political clout of their counterparts that ring the Twin Cities, they do have the need. Other targeted areas in Minnesota face similar challenges.
When Albert Lea/Freeborn County implemented JOBZ, they saw the program as an opportunity to spur significant capital investments in the community. A formula was implemented to quantify, &8220;the long-term benefits to the community through capital investment and job creation.&8221;
For a project to qualify, the community benefits must exceed the tax benefits by a 5-to-1 ratio.
The annual financial benefit of the project, including annual payroll and capital investment, must exceed $400,000 per year.
The approach allows high capital investment projects to qualify for the program, so long as they meet the 10-job creation minimum.
The legislative auditor criticized the program compliance agreements with companies. But the &8220;program administration&8221; problems cited by the report are not universal and are easily remedied by proper implementation and oversight.
The Albert Lea/Freeborn County program has a standard business subsidy agreement which documents the job, wage and capital investment requirements. Compliance is reviewed annually.
One of JOBZ&8217;s success stories was the opening of Albert Lea Select Foods. The company&8217;s decision to build in Albert Lea brought a $12 million capital investment and promises of 50 new jobs to our community. The work number quickly skyrocketed to 390 jobs.
The company recently announced that it was investing another $1.5 million expanding the plant and adding another 50 to 100 new jobs. It would be unfortunate if the same story was being told about Clear Lake (Iowa) Select Foods.
Another success story was the recent construction of a distribution center for the South Dakota-based Larson Manufacturing.
Larson Manufacturing is a Minnesota-grown company moved to South Dakota. With JOBZ, we were able to lure at least part of the company back to Minnesota.
The legislative auditor&8217;s observation that JOBZ has &8220;some value as an economic development tool&8221; is a substantial understatement. In our community, JOBZ is the economic development tool, and it has produced significant, measurable results. JOBZ projects have accounted for 40 percent of the new commercial and industrial construction in the county since the program was first initiated.
In the book, &8220;How to Make an Apple Pie and See the World,&8221; the chef is forced to travel the world to find the ingredients to make apple pie when the market is closed. Many of the ingredients necessary to make the revenue pie bigger in Greater Minnesota are already available.
The Legislature must ensure that these ingredients remain available.
Growth in Greater Minnesota means success for the entire state. Businesses looking to expand or locate in Minnesota should not be given the message, &8220;The market is closed!&8221; Instead, we should be saying, &8220;We are open for business and please join us in making more pie in Minnesota.&8221;
Dan Dorman is the executive director of the Albert Lea Economic Development Agency. This column was written with the assistance of Albert Lea attorney Matt Benda.