Minnesota’s Rural JOBZ Program Falls Short

Minnesota Governor Tim Pawlenty’s signature rural economic development program is unaccountable and ineffective, says a new report by the state’s Legislative Auditor.

The Jobs Opportunity Building Zones (JOBZ) program has granted $46 million in tax breaks to 350 businesses since 2004. However, two-thirds of businesses admitted to the Auditor that they would have expanded to some extent without the subsidies – including 11 percent who admitted they would have made the same investment in the exact same location (a remarkable admission to a public agency; who knows how much higher the true figure is?)

The Auditor also found bloated job creation claims by the Department of Employment and Economic Development (DEED). Almost half of the subsidized businesses are obligated to hire a measly five or fewer new employees. And although DEED claims 5,500 new full-time JOBZ jobs, the Auditor concluded actual job creation is 20 to 30 percent lower.

Although Good Jobs First has found that Minnesota’s pioneering disclosure law (requiring subsidy deals to be posted online) has increased civic engagement and expectations on economic development spending, tax credits like JOBZ are not covered.

The JOBZ program subsidizes companies located outside of the Minneapolis-St. Paul metro area through the creation of tax-free zones. Although Gov. Pawlenty is lobbying to have the program extended past its 2015 sunset date, the legislature has shifted its attention to fixing the program’s massive flaws.

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