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III II , - - * , „ -,,L-, i,sii,,,,,s,i,s, ,,„ ,., 4 ST. PAUL PIONEER PRESS ■ WWW.TWINCITIES.COM 'NEW$ SUNDAY, DECEMBER 21, 2003 W 9A' FROM PAGE 1A Tax-free ZOl leS much richer program(than TIF),"said r g to yes,the more the subsidy is a waste Dan Greensweig, director of the tax ; ;' q. of public money.Unfortunately,govern- + increment finance division of the state . ments often never know if the answer (continued) auditor's office. 17, ., is yes or no,so they settle for maybe. In Kasson,Dan King agreed,calling ,,� ,' That's the situation in Kasson. But Tens of millions of dollars in taxes JOBZ"TIF on steroids." t t. King said a tax free zone would cer tis '' ' are likely to be forgiven during the 12- King said that, at first,JOBZ didn't ,, tainly expedite any expansion. "Our year lifespan of the zones, reshaping sound like it would be useful to Kasson, 's ....4 . hope is that this will speed upthe the state's economic development land a town of about 4,800 tucked amid the ` , process." P scape while raising irksome questions farmland of Dodge County. Sure, Is along the way, according to a Pioneer Kasson struggles with a dearth of q,,,,,,9„.,, PROFITEERING POTENTIAL Press analysis of tax-free zone propos- hometown employers. But JOBZ t i` 'r iE als submitted to the state. seemed aimed at distressed cities,and4i ".„71,- 71 ¢ � �� •7,$,� Rig and economic developers For example, do several cities and Kasson didn't fit that description,King ' , ' - ''across the state also hope JOBZ counties that will host tax-free zones said. }�{ � V 43,: will spark development on land that, really need them? Economic develop- In Dodge County,the median annual G � has long hosted little more than dander, meat experts say that if a state is coin- household income in 1999 was$47,437, c 9? lions and snowdrifts. pelled to dole out tax breaks,it's best to about$300 higher than the state's medi 71tf, ,- ,t iy�,&'e Tax-free zones include dozens.of target the neediest regions.Indeed,the an,according to the Minnesota demog f i�l s, : n, ;. parcels of vacant land, some of it pub; JOBZ program—a favorite of Pawlen- rapher's analysis of U.S. Census data. ' licly owned, but much of it privately„ ty's — was pitched to the Legislature Meanwhile,Dodge County's population �ftfr � ..FI , , 6`11/4., > i FAN,: owned. The latter brings up another: 3 last winter as a balm for depressed grew a bit faster than the state's during .0 •a� > �' .;, prickly issue. rural areas.Those areas were awarded the 1990s. , 4q< r, ' ° When privately owned land is. tax-free zones,but so were many towns Kasson, the county's largest town, ,` r, F ;_; granted tax-free zone status, it could: like Kasson that would hardly qualify saw its population balloon 25 percent, I i $� ! " ) suddenly become more valuable. a out e rata asIn fact just about every part of Min growth twice tems,from nearby Much pester. <;', ,ef; , fi.• -, Timothy Bartike an economic develop:,rious problem" nesota will be in a tax-free zone, even Kasson is a magnet for Rochester resi ! . _ , r ..• ment a ert at the W.E. Upjohn Inti- though only parts of the state - the dents looking for a more bucolic place ` g yrs pJ � � � .� �� tute,a Michigan-based research groin, northwest corner and several far to live,King said. ' . . that focuses on employment-related southern and far western counties — Rochester,like Kasson,is part of the �' ' policies. could be described as chronically tax-free zone that spans nine southern L „ Subsidies are supposed to provide depressed. Minnesota counties, most of which ,P�, y i't° "°_ public benefits,and what private bene- Here's another question, a classic sport median household incomes near s= = " ,` 3,1"` •; fits they create should be limited, economic development conundrum: or above the state's median. .1...t....,!,,,,, � Bartik said. But some benefits of the When JOBZ is applied to existing busi- The region probably is the wealthi- ,t;:(,, JOBZ program are likely to be nesses with hopes that tax breaks will est with a tax-free zone,but others also , "capitalized" — built into land spur future expansions—as dozens of include communities that have been values,he said. cities plan to do—is the state subsidiz- economically vibrant over the past And owners of vacant land general- ing something that might have decade. ., � '" ly aren't creating the jobs that, occurred even without a subsidy? Tax-free zones even stretch into ; " programs like JOBZ seek to create. And one more: Bybestowingtax Chisago and Isanti counties. Both areAKing g I and officials •in other cities, breaks on hundreds of acres of private- relatively well-off, and both are , said they're aware of the potential ly owned land,will government poten- increasingly bedroom communities of g 1.. problem. tially be creating windfalls for private the Twin Cities. But neither is among x•f' ,'" � V .1t -: Take Lake City,for example.It won, property owners? the seven metro counties that are . 1'' tax-free status for five privately owned; The answers to thosequestions are exempted from JOBZ bylaw. "�F p � - acres that once hosted a restaurant murky and often draw fervent econom- Chisago already has been sir Z`x t � b � l�� _; but have been devoid of business for is debate. announced as the site for two big \,----,,,-�•, _ '�� ,_. , ., :•AA years. The city hopes to attract light There will be 10 tax-free zones,each JOBZ-aided projects,a new factory for SCOTT TAKUSHI,PIONEER PRESS manufacturing to the site. spanning several counties. Each zone window manufacturer Andersen Corp.. Kasson, Minn..won a state JOB zone adjacent to Advantage Equipment, The land's current owner put the will include dozens of sub-zones scat- and a new research center for snowmo- which reconditions bakery and restaurant equipment and employs 13.Cam parcel up for sale last year for$500,000,, tered over many square miles. Most bile maker Polaris Industries. JOBZ Banks, left,and Chris Stuhr recently worked on a dough machine at Advantage. and recently hiked the price to$575,000 sub-zones will be further divided into helped land both projects in Minnesota after razing a vacant building on the. individual properties — 10 barren instead of Wisconsin,the state said. site. acres on one side of a town, an aban- State officials say most of the tax- League of Cities has often heard such Call,a baker by trade.There,he began Ron Zeigler,head of Lake City's Eco- doned factory on another—and so on. free zones are in economically dis- concerns. reconditioning industrial-strength bak- nomic Development Authority, agreed State administrators nixed propos- tressed areas.But the law that created "No community feels it can sit on its ing equipment in 1991.By the late 1990s with a reporter's statement that, als for some sub-zones because they JOBZ defines"distressed"broadly. hands and do just nothing," said Call's sideline had become a full-scale $500,000 seemed like a relatively high included too much acreage,didn't seem For instance, Rochester, the Olm- Frazell, the league's director of mem- business,which is now run by his sons. price for the property. "I would agree feasible or didn't comport with JOBZ's sted County seat and home of the Mayo ber services.The thinking is,If I don't The elder Call scours the nation for that is a reason why it hasn't sold,"he goals.No proposals were axed because Clinic, is an economic dynamo. Its win,the other guy down the street does equipment — doughnut fryers, bun said. One of the property's owners, a community was deemed too well off unemployment rate is lower than the and then where does that leave makers, 140-quart mixers, etc. The Mike Lowther, disagreed, noting that, economically. state's as a whole, its wages higher me?'" machines are stripped to their gears it's in a prime highwaylocation and, The zones, which officially com- than the state average. So cities throughout the state con- and bearings, then reassembled and already has utilities. mence next year, are prohibited in the But JOBZ's neediness criteria suited their economic development sold all over the world. Either way,by putting the property Twin Cities. include "sudden and severe job loss," playbooks and picked JOBZ for the Advantage's 30,000-square-foot plant in a tax-free zone,wouldn't the city and, and Rochester has been hit hard by fac- plays that looked most promising. was built last year, with the help of state be making it easier for the `TIF ON STEROIDS' tory closings. Olmsted County saw a One common strategy: putting Tax-Increment Financing from the City landowner to fetch that$500,000 price? ,: much larger percentage increase in abandoned factories into tax-free zones of Kasson.The city chose the land next Zeigler said he didn't think so ti conomists generally deride tax unemployment benefit applications in order to spur redevelopment. The to Advantage as a tax-free zone because nearby property — including breaks and other business subsidy between 2000 and 2002 than did the former Celestica plant in Rochester is because Advantage has the best some that also won JOBZ designation programs as economically useless at state as a whole,state data shows. an example. The 2-year-old circuit growth prospects of any Kasson busi- —could be priced more competitively., best,wasteful at worst. But in the real board factory closed earlier in 2003, ness, King said. "They're expanding Essentially, the market will work to world, subsidies are a prime currency COMPELLED TO JOIN erasing 550 jobs. exponentially." minimize windfalls to landowners,he= for cities and states scrapping for jobs. Another common strategy: placing Advantage also plans to begin man- said. JOBZ is sort of a cousin to a much Tn King's view, JOBZ has morphed property next to an existing factory ufacturing its own doughnut machines, Louis Jambois, the state's JOBZ used—and critics say overused—sub- 'into a general rural development pro- into a tax-free zone, with hopes of which the company said would add coordinator,agreed.So many parcels of sidy called Tax Increment Financing. gram—not just a tonic for dying farm prompting an expansion. more than 20 jobs and probably double vacant land will be granted tax-free' With TIF, taxes generated by a new towns and crumbling mining villages. For instance, Kasson won a zone sales. status that they will compete against,, commercial development help pay the It's a program that will make rural adjacent to Advantage Equipment, So' would this expansion happen each other,he said. costs of that development. cities like Kasson stronger,he said. which reconditions bakery and restau- even if JOBZ never existed? Among "I expect people to try to profiteer; Many cities have had a harder time It's also a program,King said, that rant equipment and employs 13. economic development experts,such a from this, but for the most part they; using TIF since the Legislature over- Kasson felt compelled to join to stay Advantage is just the sort of home- question brings up the "but for" will flunk because there is enough, hauled Minnesota's property tax sys- even with neighboring cities and coun- grown company that small cities love to maxim: Would a new business or available land." tem in 2001.JOBZ could fill the breach, ties."We don't want to be at a competi- see: a fast-growing provider of decent expansion occur in a particular loca „ and then some. That's because JOBZ tive disadvantage to areas 40 miles jobs. tion but for the subsidy involved? Mike Hughlett can be reached at offers bigger subsidies than TIF. away. Advantage started in a shed on the The closer the answer is to no, the mhughlett@pioneerpress.com or at "On an annualized basis,JOBZ is a Kevin Frazell at the Minnesota rural Dodge County property of Daron more sensible the subsidy. The closer 651-228-5428.