Accountable USA - Minnesota

Minnesota is a middling state in terms of economic development subsidy spending. Its most expensive program, the Job Opportunity Building Zones (JOBZ) program, cost the state more than $30 million a year; Research and Development Tax Credits another $20 million.

The numbers are much bigger at the local level. Unlike nearly every other state, Minnesota tracks the local cost of tax increment financing (TIF) districts—but then, the state has about 2,000 of them! In 2009, Minnesota localities diverted $333 million in property tax revenues for TIF deals. One controversial TIF involved a Minneapolis outlet of the retail giant Target, which later also sought some $80 million in property tax abatements and other subsidies for a mixed-use project in suburban Brooklyn Park that remains unbuilt (see below).

Aside from programmatic spending, the state has been willing to enact company-specific subsidy deals. For example, in 1991, the state caused an uproar when it offered Northwest Airlines an $838 million subsidy for a maintenance facility in Duluth. In 2002 the state legislature approved nearly $400 million to subsidize a new baseball stadium for the Minnesota Twins (see below). And in 2010 the state was prepared to offer Ford Motor a $90 million package, enabled through a proposed tax-free “CARZ” incentive zone, to avert the shutdown of an assembly plant in St. Paul. The company declined, apparently because proximity to suppliers (more heavily concentrated in the central Midwest) was more important than tax breaks.

A March 2011 investigation by the Star Tribune found that the state's subsidy programs had a poor record on job creation and that officials were not aggressive in implementing clawbacks against recipient companies that failed to meet their hiring goals.

Thanks to a coalition of community-based, labor and progressive groups led by the Minnesota Alliance for Progressive Action (now TakeAction Minnesota), the state was a pioneer in subsidy disclosure. In 1995 a landmark law was enacted requiring reporting on a wide range of state and local subsidy types, including data on outcomes such as job creation and wage rates.

The Minnesota data enabled Good Jobs First to issue two path-breaking studies: the first statewide analysis of wages paid by subsidized companies (in 1999) and the first study linking economic development subsidies to suburban sprawl (in 2000). In response to these reports, the state improved its disclosure system, including a new question to track subsidized corporate relocations. That enabled us to issue our 2006 study, the Thin Cities, which looked systemically at 86 companies that got paid to simply move around within the Twin Cities metro area, causing greater inequality by several key measures.

Despite Minnesota’s early lead in disclosure, its reporting system is now technically antiquated and fails to include some of the state's most important programs.  Of the five major programs we examined, three – the Business Development Public Infrastructure Grant Program, the Minnesota Investment Fund and Research and Development Tax Credits – have no online recipient disclosure, while two, the JOBZ program and the Job Skills Partnership Program, do.

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Business Development Public Infrastructure Grant Program

a funding stream for road infrastructure built primarily to benefit specific companies

$7.9 million (FY 2012)
0/100
60/100
55/100

Job Opportunity Building Zones (JOBZ)

a controversial program allowing state and local tax subsidies for companies locating in special zones; criticized as ineffective, it has resulted in numerous clawbacks

$37.2 million (FY 2012)
80/100
50/100
63/100

Job Skills Partnership Program

a grant program that pays educational institutions to provide training for employees of specific companies

$5.7 million (FY 2012)
23/100
18/100
47/100

Minnesota Investment Fund

a cash-grant and loan program which subsidizes businesses creating manufacturing and technology-related jobs

$3.8 million (FY 2012)
0/100
53/100
64/100

Research and Development Tax Credits

a tax credit program subsidizing companies for up to 10 percent of R&D expenditures; a handful of major corporations benefit the most from this subsidy, frequently wiping out between 20 and 60 percent of state corporate tax liabilities

$66.8 million (FY 2012)
0/100
10/100
18/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Target (1998)

For many years, officials in Minneapolis, headquarters of Dayton Hudson, urged the retail holding company to open one of its suburban-style Target discount stores in the city. In 1996 developer Ryan Properties put together a deal to build such a store on downtown’s Nicollet Mall, within a tax increment financing district. The plan was delayed by a dispute with another developer, but Ryan pushed to get substantial TIF funding for the project. In November 1998 the Minnesota Supreme Court finally allowed the Ryan deal to proceed, and the city agreed to provide $33 million in TIF money. That amount jumped to $62 million after Ryan decided to put an office tower next to the store, which opened in 2001.

Five years later, Target (now also the name of the parent company) announced plans for a big expansion of its operations in the Minneapolis suburb of Brooklyn Park as part of a $1.75 billion mixed-use project that the company said would create some 13,000 jobs (only about 1,500 of them on Target’s own payroll). The company sought more than $20 million in property tax abatements and a public contribution of $60 million toward the $216 million in projected infrastructure costs. The company provoked controversy when it sought waivers from the city’s living-wage policy for many contract and part-time workers. In 2008 the Brooklyn Park project was put on hold. (Key sources)

Minnesota Twins (2006)

In the late 1990s billionaire Carl Pohlad threatened to move his Minnesota Twins to North Carolina unless he got substantial public funding for a new baseball stadium, despite widespread public sentiment against the subsidies. In 1997 the state legislature voted against using tax dollars to finance a proposed $400 million ballpark. Two years later, Pohlad tried to make a deal to move the Twins across the Mississippi River to a publicly financed stadium in Saint Paul. That plan, which included the sale of the team to a group of local investors, was resoundingly rejected by voters in a November 1999 referendum. Another push in 2002 also failed.

By the mid-2000s, opposition to a stadium deal had softened, especially after Pohlad agreed to bear a larger share of the costs. In 2006 the state legislature approved plans for an open-air ballpark whose cost had risen to $522 million, of which taxpayers would contribute some $392 million from sales tax revenue. The stadium, which became known as Target Field after naming rights were sold to the Minneapolis-based retail chain, opened in 2010, by which time Carl Pohlad had died and the team was being run by his son Jim. (Key sources)

Walmart in Minnesota

  • At least 1 Wal-Mart location has received subsidies worth about $2 million in Minnesota.
  • At least 1 Wal-Mart location in Minnesota has challenged its property tax assessment.
  • Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. Minnesota is among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.

For more information, see the Minnesota page of Wal-Mart Subsidy Watch.