The Free Press, Mankato, MN


August 3, 2013

State incentives need more transparency

WHY IT MATTERS: Incentives use tax money to lure corporations who may be turned off by other negatives

Minnesota Gov. Mark Dayton has been kicking up a lot of media dust lately, traveling to parts unknown apparently holding meetings to find potential employers for the state.

The dust up has generally been over the governor’s unwillingness to disclose where he is going and who he is talking to, fearing it would hamper negotiations.

News media are interested not only because of what firms might be lured but what deals or incentives are on the table. And there is every right to be curious after about $850 million in incentives were agreed to last session including $455 million for a Mayo Clinic project and $250 milllion for the Mall of America. The legislature also funded, among other things, $30 million into the Minnesota Investment Fund that offers forgivable loans to job creators.

So this looks like an administration that embraces the idea of providing public incentives to private companies pretty readily. And that can be a tad risky.

In a Politics in Minnesota report, a former Federal Reserve Bank executive warned that easy business incentives may be good politics but bad economics. Art Rolnick, former vice president of the Fed in Minneapolis told PIM, “It’s a red flag when a private company comes to you for this kind of money. Either it’s very risky or it’s going to pan out either way and the company wants to see what it can get from the state. This is power politics to the rich.”

Instead, Rolnick advises the state should beef up education funding and working to ensure we have a skilled workforce.

But incentives are the “drug of choice” now and was partly responsible for an Ardent Mills headquarters to locate to Denver and not Minneapolis. Cargill and CHS, both of Minnesota, are joining Nebraska’s ConAgra to combine forces on a mega flour-million business called Ardent Mills. Twin Cities Business reported that one reason for selecting Denver area was government aid: The companies said their plan to locate is “contingent upon final application and approval of state and local incentives.”

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