Legislative auditor criticizes rural JOBZ program

02/08/2008

By PAT DOYLE,
Star Tribune
Last update: February 8, 2008


The state's primary program to stimulate rural job growth has given tax breaks to firms and communities that don't need them and may have hurt competing businesses that aren't subsidized, the legislative auditor reported Friday.

The report also criticizes JOBZ, a creation of Gov. Tim Pawlenty, for lacking adequate job and wage requirements for the firms receiving a wide array of tax breaks.

Legislative Auditor Jim Nobles urged the legislature to limit the number of businesses allowed in the program each year or the cost of subsidies. The recommendation is at odds with a desire expressed by Pawlenty to expand the program.

More than 150 local communities and 350 businesses have participated in the program since 2004.

The report noted that the program "has some value as an economic development tool" in attracting some out-of-state businesses to Minnesota and retaining other Minnesota firms.

But it said surveys of JOBZ businesses indicate that nearly 7 in 10 would have expanded to the same extent or to a lesser degree without the tax breaks.

"The increase in employment at subsidized businesses could be offset by job cuts at their competitors," the legislative auditor added.

In a letter responding to the report, DEED commissioner Dan McElroy said, "We agree that more meaningful state-level review is required." He said the four-year history of the program has given "sufficient reason to strongly agree that a new direction" is needed.

McElroy said DEED will work with cities and economic development leaders to design a new system for awarding tax breaks.