equipment. Perkins Transport, located off Hwy. 3 in Northfield, moved to town after getting tax incentives from a state program. (News photo by Suzanne Rook)
Count Neil Perkins as a JOBZ fan.
The state program, which provides tax incentives to companies expanding or relocating in rural counties, brought Perkins’ company, Perkins Special Transportation Contracting, to Northfield.
Without JOBZ, Perkins Transport might never have left Farmington, which as part of the metro can’t participate in JOBZ. The tax breaks, Neil Perkins said, were too good to pass up.
“Any time you can reduce costs and use that money to reinvest … that creates growth,” he said.
In four years, JOBZ — Job Opportunity Building Zones — has been credited with helping create of 5,459 full-time positions. But a February report by the Office of the Legislative Auditor found employment figures are at least 20 percent lower. The difference, the auditor’s office said, is “due to the lack of adequate reporting forms and a tendency to overstate their employment.”
Legislation passed this past session will ratchet up the oversight on JOBZ and should eliminate or reduce the number of companies failing to live up to their agreements with local governments.
Northfield already has one such company. In late 2005, the city council, Rice County commissioners and Northfield School Board agreed to tax breaks for SpeechGear, a firm that develops translation products, in exchange for the creation of 35 jobs by December 2007. Salaries for all jobs were to be at least 100 percent of the Rice County median wage. By this May, the company had created seven jobs, according to the city.
WHAT IS JOBZ?
Launched Jan. 1, 2004, the Job Opportunity Building Zone initiative is a state rural economic development stimulus program. The program provides tax relief to companies that start up or expand in targeted areas of Minnesota (except in the seven metro counties) — from the date they sign a business subsidy agreement until the program expires on Dec. 31, 2015. Besides targeting areas in economic distress, the program aims to promote development in places that are already poised for business growth and have adequate infrastructure in place. It also seeks out places where conditions exist for restoring productivity to under-used and unproductive properties.
Source: Minnesota Department of
Employment and Economic Development
SpeechGear President Robert Palmquist, who signed the agreement with the city, said the job creation projections were overstated by a former employee. How the company’s failure to live up to the agreement plays out isn’t yet known.
Palmquist, an ardent supporter of the program who this week endorsed JOBZ to Gov. Tim Pawlenty, said he wants to remain a participant.
“If we don’t, we leave,” he said.
And though he’s willing to be flexible in renegotiating or revising the agreement, he wouldn’t be specific about his ability to bend.
The city, too, isn’t sure how to handle its agreement SpeechGear. City officials said they are waiting on recommendations from the Department of Employment and Economic Development, which administers the program. Among the options: Non-compliant companies can be removed from the program and forced to repay incentives.
In two years, according to the Rice County auditor’s office, SpeechGear has received nearly $20,000 in tax breaks, just by being enrolled in JOBZ.
Fruitful lure?
Created by the legislature in 2003 at Pawlenty’s urging, JOBZ is the state’s only economic lure to create jobs and attract and expand businesses. City, county and school boards can all agree to relieve taxes payable until 2016 as part of JOBZ.
Northfield has four companies in JOBZ. Two of the four agreements were signed late last year — Upper Lakes Foods, a distributor of restaurant supplies, and three subsidiaries of Stroebel-Warner, affiliated with Cannon Valley Veterinary Clinic. Both have until late next year to fulfill their agreements.
According to the agreements, those four companies must create more than 100 additional jobs in Northfield with an a average wage of just under $11 per hour.
So far, JOBZ incentives have relieved Perkins and SpeechGear of $82,500 in taxes. Forty jobs have already been created, according to city records.
By contrast, Faribault has two companies in JOBZ: Aldi, a distribution center for the grocery retailers, and Sage Electrochromic, which relocated from New Jersey. Those firms have agreed to create a total of 62 jobs with an average wage of $12 per hour.
More than $508,000 in taxes have been relieved for those two companies due to JOBZ, the county auditor’s office reported. Aldi alone was relieved of the lion’s share of that figure, $403,600.
Better than nothing?
Rice County Economic Development Director Deanna Kuennen, who held a similar position in Northfield, acknowledges the program’s flaws, but said when competing for businesses against other states, JOBZ is better than nothing. Kuennen says she’s currently working with a Finnish company that has kept Rice County on its short list specifically because of JOBZ.
And while some states offer incentives that look appealing, Kuennen said, JOBZ often offers a greater value over the long haul. Ensuring business prospects understand the realities of JOBZ frequently means working with the county’s assessor to project tax savings over the life of the agreement, she said.
Minnesota’s main competition, Kuennen said, is Iowa, Wisconsin and the Dakotas. It’s tough to fight Iowa, Kuennen said, a state that’s more aggressive with economic development.
It not only has a Department of Economic Development, but a variety of programs, including those that offer tax incentives, entrepreneurial and infrastructure assistance, as well as job training.
Despite the array, Minnesota economic development directors aren’t empty-handed. They can play up the state’s access to transportation and large workforce, Kuennen said, adding that “While we can’t compete on dollars, we can compete on other things that in the long run are more important.”
— Suzanne Rook can be reached at srook@northfieldnews.com or 645-1113.
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