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 Response Page - Hortman  Interview -      
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These comments are responses to the statements listed below,
which were generated in regard to the
Melissa Hortman & Jeff Lunde  Interview of
11-22-2013.
 

Using subsidies to attract businesses can benefit community

OVERVIEW

Offering businesses subsidies to locate or expand in a community has become an integral part of economic development strategy, say state Rep. Melissa Hortman, Brooklyn Park Mayor Jeff Lunde and Brooklyn Park City Manager Jamie Verbrugge. But the local, national and global competition for high-end business development potentially allows companies to pit communities against each other in offering the best incentives, which can drive up offers, Verbrugge says.

The three officials reflect on their experience with Brooklyn Park's just-completed successful effort to attract Baxter International, Inc., a biopharmaceutical company, to an empty biologics facility in the city. The city competed internationally in trying to attract the company, Lunde says, and put together a successful deal with Baxter that combines both state and local subsidies. The total publicly-funded incentive package for the $200 million project could cost $10 million to $12 million and includes money from the Minnesota Investment Fund, a state sales tax exemption, locally raised tax-increment financing funds and a 10- to 20-year property tax abatement from the city. In exchange for the subsidies, the officials point out, Baxter will have to meet certain performance requirements, including creating a certain number of highly skilled, high-wage jobs.

A recent survey shows that more than three-quarters of Brooklyn Park residents approve of the use of incentives to attract economic development. Hortman believes the Baxter deal is good for the city's residents because it increases the tax base, brings in new jobs and raises the values of existing homes. 

For the complete interview summary see: Hortman interview

Response Summary: Average response ratings shown below are simply the mean of all readers’ zero-to-ten responses to the ideas proposed and should not be considered an accurate reflection of a scientifically structured poll.

To assist the Civic Caucus in planning upcoming interviews, readers rated these statements about the topic on a scale of 0 (strongly disagree) to 5 (neutral) to 10 (strongly agree): 

1. Topic is of value. (7.9 average response) The interview summarized today provides valuable information or insight.

2. Further study warranted. (7.6 average response) It would be helpful to schedule additional interviews on this topic.

Readers rated the following points discussed during the meeting on a scale of 0 (strongly disagree) to 5 (neutral) to 10 (strongly agree): 

3. Tax subsidies necessary. (5.6 average response) Cities in Minnesota and state government must offer tax dollars as subsidies if they expect to compete successfully for business.

4. Competition is international. (7.2 average response) Units of government in Minnesota need to recognize that competition is heavily international in character, not just among states or cities within the U.S.

5. Blind offers may be necessary. (5.3 average response) Competition is so intense that cities and the state should recognize that sometimes they'll need to make "blind" financial offers, not even knowing names of specific companies that might locate within their borders.

6. Provide the basics, not subsidies. (7.6 average response) Instead of offering subsidies to individual businesses, governments should concentrate on providing benefits across the board with, for example, good schools and good transportation.

7. Subsidies could be abuse risk. (7.9 average response) Moreover, the magnitude of subsidies and the extent that negotiations occur privately present serious risks of abuse.

Response Distribution:

Strongly disagree

Moderately disagree

Neutral

Moderately agree

Strongly agree

Total Responses

1. Topic is of value.

0%

0%

11%

67%

22%

9

2. Further study warranted.

0%

0%

22%

56%

22%

9

3. Tax subsidies necessary.

10%

20%

20%

50%

0%

10

4. Competition is international.

0%

10%

20%

40%

30%

10

5. Blind offers may be necessary.

20%

0%

30%

50%

0%

10

6. Provide the basics, not subsidies.

0%

0%

0%

80%

20%

10

7. Subsidies could be abuse risk.

0%

0%

20%

40%

40%

10

Individual Responses:

Ray Ayotte (10) (10) (7.5) (7.5) (7.5) (10) (10)

Frank Long (7.5) (7.5) (0) (2.5) (0) (7.5) (10)

1. Topic is of value. This shows the mindset and rationalization of those that think it's government’s job to provide jobs, even if it's through bribery with other peoples’ money.

2. Further study warranted. Only if it is from more than just the point of view of those who advocate for government subsidies. Perhaps a counterpoint on attracting and retaining business by providing an attractive environment for all businesses. Perhaps a view that differs from raising corporate tax rates and shifting a greater burden on commercial property taxes, and using those extra costs on business, in part, to subsidize other business.

3. Tax subsidies necessary. This brings forward the old schoolyard argument "everyone else is doing it, too" that is used for stadium subsidies and funding of other recreational projects using taxpayer dollars from State or regional or Federal sources. Where do these funds come from? The existing and new businesses that did not get subsidies. Bad, wrong or unethical behavior (ie: legal theft) is never legitimized because others are also doing it.

4. Competition is international. We are (the USA) still the #1 market; if it is cost effective to do business here, people will, without being bribed to do so. It is not government’s job to pick winners and losers, or affect the outcome by taking the income from one business and giving it to another; that just undercuts the competition of the free market.

5. Blind offers may be necessary. How about a drop in the corporate tax rate? How about a drop in the corporate property tax rate? That would attract new business, help retain existing business and fuel entrepreneurship towards new start-ups. That would create the same incentives without the ethical problems or interference in the free market.

6. Provide the basics, not subsidies. Also a good tax climate, not a hyper-taxed region with overgrown government providing infrastructure that is nether cost effective nor needed.

7. Subsidies could be abuse risk. An obvious statement. Where there is money being negotiated by those who did nothing to earn it, incompetence, malfeasance and/or outright larceny will be a by-product more often than not. People in business negotiate for a living, know the market and have a vested interest. People in government are at a disadvantage on every level, and take no personal loss. A recipe for disaster.

Don Anderson (5) (5) (5) (10) (5) (7.5) (10)

Bruce A. Lundeen (10) (10) (2.5) (5) (0) (7.5) (10)

3. Tax subsidies necessary. In the end, 10 to 12 million dollars for 190 - 360 jobs? Was there a cost-benefit ratio done on the investment vs. the returns?

7. Subsidies could be abuse risk. The real winners are the consultants who negotiate terms of financial packages, and the potential for abuse is so very, very real.

Chuck Lutz (9) (8) (9) (10) (8) (7) (5)

Tom Spitznagle (6) (5) (7) (7) (5) (6) (8)

RogerA Wacek (na) (na) (5) (5) (5) (10) (5)

6. Provide the basics, not subsidies. Good schools and good transportation, I would add, good roads, police and fire departments. These things are not benefits but the job of local governments.

Wayne Jennings (8) (7) (8) (8) (8) (6) (7)

Mina Harrigan (8) (8) (4) (10) (6) (8) (8)

Not all cities need to offer subsidies. Brooklyn Park probably does need to at this point. Transportation, housing, education are better aids from public dollars.

Paul and Ruth Hauge (8) (8) (8) (7) (8) (6) (6)

Dennis Szymialis (na) (na) (na) (na) (na) (na) (na)

It is a double-edged sword. The power rate agreement between Minnesota Power and PolyMet that had to go through the MPUC and was in violation of MEPA along with other government subsidies and tax policy manipulations favoring mining will rip our economy apart and [harm] us all.    

The Civic Caucus   is a non-partisan, tax-exempt educational organization.   The Core participants include persons of varying political persuasions,
reflecting years of leadership in politics and business. Click here  to see a short personal background of each.

   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 Bob White


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Dan Loritz, chair, 612-791-1919   ~   Paul A. Gilje, coordinator, 952-890-5220.

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