Presentation to the Senate Business, Industry, and Jobs Committee January 7, 2009 Mark Lofthus, DEED Business and Community Development Division

Today’s Presentation Review 2008 Legislative changes Review DEED’s administrative changes Current project status/looking forward

Summary of OLA Report Wide variation in implementation Cost/benefits and need not examined Subsidy agreements not standard Inadequate and delayed compliance Need for verification of business data Need for more effective targeting

Recent JOBZ Success

2008 Legislative Outcomes Business Subsidy Agreements cannot be amended without DEED’s approval Businesses that substantially meet goals may be allowed to remain in program: reduced benefit duration Clarification of clawback provisions

2008 Legislative Outcomes State Auditor and Legislative Auditor given access to tax and unemployment (jobs) data to assist in compliance reviews Increased business reporting requirements (new reports to Revenue)

DEED Administrative Changes Implementation of JOBZ and Business Finance Office Seven meeting around Minnesota in July and August Changes formalized in October 6, 2008 – State Register notice Discussed with OSA and OLA => Based on authority in 116J.314, Subd. 6 to establish administrative processes without rulemaking

DEED Administrative Changes Application Process –DEED’s review process Is need for JOBZ demonstrated? Do benefits to state exceed tax costs? Would other assistance be more appropriate? Will competitors be injured? Scoring system weighs number and wages of jobs, return on investment, community distress

DEED Administrative Changes Summary Approval of all JOBZ applications => All projects originate and approved locally, with DEED sign-off Standardized Business Subsidy Agreement Heightened reporting/compliance

DEED Administrative Changes DEED must review and score all JOBZ applications –Submitted by city with information from the business JOBZ Benefit Calculator Description of JOBZ project need and community needs and priorities Sources and uses of project funding Listing of local and regional competitors Proposed new jobs with wages and benefits

DEED Administrative Changes Business Subsidy Agreement –Attorney General consulted on development of standard agreement –DEED approves all agreements prior to execution –New, clear definitions of “employee” and “full time equivalent” employee

DEED Administrative Changes Heightened reporting/compliance –Revised Minnesota Business Assistance form specifically for JOBZ –New projects reviewed on anniversary date; thereafter on business subsidy schedule New reports to Revenue (legislative) –October 15 – expected tax benefits –December 1 – certification of continued compliance

DEED Administrative Changes Heightened reporting/compliance –If job creation goals are not met: If business still operates, and has >50% goal attainment, reduced duration of benefits If business still operates, and has <50% goal attainment, terminated but no clawback If business closed or violates statute, subject to Revenue’s clawback determination

Current Status of JOBZ Projects Fully in compliance: 314 projects, 6,392 new jobs as of 2007 MBAF review Operating, but with reduced benefits: 5 projects Operating, but terminated from JOBZ: 11 projects Business closed or did not meet wage goals: 46 projects

Current Status/Looking Forward Clarify authority for DEED to grant extensions for Business Subsidy Agreements; needed in this economy JOBZ is a selectively targeted tool – it is not for every/most businesses Green JOBZ will be proposed to attract renewable energy projects State Auditor will begin their annual audit

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