Shakopee is rethinking tax incentives for prospective employers

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: February 20, 2014 - 11:26 PM

The city, which used hefty tax breaks to land big employers in the past year, is taking a hard look at requiring more out of such deals.

After more than a year of dishing out millions in sometimes controversial financial incentives, Shakopee is weighing more explicit rules for what it will ask of employers looking for tax subsidies in the future.

The city wants to peg financial packages to things like how many jobs a company creates, the wages it offers and how much a new or improved factory or office building bolsters the tax base. Shakopee has considered those things in the past, but there’s been no formal policy that specifies requirements.

It’s not uncommon for cities to lack clear rules on when tax assistance is appropriate; Shakopee City Administrator Mark McNeill says the city’s staff checked other communities’ guidelines and found some were equally vague. “Many of them have left it very flexible,” he said.

The city made headlines in 2013 by landing a Shutterfly distribution center, an Emerson Process Management site that will employ 400, and several other large employers.

There’s a mixed feeling of pride and uneasiness in Shakopee regarding its aggressive push to lure new employers. The city stands to gain more than 1,600 jobs from five companies that are pouring hundreds of millions of investment dollars into new and improved buildings.

But the series of deals has civic leaders in Shakopee and Scott County wondering if financial breaks to newcomers shift too much of the tax burden onto existing businesses and residents. “Who is left to pay for city services?” said Council Member Matt Lehman, who has voted against two of the deals.

“We’ve had some good success with economic incentives, but the question has been unresolved as to whether there needs to be hard-and-fast rules on what you need to do — things like the number of jobs and how much they pay — to qualify,” McNeill said.

The city already requires businesses getting subsidies to pay at least 200 percent of the federal minimum wage, or $14.50 an hour. The new policies would require projects getting tax-increment financing to create one job for every $15,000 they receive and build at least 50,000 square feet of space.

New businesses getting tax abatements would have to invest at least $10 million while those expanding would have to invest at least $5 million. Projects seeking tax abatements also would have to outline what they would do to increase and diversify the workforce, encourage unsubsidized spin­off investments, and improve the city’s transportation and other infrastructure. The city would use the information to score businesses and determine if they qualify for assistance.

The scoring already has taken place informally. Last year, Compass Datacenters withdrew its request for incentives for a facility it’s building in Shakopee because it cut the number of jobs it would create.

McNeill said that next month the council could consider policies on tax abatements and tax-increment financing that recently were approved by the city’s Economic Development Advisory Committee.

Mayor Brad Tabke, who has supported the financial incentives, says the new policy should encourage more businesses to consider locating in Shakopee. “We’ll be able to respond to inquiries faster, give these companies a very clear road map,” he said.

Tabke considers the financial packages a short-term sacrifice needed to accomplish the long-term goal of having more jobs for Shakopee residents. That’s also a goal for Scott County, which last year said just 24 percent of its residents were locally employed, with more than 40 percent traveling to Hennepin County. The county wants to create enough jobs so that half of the county’s residents would be locally employed by 2030.

Lehman, a council veteran who ran against Tabke last fall, is concerned a policy could be used to extend benefits to businesses regardless of their financial need. He voted against tax abatements for Datacard Group and Shutterfly because he didn’t think either lacked the financial wherewithal to do the projects on its own. He also said he opposed the financial package for Shutterfly, which makes personalized photo books, calendars and cards, because 200 of its 529 employees in Shakopee will be seasonal workers.

“I’m a little apprehensive,” he said. “If you have a policy that’s in place all the time, there’s a question whether we offer these incentives even when the economy is flying high.”

Susan Feyder • 952-746-3282

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