Delivering his State of the City speech in 2009, Minneapolis Mayor R.T. Rybak stood in the gleaming North Side headquarters of Coloplast and promised that this city-supported private business would pay off in jobs for Minneapolis.
Rybak said the complex overlooking the Mississippi River would hold 500 corporate jobs, and the Danish medical products company would hire city residents, with a hefty share from the North Side.
Despite loans and tax relief from the city and state, the company has fallen short of the mayor's promises. Its headquarters workforce is less than half of what was projected, and that number is even fewer than the company it replaced on the site. Coloplast last week blamed the employment numbers on the worsening economy, but it also has been shipping manufacturing jobs overseas.
City leaders and staffers who supported the project say they expect the company to rebound and boost its hiring again.
City Council President Barb Johnson said the poor economy means that spending has ebbed on some of the more elective health devices that the company makes. Coloplast makes products ranging from catheters to continence products to penile implants.
"It'll come back," Johnson said of the company. Asked whether the city's investment was worth it, she responded: "Look at that stretch of the riverfront and how that development has changed things."
In 2006, Coloplast bought the urology division of Mentor Corp., the site's previous occupant, and then built a new $39 million facility on West River Road. The city provided a $2.94 million subsidy through tax-increment financing, which allows a company to divert much of its property-tax payments to paying off eligible development expenses. Overall public aid approached $4 million.
Then-Gov. Tim Pawlenty called the corporate move here "an important and exciting development." Besides the city's tax-increment financing and the job training and $500,000 in forgivable state loans, the state and the Metropolitan Council supplied more than $900,000 for site cleanup.
While some council members had criticized past subsidies, such as the about $60 million package awarded to Target for its downtown store and office tower, the City Council greeted Coloplast with enthusiasm in approving the tax-increment help. Rybak was a critic of corporate development subsidies during his first race for mayor in 2001.
But by 2009, he saw Coloplast as a success story. "There is no better illustration of how we are reinventing ourselves than the building we are in today," the mayor said then.
The company's headquarters did triple the tax value of its property, but under the terms of the deal, its property taxes can't pay for more firefighters or police or street paving until it compensates for $2.94 million of its investment.
Earlier this year, Coloplast repaid the state, with interest, two forgivable loans totalling $500,000 from the Minnesota Investment Fund. Rather than adding the required 200 jobs at its West River Road facility, employment there dropped from 381 workers to 287, according to the company. That's now fallen to 225 workers.
The company also is short of the targets it agreed to for hiring Minneapolis residents. According to information it supplied the city, Coloplast has hired just 54 of the 100 city residents it agreed to hire at its headquarters. It also has hired only 16 of the 30 north Minneapolis residents it said it would hire. The company has seven years to do so, but if it doesn't meet those targets two years from now, it faces a penalty of up to $600,000.
"They have a good chance of reaching their targets," said Mike Christenson, the city's development and planning director. "The city will continue to help as requested."
Coloplast said last week that its employment agreements with the state and city "were developed before the international financial crisis and subsequent economic downturn." Peter Fusager, a vice president for finance, said in a statement that the firm was forthright in telling the city that it wouldn't meet the state loan's job requirement.
One method for trying to meet the target was the company's participation in a state-funded job skills partnership program, which Rybak said meant that "Coloplast is now a successful avenue for local residents to become employed at one of the most successful medical device companies in the world."
But only 15 of the 69 workers who completed the program run by a North Side nonprofit were hired by Coloplast, according to the state.
"All of the graduates that we hired started out strong, but could not meet our attendance rules," a company training manager noted in a final evaluation of the effort.
During construction, the firm temporarily moved about 100 manufacturing jobs to Vadnais Heights. Coloplast said some have returned to the city but didn't disclose how many. Although the company once spoke of expanding its West River Road campus in a second phase of construction to accommodate manufacturing operations, land records indicate it owns no expansion space.
Manufacturing jobs for Coloplast here appear to be shrinking, affecting the employment prospects of entry-level workers from the North Side. "Much of our U.S.-based manufacturing will go to China," the manager told the state last year. The company said last week that it is also sending jobs to Hungary and Denmark.
Steve Brandt • 612-673-4438