A multinational medical products company is being penalized $600,000 because it didn’t live up to the hiring goals it promised as part of a deal to get nearly $3 million in tax relief from Minneapolis.
The Danish firm fell well short of goals for total jobs, as well as specific targets for hiring city residents, and those from the North Side. The firm had seven and one-half years to meet the goals from the time it got city assistance to locate on the upper Mississippi riverfront in 2007.
The company’s workforce in Minneapolis actually fell from 381 workers when the headquarters project began to 256 reported by its deadline earlier this year.
It has since added five employees and said it plans to add 20 more by early 2015. But it has just half the 500 jobs that former Mayor R.T. Rybak boasted in a 2009 speech the facility would bring to the site.
Coloplast was supposed to employ 338 people under the city’s targets, including 100 city residents, 30 from the North Side. It now employs only 59 city residents and 13 from the North Side.
City development officials and Coloplast stressed that the job goals were set before the recession. But the stock market has now rebounded ahead of that baseline, and the firm, which reported $2 billion in worldwide revenue, earlier told public officials that it was sending jobs to China, Hungary and Denmark.
City officials such as Council President Barbara Johnson expressed confidence two years ago that the firm’s hiring would rebound. But now Johnson said that the city’s goals in general may be too ambitious because employers report they’re having trouble finding workers.
Coloplast said through a spokeswoman that it would have preferred to grow as it planned, but was taking steps to notify the city “to proactively discuss the penalty.” However, the city did not formally contact Coloplast to ask for an accounting of jobs until nearly two months after a preliminary deadline last year.
After Coloplast bought the company that owned the property, it built a new $39 million facility on West River Road N. The city provided a $2.94 million subsidy through tax-increment financing, allowing the company to divert much of its property-tax payments to paying off eligible development expenses.
The penalty amounts to $25,000 for every job below the unmet targets, with a cap of $600,000. That means that the city will begin recouping the increased taxes from the property about eight to nine years sooner than it otherwise would, in 2026.
City officials also assert that Coloplast helped to stimulate another new development on the riverfront, the construction of an $18.7 million headquarters for LifeSource, a nonprofit that coordinates organ and tissue donation in the region. That development shifts 128 jobs from rented space in St. Paul, including for 16 Minneapolis residents.
But LifeSource officials said the key factors in their choice of a location were access via freeways and airports to regional hospitals, and space for a garden where the families of deceased donors could seek solace. The firm paid $850,000 for a site that the city said was purchased out of bankruptcy. It expects to occupy the new headquarters in November.
Because the firm is a nonprofit, it will not pay property taxes on land that several years ago was valued at $3.3 million, before the recession undercut values. But the city said adding the new workers will help retail businesses in the area.