EDSR INFORMATION 12-08-1997 - Laserfiche WebLink

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Minge bill puts subsidy debate on national ag... Page 2 of 6 franchise seeking a new stadium or an auto company picking the • location for a new plant. The biggest subsidy category in Minnesota is tax-increment financing,which came to $286 million last year. Sometimes the bids and counter bids are almost comical.New York spends about$500 million a year to keep existing businesses and attract new ones, often from neighboring states such as New Jersey and Connecticut. Meanwhile,New Jersey and Connecticut each spend about$300 million annually to lure industry away from each other and New York. A few years ago,the three states called a truce. But it didn't last. And taxpayers are paying the bill for a renewed competition. At last count, money available from state economic development agencies alone approached$1 billion, with untold billions more coming in the form of local grants, loans and property tax breaks. On Tuesday, a group ranging from a small-town banker to a U.S. Treasury economist, met at the Federal Reserve Bank of Minneapolis to discuss Minge's bill and its potential consequences face-to-face with him. Minge was told that weaning companies off of subsidies won't be easy, even among people who advocate stopping the practice. • "I've come to agree that this kind of activity needs to end," said Dennis Johnson, an executive at TMI System Design Corp. in Dickinson,N.D., and a director of the Minneapolis Fed. Hard to change game Nevertheless, until the rules change, Johnson said he's ready to play the game. Johnson plans to sign papers this week for a low-interest government loan being granted to his company. Jim Morris, vice president of the State Bank of New Prague, said his town lost 70 industrial jobs to a neighboring community after New Prague decided against providing low-interest loans to build a factory. Morris said his town's decision was right, despite the fact that it led to the loss of more than$1 million in local economic activity. "Taxpayers are neither competent nor motivated to be venture capitalists," Morris said. Venture capitalists take risks that fail as often as not but lead to returns of 50 percent or more on deals that succeed. Taxpayers, Morris said, are taking risks in subsidizing business without reaping the rewards private investors expect. • However, Rebecca Yanisch, executive director of the Minneapolis Community Development Agency, said Congress should be wary of http://websery l.startribune.com/cgi-bin/stOnLine/article?stories=l0&pgraphs=l&orderBy=PUB 12/3/97,&next