critical to keeping 3M expansion in Minnesota
Civic CaucusFocus on CompetitivenessInterview October 25, 2013
Broden (vice chair), Pat Davies, Gwenia Fiskevold Gould, Sallie
Kemper, Sen. Susan Kent, Dan Loritz (chair), Dana Schroeder, Clarence
Shallbetter, Doug Stang.
financial incentives offered by the city of Maplewood and the state of
Minnesota were "critical" to 3M's deciding to build its new $150
million research and development (R&D) facility in Maplewood, rather
than locating it elsewhere, according to Minnesota Sen. Susan Kent and
3M's Doug Stang.
Maplewood created a tax-increment finance (TIF)
district to help fund parts of the 3M project and the 2013 Legislature
approved a time-limit extension for the district from the normal eight
years to 25 years. The Legislature also granted 3M a sales tax
exemption on construction materials used for the project. In exchange,
3M committed to house at least 700 employees in the new facility, with
average salaries over $50 an hour, and to make future investments in
its Maplewood headquarters. 3M also agreed to donate land to the city
of Maplewood to build a new fire station.
Kent says it's important that 3M is
recommitting to Minnesota. Stang points out that few companies have
made the level of investments in Minnesota recently that 3M has made
at its various facilities around the state. He says Minnesota's
workforce has always been a significant draw, but that 3M sees that
foundational strength in the state and in the U.S. declining. He says
3M is very concerned about the lack of highly trained people for R&D
and calls the ability to attract those people the "greatest threat" to
its R&D staying in Minnesota.
Stang recommends that the state consider
better ways for businesses to partner with the Department of
Employment and Economic Development (DEED), which had few tools in
place for an expansion as large as 3M's. Kent says economic incentives
to businesses can become "an arms race" and that the real challenge is
to maintain what has made Minnesota a good place to do business for a
Susan Kent (DFL-Woodbury) is Minnesota
state senator for District 53, representing Woodbury, Landfall, and
portions of Maplewood and Oakdale. She was elected in 2012 and serves
on the committees for Early Childhood to Grade 12 (E-12) Education
Finance, E-12 Education Policy, Higher Education and Workforce
Development, and as Vice Chair of the Transportation and Public Safety
Senator Kent has a strong combination of
private, public and community experience, including many years of
advocacy for students in South Washington County Schools, owning a
small business, and more than 20 years of professional experience in
strategic marketing and media. Her work has ranged from major
corporations and government to tourism, hospitality, and local arts
and nonprofit organizations.
Kent was founder of the Twin Cities East
Chapter of Mothers & More, a nonprofit organization dedicated to
improving the lives of mothers through support, education and
advocacy. She has served several roles in school district working
groups and PTA, and has done volunteer work in prenatal counseling for
high-risk women and child abuse prevention.
Kent has a B.S. degree from the University
of Texas, Austin.
Doug Stang has worked in public affairs
for the 3M Company since 2007. He oversees all state and local public
affairs in the U.S. for the company. Stang came to 3M with a broad
background in public affairs.
From 1997 to 2004, Stang served four terms
in the Minnesota legislature as a Republican State Representative from
District 14B, in the central part of the state. During that time, he
served as assistant majority leader and as chair of the Higher
Education Finance Committee. From 2004 to 2005, he was deputy
commissioner of the Minnesota Department of Health. From 2005 to 2007,
he worked in government affairs for the Minneapolis law firm Lockridge,
Grindal, Nauen, PLLP.
Stang currently serves on the boards of a
number of organizations: the Minnesota Chamber of Commerce, the St.
Paul Area Chamber of Commerce, the Minnesota Zoo, the Citizens League
and the Minnesota Government Relations Council.
Stang has a B.A. degree in government from
St. John's University in Collegeville, Minnesota.
The 2013 Legislature approved two financial
incentives for the 3M Company
to help finance the building of a new $150 million research and
development (R&D) facility on its Maplewood campus. The first
legislative action was to extend the time limit on the economic
development tax-increment finance (TIF) district set up by the city of
Maplewood from the normal eight years specified in state law to 25
years. 3M's Doug Stang said the time extension was needed in order for
the TIF district to capture enough revenue to reimburse 3M for its
eligible expenses outlined in state statute. Those eligible expenses
include improvements such as sewer and water, road construction,
parking lots and demolition of buildings. The second legislative
action was to grant an exemption to 3M on the sales taxes that would
normally be applied to the construction materials used in the project.
State Senator Susan Kent was the Senate author of this 3M-related
Tax-increment financing (TIF) is an economic
development tool available to Minnesota cities under state law.
Cities may create TIF districts for economic development (unblighted
areas being developed for manufacturing, research and development, and
warehousing) or for housing, redevelopment or pollution cleanup. Under
state law, economic development districts have eight-year time limits,
while the other districts have 25-year time limits. The TIF district
created by the city of Maplewood for the 3M project is an economic
development district and is located on undeveloped 3M property.
TIF districts, which take in the area slated
for development, redevelopment or cleanup, generate revenues to help
pay the costs of those activities. The revenues, known as the
increment, are the property taxes generated each year on the
increase in taxable value within the district. Thus, TIF revenues
depend on the taxable value increasing over the life of the TIF
district to generate the increment. The TIF increment revenues are
captured to help pay for various improvements in the TIF district
and are not available during the life of the district as general
revenue for the city, the county, the school district or any special
taxing districts in which the TIF district is located.
An interviewer commented that the
Legislature has been looking at TIF and has earlier narrowed its use,
especially in Minneapolis. But, he said, the 2013 legislative session
opened up the use of TIF in various places. He asked what the role is
of the city, the state and special purpose districts in economic
development. What can be done to assure that economic development
incentives and investments don't heavily impact the overall tax base
of the state?
Kent responded that it's "an important
philosophical debate that's been going on for some time. We're coming
out of a recession with real opportunities to leverage things. The
broader conversation was what will make a difference in the shorter
term for jobs and what investments in education will help in the
The TIF district created by Maplewood for
the $150 million 3M project is expected to raise $19 million over the
25-year life of the district and the sales tax exemption on
construction materials for the project should save 3M about $3.5
million. According to Kent and Stang, 3M can use the money
generated from the increased property taxes in the TIF district over
the next 25 years for various project expenses specified in state law,
such as sewer and water improvements, road construction, parking lots
and demolition of buildings. The TIF district has been in place since
the summer of 2013. Stang said the state sales tax exemption requires
that 3M pay the sales tax on construction materials and then seek a
The TIF district incentive places the risk
on 3M, not on Maplewood. Stang said Maplewood is not selling bonds
to pay for demolition and improvements up front, so "the burden is not
on the city." 3M doesn't get reimbursed for its costs unless the money
is in the TIF fund. And if, for some reason, the TIF district does not
generate any revenue over the 25 years, the city does not have to make
up that difference. He said most of the project's expenses would be
incurred in the next 24 months or less, when the new R&D building will
"The risk is on 3M," Stang said. "We incur
the expenses and hope money is generated to reimburse 3M" for the
eligible expenses. He pointed out that Maplewood will only pay out
money to 3M as it is generated by the TIF district. If the district
generates more than $19 million over the 25 years, which is not
anticipated, 3M could get additional reimbursement, if its allowable
expenses are greater than $19 million.
Establishing the TIF district dedicated to
the 3M project was tied into job creation and future investment
commitments made by the company to the city of Maplewood. Stang
said 3M has made commitments that the new R&D facility will house, at
a minimum, 700 employees, with average salaries over $50 an hour. 3M
also committed to making additional investments in its Maplewood
campus over time. In addition, while not part of the TIF agreement, 3M
recently agreed to donate property for the city to build a new fire
station. "The city wanted assurances," Stang said. "We've made
long-term commitments to the site."
The incentives offered by Maplewood and by
the state were "critical" to 3M. Stang said that 3M was
considering various options for the location of the new R&D facility
and cited the Austin, Texas, 3M facility as a potential location.
"It's a beautiful facility and it's less than half full," he said.
Building the new facility in Minnesota "may not have happened without
the incentives. This was very significant to 3M." He did say, however,
"because 3M is such a diverse company, having the R&D done at one
location is an advantage."
Stang believes creating the TIF district was
"appropriate" and "not anything unique offered to 3M." He said every
city has this economic development tool and most cities have at least
one district in place. Kent called the 3M incentives a "highly
integrated local, state and regional package. Everybody was committed
to making it work. We looked at it as a public/private partnership,
public at two levels (local & state), and everybody committing over
the longer term," Kent said. "This is a historic relationship and we
need to keep it here."
"Arguably," said Kent, "3M is one of the
preeminent of the state's Fortune 500 companies, embodying Minnesota's
heritage, talent and tradition of innovation. 3M has a huge impact in
the eastern metro area. It's deeply connected in the fabric here."
"It's important that 3M is recommitting to
Minnesota," she continued. "Minnesota is a huge part of 3M and 3M is a
huge part of what Minnesota is now. That's the framework for all of
A lot of 3M's investment in the last 20
years has been outside the U.S., where the company's real growth is
Stang said much of
the company's growth is in Asia, Brazil and Eastern Europe and that is
expected to continue. With international growth, he said, there's
pressure to invest where your growth is and where your customers are.
Investors may question why we invest so much in the U.S. and
Minnesota, when the growth is overseas, he said. "3M has made it a
priority to shorten the supply chain and be closer to our customers,"
he said. "Often we can't be competitive if we make a product here and
have to ship it to our customers in Asia or other parts of the world."
And the company invests a lot of money in adapting its products to fit
the customers in each of those markets.
He said as manufacturing has shifted
overseas, 3M has dispersed its R&D work to 30 countries around the
world. "With these research opportunities, people can now stay in
their countries, in India or in China," Stang said. "We used to
attract them to work in our R&D facilities here."
3M's new CEO, Inge Thulin, is interested in
investing in Minnesota. Stang said Thulin is "a lifetime 3Mer and
understands the importance of Minnesota." 3M has 90,000 employees
worldwide, with 30,000 in the U.S. and 15,000 in Minnesota.
Stang pointed to a $50 to $70 million
investment 3M made in its Cottage Grove "gateway facility," where the
company often establishes pilot production lines to determine how to
manufacture products that have been developed at the headquarters R&D
facility. The company also made significant investments recently in
its facility in Alexandria. "Not a lot of businesses have made these
levels of investments in Minnesota in recent years," he said.
The greatest threat to 3M's R&D staying in
Minnesota is not high taxes, but the ability to attract highly trained
people here. Stang said high taxes and the regulatory system make
it difficult for 3M to do business in Minnesota, but the workforce has
always been a significant draw. "But we see the foundation here in the
U.S. and in Minnesota declining," he said. "We're very concerned about
the lack of highly trained folks for R&D. It's harder to attract
people from Minnesota. As folks graduate from the University of
Minnesota (U of M), even folks from Minnesota, they're leaving.
They're not staying in Minnesota as they historically did." He said
the retention rate has historically been very high at 3M, but that
could change, as well, as the workforce continues to change and be
"The challenge in Minnesota," Stang
continued, "is keeping our highly trained people here and attracting
them here. In order to meet our long-term need for filling jobs with
highly trained folks, we must do more to get women and minority
workers in science-related fields." He said 3M helps fund Science,
Technology, Engineering and Math (STEM) programs in local school
districts and some of those programs target women and minorities to
convince them to go into science-related fields.
Stang said 3M has a "great relationship"
with the U of M. "We invest a lot in their school of engineering and
their dental school," he said. "We invest in programs training people
who are going to be working in our areas. We also invest in several
other universities in the U.S., but the U of M is very important to
3M has partnerships with several Minnesota
community colleges. Stang gave the example of 3M's partnership
with Staples Community College to train students for specific jobs in
the company's 100-employee facility in Staples. The facility makes the
equipment used in manufacturing the company's products. He said there
is a similar partnership in Alexandria. "Around the country, we work
very closely with higher education," he said.
Minnesota needs a stronger and wider
industrial base. Kent said a number of initiatives from the 2013
legislative session were aimed at that goal. She noted, for example,
that the Legislature made a commitment to the University of Minnesota
this year for work it is doing in four specific industries: robotics,
medical devices (moving out of cardiac and into neural devices),
agriculture and water-related initiatives.
"It's all about being very strategic," she
said. "We need to look at where our growth is going to be and how we
get our share and build the infrastructure to get there."
The state should consider better ways for
businesses to partner with its Department of Employment and Economic
Development (DEED). An interviewer asked whether the
Legislature thought about whether TIF was the way to go, as opposed to
a direct grant from DEED or other methods. Kent responded that 3M and
Maplewood came to her with the TIF proposal already developed.
"We initially met with the state DEED
officials," Stang added. "But we found the state had few tools in
place for an expansion of this size. We appreciate DEED's support of
the proposal, but it was clear from the beginning that we would have
to work with the city and the state legislature on an incentive
package. DEED did initially propose the building supplies sales tax
exemption, which the Legislature approved."
Federal immigration reform could help in
staffing the new R&D facility. An interviewer commented that one
way to staff the R&D facility would be to bring in people from other
countries. He asked what the role of the state should be in
immigration of high-tech personnel.
Stang replied that 3M is supportive of
federal immigration reform. "The lack of H1 and N1 visas has really
made it difficult to recruit people from around the world," he said.
Even though the issue is a federal one, Kent said she is supportive of
Incentives can become "an arms race." An
interviewer asked whether, if Minnesota's foundational competitiveness
declines (that is, its competitiveness on basic things like
infrastructure, education, health care, etc.), as some people believe
it already is, use of economic incentives to keep businesses here will
increase, which could raise taxes.
Kent replied, "Incentives can become an arms
race and that's not good for anybody. We must look at what our
position in the marketplace is as a state. I won't give up on
foundational competitiveness. Our challenge is to maintain what has
made Minnesota so good for so long. But we must remind people about
the value equation: it's not only what you pay, but also what you get
for that investment. We don't want to 'out-Texas' Texas. It has no
income tax, but its education system is inconsistent in preparing its
The Civic Caucus
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tax-exempt educational organization. The Core participants
include persons of varying political persuasions, reflecting years of leadership in politics and
business. Click here
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David Broden, Janis Clay, Bill Frenzel, Paul Gilje,
Jan Hively, Dan Loritz (Chair), Marina Lyon, Joe Mansky,
Tim McDonald, John Mooty, Jim Olson, Wayne Popham and