Firms sue state to end JOBZ tax breaks

06/27/2007

Among them are three truck repair shops that don't get tax breaks and say the program subsidizes their competitor.


By Pat Doyle,
Star Tribune
June 27, 2007


Claiming they've been put at a disadvantage by tax breaks given competitors, several Minnesota businesses sued the state Wednesday to end the practice.

The lawsuit reinforces an earlier challenge to the constitutionality of the Job Opportunity Business Zones Program, which grants extensive state and local tax breaks to chosen firms. The earlier challenge was dismissed by a judge who ruled that the plaintiffs, including a former politician, couldn't show they were hurt by the tax breaks. That decision is under appeal.

Wednesday's suit relies on a different group of plaintiffs who say their businesses were hurt when competitors received the tax breaks. Those claiming unspecified damages include three truck repair shops in Albert Lea and Austin that don't receive the tax breaks.

One of them, Terry Kvenvold, owner of Interstate Motor Trucks in Albert Lea, said in an interview that a competing repair shop a short distance from his expanded substantially around the time it got JOBZ breaks in 2004.

"What it amounts to is the state is subsidizing my competitor," Kvenvold said.

He said he reduced his staff of mechanics because of a falloff in business as a result of competition from Trail's Truck Service Center, which was not named in the suit. Its attorney, Don Savelkoul, declined to comment Wednesday, saying he had not had time to review the suit.

The JOBZ program is run by the Minnesota Department of Employment and Economic Development, which is named as a defendant. Deputy Commissioner Paul Moe declined to comment about the latest suit.

JOBZ tax breaks can be worth millions of dollars to qualifying businesses. The program gives exemptions from sales, income and property taxes for up to 12 years. The bulk of the firms in the program expanded existing operations in Minnesota or relocated from a taxed zone to a tax-free one. Trail's was among businesses that both relocated and expanded.

The state says there have been nearly 300 deals involving businesses that entered the program since 2004.

While the program was originally intended to help economically struggling areas, critics have claimed that the tax breaks are too often given to businesses in more prosperous or promising areas.