Minnesota’s Rural JOBZ Program Falls Short

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Minnesota Governor Tim Pawlenty’s signature rural economic development program is unaccountable and ineffective, says a new report by the state’s Legislative Auditor.

The Jobs Opportunity Building Zones (JOBZ) program has granted $46 million in tax breaks to 350 businesses since 2004. However, two-thirds of businesses admitted to the Auditor that they would have expanded to some extent without the subsidies – including 11 percent who admitted they would have made the same investment in the exact same location (a remarkable admission to a public agency; who knows how much higher the true figure is?)

The Auditor also found bloated job creation claims by the Department of Employment and Economic Development (DEED). Almost half of the subsidized businesses are obligated to hire a measly five or fewer new employees. And although DEED claims 5,500 new full-time JOBZ jobs, the Auditor concluded actual job creation is 20 to 30 percent lower.

Although Good Jobs First has found that Minnesota’s pioneering disclosure law (requiring subsidy deals to be posted online) has increased civic engagement and expectations on economic development spending, tax credits like JOBZ are not covered.

The JOBZ program subsidizes companies located outside of the Minneapolis-St. Paul metro area through the creation of tax-free zones. Although Gov. Pawlenty is lobbying to have the program extended past its 2015 sunset date, the legislature has shifted its attention to fixing the program’s massive flaws.

4 Responses to “Minnesota’s Rural JOBZ Program Falls Short”

  1. Anne Nolan Says:

    Are you sure about the “tax credits like JOBZ are not covered” part? Thanks to the efforts of JOBS NOW Coalition, MAPA, and then-Sen. John Hottinger, the JOBZ statue was amended before it was enacted to explicitly require that JOBZ deals be covered by the business subsidy disclosure law. There was a citation to the business subsidy statute right in the JOBZ statute.

    If reports from JOBZ deals are not showing up in the business subsidy reports, I can think of three alternative explanations:

    1) JOBZ’s been amended again to take that requirement out (I hope not!), or
    2) The deals are too recent to show up in the data (the subsidy disclosure process does have some serious lags in Minnesota), or
    3) For some reason the law’s not being followed or enforced by DEED.

    I would be interested in learning which of these explanations might be true.

  2. Karla Walter Says:

    Thank you for your comment. To clarify, JOBZ participants must file annual reports that are posted Minnesota Department of Employment and Economic Development website. However, tax breaks continue to be confidential under Minnesota law, so these reports do not disclose the value of the JOBZ tax breaks the firm received. Usually, JOBZ reports will list the total subsidy value as $0. Occasionally, when a firm has also received another type of subsidy from the community, its value will be listed. I contacted the Minnesota Department of Employment and Economic Development, who confirmed that this has always been the reporting practice for the JOBZ program.

  3. Anne Nolan Says:

    Karla, thanks for your prompt and informative follow-up. This was news to me. I know at least one local legislator who will find DEED’s inventive interpretation of its JOBZ disclosure obligation very interesting. As my dad used to like to say, “You learn something new every day.” Thanks for your work.

  4. UPDATE: Minnesota State Senate Votes to Axe Rural JOBZ Program « Says:

    […] as the Jobs Opportunity Building Zones (JOBZ) program. This is the latest development since GJF blogged in February about the state Legislative Auditor’s report concluding that the subsidy program is […]

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