Some competitors and residents are angry about the North Mankato Port Authority’s approval of the Coughlan Cos. book-publishing business for a government subsidy package likely worth several hundreds of thousands of dollars.

The company plans to use the subsidy to move about 130 employees from its corporate offices in Mankato to a new office in North Mankato’s NorthPort Industrial Center, adding 28 employees.

A state official said that while not prohibited, the program is not intended to help a city lure a business from another city.

A Coughlan official and others said no one lured the company and that it looked at a number of cities to expand in, but it made the best business sense for the company to consolidate next to its existing building in North Mankato.

George Peterson Jr., president of Peterson Publishing Cos., a fourth-generation book publishing company in North Mankato that competes with Coughlan, said he has no problem with them. “They’re good people and good competitors.”

But he does have a problem with the city, through JOBZ, giving tax subsidies to successful businesses and creating an unfair playing field.

“We’re successful and the Coughlans are successful without the need for government welfare for the rich.”

Peterson, and others, say the North Mankato Port Authority is creating an unfair market by subsidizing Coughlan when there are six direct competitors within a few blocks.

They’re particularly upset the Port Authority removed a clause in the agreement that said Coughlin would not use the subsidy to compete with a similar business in the area.

Bill Coughlan said the family is simply taking advantage of a program available to anyone.

He said no final decision on where to build their new headquarters has been made, but that it makes sense to be next to the distribution center in NorthPort.

Jonathan Zierdt, executive director of Greater Mankato Economic Development Corp., said this isn’t a case of one city luring a business away. He said Coughlan looked at a number of sites, including Mankato and other area cities with JOBZ areas available, but the company decided it made the best business sense to locate next to the North Mankato facility.

A major player

The Coughlan family, which has interest in quarries and other businesses, got into the juvenile book business in 1991. They sell to schools and libraries, the same business that Peterson and other publishers in upper North Mankato are in.

The Coughlans’ book-publishing businesses grew dramatically and they are now, according to their Web site, the country’s leading publisher of nonfiction children’s books for schools and libraries. Their publishing companies include Capstone Press, Children’s Library Resources, Compass Point Books, Picture Window Books, Stone Arch Books, and Red Brick.

The company’s headquarters are at Good Counsel in Mankato.

Unfair advantage?

Bob Kitchenmaster, a North Mankato resident and a CPA, opposed the JOBZ designation for Coughlan at the Port Authority meeting this week.

He, too, said he has no enmity toward the Coughlans; it’s the subsidy program he opposes.

Kitchenmaster, who has been critical of the Port Authority in the past, said he understands the board members were in a difficult position.

“But it’s just horrible public policy for the Port Authority to pick one local business at the expense of others that are already in the community.”

Wendell Sande, North Mankato city administrator and executive vice president of the Port Authority board, said he does not view the venture as bringing in new competition.

“In this case the Coughlans, via Capstone, are already in the industrial park,” Sande said. “It’s not an instance of introducing a new competitor.”

ABCs of JOBZ

Paul Moe, with the Department of Employment and Economic Development, said his department has been wary of allowing communities to use JOBZ to attract an existing business from another community.

“I think most people would agree the intent of the program was not for a community to steal a business from another community.” DEED is the state agency that administers the JOBZ program.

Moe said he was not familiar with the details of the North Mankato plan but was beginning to look at it. “I know there are some concerns from Mankato.”

He said there have been cases where a city has used JOBZ to encourage an existing business in another city to expand in their city — but the business didn’t relocate.

Change in the contract

In the original draft agreement between the city and Coughlan — presented to the Port Authority at its meeting in August — one clause read: “(Coughlan) agrees not to compete with or displace local businesses currently operating within the subzone community.”

After Kitchenmaster and Peterson said that Coughlan would be violating that clause, it was removed from the agreement prior to the Port Authority unanimously approving it this week.

Sande said the clause was part of a “template” contract available from the state.

DEED spokesman Moe said he was not aware of any language in the JOBZ laws that requires the clause.

Competing for employees

Peterson, whose family has been in the book business in the Mankato area since 1931, said subsidizing new jobs also will harm the existing book publishers. “We can’t find editors and employees now who are trained in educational book publishing. It’s a specialized field.

“We’re all competing for the same employees now. I think (the Coughlans) are going to get some of those (28) new employees from me, with the help of a government subsidy.”

Coughlan disagreed. “It isn’t a specialized world,” he said of the educational book-publishing business.

Peterson said he pays about $28,000 a year in property taxes, or nearly $300,000 over the 10 years or so the Coughlan JOBZ program will be in effect. Meanwhile, Coughlan operating under the JOBZ designation will pay no property taxes or sales or corporate income taxes from the new office.

Peterson knows he could move across the street and apply for a JOBZ subsidy, too. “But I’m just philosophically opposed to the government meddling in a healthy private business market.”

A tough call

Port Authority Board Member Wade Hensel agrees the JOBZ subsidy is unfair to competitors. But, he said, the city also needs to keep a growing company like Coughlan.

“With the JOBZ program, you’re put in an almost impossible position,” Hensel said. “If you don’t provide the JOBZ benefits, we’re going to lose Coughlan Cos. to another community that will. But on the other hand, the state is giving huge tax benefits (through JOBZ) that other competitors won’t get unless they’re in a JOBZ zone.”

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