Accountable USA - North Dakota

It is difficult to know how North Dakota is using its economic development subsidies, because four of its five major programs do not provide online company-specific reporting. What is known is that some companies have received subsidy deals of substantial size, by North Dakota standards. These are often negotiated at the local level. For example, during 1990s Sykes Enterprises received millions of dollars to build call centers in Bismarck and Minot. Beginning in 1998 the windmill blade producer LM Glasfiber (now LM Wind Power) received several million dollars in assistance from Grand Forks, where it initially ramped up employment but later cut back sharply (see below).

In 1999 Mainline Travel, a subsidiary of Northwest Airlines, received a $10.7 million subsidy for a call center in Minot. In 2002 Coventry Health received more than $2 million for a service center in Bismarck despite having a track record of investigations, regulatory violations and other controversies. A major state deal occurred in 2006, when Gold Energy and U.S. Bioenergy got a $30 million sales tax exemption on construction materials and equipment for an ethanol plant (see below).

In 2002, Good Jobs First documented flaws in North Dakota’s economic development accountability system in a report called In Search of the Great Pumpkin. We found that few state programs were required to live up to job creation or job quality standards, allow public participation in subsidy decisions, disclose subsidy recipients, or impose clawbacks.

In 2005, the North Dakota Progressive Coalition (now the North Dakota Center for the Public Good) spearheaded a subsidy accountability effort. Although the state passed a law requiring recipients to report job creation, wages and benefits as well as clawbacks if a company fails to meet benchmarks, the law hasn’t resulted in comprehensive disclosure.

Key Subsidy Programs

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

Development Fund

gap financing through loans and equity investments for companies requiring a lender of last resort

$5.6 million (2009)
20/100
25/100
45/100

Income Tax Exemption for New or Expanding Businesses

five-year exemptions from state corporate income taxes for companies locating or expanding in the state

$2 million (2008)
0/100
0/100
8/100

New Jobs Training

reimbursements for training costs; derived from personal income taxes withheld from wages of new employees

$2.6 million (2009)
0/100
50/100
63/100

Renaissance Zones

a controversial program of tax credits and property tax abatements for businesses (and homeowners) in designated areas

$21.2 million (2008)
0/100
10/100
15/100

Wage and Salary Credit

corporate income tax credits for new or relocating companies based on payroll costs

not available
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

LM Glasfiber (1998)

In 1998 officials in Grand Forks agreed to spend $5 million (raised through a bond issue) to build a windmill blade plant for the use of Danish company LM Glasfiber, which promised to create up to 80 jobs there. The city also provided a five-year, 60 percent tax abatement, a $350,000 loan from its Economic Development Administration revolving loan fund and a $500,000 Community Development Block Grant loan that would be forgiven after 15 years. The company greatly expanded its payroll in the mid-2000s. In 2006 the city agreed to spend another $2 million on an expansion for the company, which was projecting that its workforce would continue to climb to about 550. It ended up soaring to about 900, but by 2009 market conditions had taken a major turn for the worse, and the company laid off one-fifth of its workers. The company, which changed its name to LM Wind Power in 2010, announced more layoffs in January 2011. Three months later, it was hit with more than $100,000 in fines by the U.S. Occupational Safety and Health Administration. (Key sources)

Gold Energy/U.S. Bioenergy (2006)

In 2006 the state Board of Equalization granted a five-year corporate income tax exemption to Gold Energy LLC and U.S. Bioenergy, which were planning to build a 100-million-gallon ethanol plant, the largest such facility in North Dakota. The $145 million project, located in Hankinson in the southeast corner of the state, was also given a sales tax exemption on construction materials and equipment as well as grants and loans targeted to ethanol producers. The total value of the subsidies was estimated at $30 million. In 2007 U.S. Bioenergy agreed to be acquired by another ethanol company, VeraSun Energy. The deal put the plant in Hankinson and U.S. Bioenergy’s other three plants under the control of a company that already had five ethanol production facilities. In November 2008 VeraSun filed for Chapter 11 bankruptcy protection and sold off its plants. The Hankinson operation ended up in the hands of the conventional petroleum company Murphy Oil, which resumed production at the plant in 2009. (Key sources)

Walmart in North Dakota

  • Good Jobs First found no instances of Wal-Mart subsidies in North Dakota, but given the absence of comprehensive centralized data, it is still possible that deals have quietly occurred.
  • We found no instances of property tax assessment challenges by Wal-Mart in North Dakota, but given the absence of centralized data, it is still possible that appeals have occurred.
  • 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. North Dakota 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 Wal-Mart Subsidy Watch.