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 Response Page - Champeau / Menke / Nordlund  Interview -      
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These comments are responses to the statements listed below,
which were generated in regard to the
Real Estate Developers Interview of
02-28-2014.
 

Minnesota's incentives not competitive with those of other states

OVERVIEW

Minnesota needs better economic incentives to be able to compete with other states in attracting and maintaining businesses, according to commercial real estate developers Brandon Champeau, David Menke and Mark Nordland. They give an example of how United Natural Foods, Inc., decided to build a large distribution center in Prescott, Wisconsin, rather than in Lakeville, Minnesota, a competing location. Wisconsin and Prescott were able to offer the company over $7 million more in incentives than the incentives offered by Minnesota and Lakeville. The developers believe economic incentives can pay off by attracting new businesses that will cycle money from new jobs through the community and the state economy.

Champeau, Menke and Nordland all believe transportation is extremely important in competing with other cities and that the Twin Cities area is making progress in developing transit. Nordland says the area needs to complete the transit system, but cannot neglect its degrading road system. He also believes Minnesota must be careful not to tax itself out of competitiveness in businesses property taxes and income taxes.

The developers say the benefit of the large increases in land values that occur when the state invests in public infrastructure, like a new highway interchange, generally goes to farmers or to land speculators who own the land nearby, not to developers, who tend not to buy land far in advance of development. Nordland believes government can recoup part of this type of infrastructure investment through the increased property taxes paid on the developed land and the income taxes paid by employees working in newly created jobs.

See the complete interview summary here.

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. (8.6 average response) The interview summarized today provides valuable information or insight.

2. Further study warranted. (8.1 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. Match other states' incentives. (5.7 average response) Minnesota's financial incentives to attract business should be increased as necessary to match incentives offered by other states.

4. Incentives pay off in the end. (5.9 average response) Offering competitive financial incentives for businesses to relocate or expand here is a reasonable use of tax dollars that pays for itself in the long run.

5. Use incentives to move firms within a state. (4.1 average response) It's also beneficial to offer financial incentives to entice businesses from one city to another in the same state.

6. Business lures trump foundational investments. (3.8 average response) It's more important to provide financial incentives to attract business than to invest more in education, transportation, sewer and water, and other government services.

7. Don't tax property owners' windfalls. (4.5 average response) If new highways, highway interchanges, transit lines and transit stations produce financial windfalls to adjacent property owners, those owners shouldn't be assessed for a portion of the costs of construction.

Response Distribution:

Strongly disagree

Moderately disagree

Neutral

Moderately agree

Strongly agree

Total Responses

1. Topic is of value.

0%

0%

15%

31%

54%

13

2. Further study warranted.

0%

8%

15%

23%

54%

13

3. Match other states' incentives.

7%

21%

29%

29%

14%

14

4. Incentives pay off in the end.

14%

7%

29%

29%

21%

14

5. Use incentives to move firms within a state.

21%

21%

36%

14%

7%

14

6. Business lures trump foundational

investments.

29%

21%

21%

21%

7%

14

7. Don't tax property owners' windfalls.

7%

50%

14%

14%

14%

14

Individual Responses:

Matt Kane (5) (7.5) (0) (0) (0) (0) (2.5)

1. Topic is of value. Interesting topic but needs balance. Subsidies and incentives for new companies come from taxes paid by existing ones and by taxpaying residents. The job growth rate and employment rate in Minnesota demonstrate our strength as a regional leader when it comes to economic vitality. Targeted subsidies and incentives may help one industry over another (commercial real estate and warehousing, for example) but distort the situation for others.

2. Further study warranted. Tap into those with a broader perspective and a research base. Also, I would much rather see a broader take on economic development. Business attraction is one element and likely not the most important one. Let's stop equating economic development with chasing and underwriting relocations.

3. Match other states' incentives. Two points. Job growth is more likely to come from business retention and expansion. Economic development far too often focuses on chasing down relocations, partly because these are very visible and thus politically important. We need to stop the overemphasis on business attraction. Second, Minnesota should play to its strengths rather than collect dollars from existing businesses and residents to pay for subsidies and incentives aimed at putting us on a "level playing field" with Kentucky, Arkansas and Louisiana (states cited in the interview recap). It is off-target to argue that Minnesota's long-standing reluctance to attract businesses by handing them a bucket of public money has undermined our economic strength, as evidenced by the state's experience both in the Great Recession and beyond it.

4. Incentives pay off in the end. At what opportunity cost? Minnesota doesn't print this money used for incentives and subsidies. It collects it from other tax-paying businesses and residents, or keeps high or raises the taxes on those businesses and residents in order to give the new businesses a reduced rate. What could those dollars have been put to -- not only by the public sector in terms of education and infrastructure spending but by the businesses and residents who can have lower taxes if we aren't taking up a tax collection to chase after relocations. In the case of existing businesses -- the likely source of most new jobs for Minnesota -- that's money that could go toward hiring, increased productivity and other investments.

5. Use incentives to move firms within a state. This is a zero-sum game. No net new jobs for the state but public subsidies.

Ray Ayotte (7.5) (2.5) (5) (5) (2.5) (2.5) (2.5)

John Cairns (7.5) (5) (2.5) (2.5) (0) (0) (2.5)

1. Topic is of value. I have not seen definitive data on whether Minnesota or Wisconsin or Iowa or North/South Dakota is a net gainer in employment where incentives play a role. Emerson just bought the former headquarters of ADC in Chaska. I know the CEO well and discussed this choice. Minnesota won pretty easily all factors considered. The facility could have been anywhere in the Midwest and there was heavy competition from Wisconsin and South Dakota. Shutterfly just committed to a huge investment in Minnesota. State incentives tend to cost more than gained. Where will the employees live? With a plant in Prescott, [will they live in] Minnesota or Wisconsin?

2. Further study warranted. If you are interested, I could talk with Steve Sonnenbert, the CEO of Emerson to see if he would be willing to be interviewed. I also suggest interviewing a Shutterfly rep and the CEO of the company who located in Prescott. I suspect the rational for these decisions were much more complicated than mere state incentives.

3. Match other states' incentives. See above comments. There is inadequate data in my view to answer this question.

Phil Kinnunen (10) (10) (10) (10) (10) (7.5) (10)

6. Business lures trump foundational investments. A bird in hand is better than two in the bush. The infrastructure has to be in place or at least the proof that it can and will be, and that it will be maintained.

7. Don't tax property owners' windfalls. It's just wrong to tax someone because they made a good business deal or were lucky enough to be in the right place at the right time.

Bruce A. Lundeen (7.5) (7.5) (5) (5) (5) (5) (5)

2. Further study warranted. We need somebody who has studied whether or not past economic incentive packages have reached the employment objective they promised, and form an opinion on benefit to the community—a cost/benefit analysis.

Michael Martens (10) (10) (2.5) (10) (7.5) (5) (10)

2. Further study warranted. What is important to one type of business is unimportant to other businesses. Minnesota needs to be clear about what types of businesses it wants to attract and be competitive with other states. Google, Facebook and Microsoft are investing $ 3 billion in Iowa. Minnesota did not even make the first cut because of its real estate and sales taxes. Transit moves people but highways moves goods and people. If roads get too crowded manufacturing jobs will leave and take the need for all the doctors, accountants, and engineers. Minnesota has more Fortune 500 companies started before 1900 ( yes 2 zeros) than after 1950. Google, Facebook, etc., are not being started in Minnesota.

3. Match other states' incentives. Minnesota's incentives don't have to equal other state because of our high quality of life, but they have to be close.

6. Business lures trump foundational investments. This is complicated. All are important and none can be ignored. Transportation, sewer and water are basic services that must be provided. Without them, money spent on education is wasted.

7. Don't tax property owners' windfalls. Yes, that value of property next to new transportation improvements. State and local government get that money back in higher property taxes. State gets money from increases in the value of commercial property when commercial property pays the statewide business property tax.

Carolyn Ring (10) (10) (10) (10) (2.5) (10) (7.5)

3. Match other states' incentives. Increased business means more in taxes and more in sales of products and services. We're in a competitive environment and we must increase incentives to compete.

6. Business lures trump foundational investments. More businesses result in more jobs than result in more taxes, so increasing business is a plus for money to invest and education, transportation, sewer, water and other governmental services.

Dave Broden (10) (10) (7.5) (7.5) (5) (2.5) (2.5)

1. Topic is of value. This interview demonstrated the importance of this segment of the Minnesota economy to the function of the business and commerce at all levels. This is a segment that perhaps many do not consider as they do public policy, and the lack of understanding highlights issues that many in public policy decision points need to expand their views.

2. Further study warranted. There definitely is a need to expand this discussion to how these businesses impact all parts of the government and private sector each day, how the economy works, [how] jobs are created and [how] foundational competitiveness is linked.

3. Match other states' incentives. Perhaps the term "to increase financial incentives" is a bit strong; a better expression would be to tailor the type and use of incentives to ensure Minnesota competitiveness.

4. Incentives pay off in the end. Again if defined and used with a value-added purpose that has measurable metrics tied to incentives for the industry to demonstrate that they are meeting objectives for jobs, etc., it will have [the] payoff desired.

5. Use incentives to move firms within a state. This is in most cases a negative, but if overall grow results and adds value then some sort of incentive that keeps the jobs, etc., in Minnesota can make sense. This requires some study and innovation in how and what is applied.

6. Business lures trump foundational investments. The investments in the foundational items of education, transportation, etc., are the incentives and value on which business can make decisions and opportunities evolve. The approach must consider how these are all linked and prioritize. Putting business second to the others is not being negative to business, but really just the opposite.

7. Don't tax property owners' windfalls. It is very reasonable to link some of the transportation value added to the adjacent property owners if a direct link can be shown.

Scott Halstead (10) (10) (2.5) (5) (2.5) (0) (0)

2. Further study warranted. Minnesota needs a coordinated State, County and Community Business Development plan that makes economic sense. We need to ensure we have good paying jobs for various skills, education, [and] training, make sure there are jobs outstate, provide roads, transit, housing, education/training with a appropriate tax structure. We also need executives that are going to act in the balanced best long-term interests of their employees, stockholders, community and state.

3. Match other states' incentives. We probably don't want all businesses in Minnesota. There needs to be an economic and broad business analysis.

4. Incentives pay off in the end. Sometimes.

6. Business lures trump foundational investments. If we have the education, training, skilled workforce, transportation, sewer, water, other government services and appropriate tax structure, financial incentives should be of little importance.

Don Anderson (5) (5) (7.5) (7.5) (5) (2.5) (2.5)

6. Business lures trump foundational investments. Government services are equally as important as financial incentives.

7. Don't tax property owners' windfalls. Most adjacent property owners don't receive any financial windfalls.

Robert M. Schlosser (10) (10) (5) (5) (5) (7.5) (2.5)

4. Incentives pay off in the end. Yes and no. Each case in different. Sometimes it benefits the large company like Wall-mart [or] Target too much. There a few recently vacated corporate campuses, [such as the old Northwest Air office campus, which are still under used.

6. Business lures trump foundational investments. Infrastructure and education are important. Until we gain a critical mass of business and jobs, we may have to tell the education lobby to lighten up.

David Therkelsen (na) (na) (na) (na) (na) (na) (na)

If Wisconsin's metrics are so much better, why is its economy doing so much worse?

James Fuller (na) (na) (na) (na) (na) (na) (na)

Yup. It will pay off. For the developers. Wouldn't do anybody else a damn bit of good. Taxpayer-paid "incentives" are a sucker game, but then there are an amazing number of suckers in government. Unless they also get "incentives" from the developers.

Tom Spitznagle (10) (10) (8) (8) (5) (5) (8)

Roger A. Wacek (na) (na) (5) (0) (0) (0) (5)

Chuck Lutz (9) (8) (9) (7) (7) (6) (3)

    

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

  John S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill Frenzel, Paul Gilje (coordinator), Randy Johnson, Sallie Kemper, Ted Kolderie, Dan Loritz (chair),
Tim McDonald, Bruce Mooty, John Mooty, Jim Olson, Paul Ostrow, Wayne Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmerman


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The Civic Caucus, 01-01-2008
2104 Girard Avenue South, Minneapolis, MN 55405.  civiccaucus@comcast.net
Dan Loritz, chair, 612-791-1919   ~   Paul A. Gilje, coordinator, 952-890-5220.

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