Presentation to the Senate Business, Industry, and Jobs Committee

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

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

3. 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

4. Recent JOBZ Success

5. 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

6. 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)

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. For More Information: www.positivelyminnesota.com or contact: Mark Lofthus, 651-259-7440 or mark.lofthus@state.mn.us