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Tax-break proposal scrutinized

Pawlenty's budget includes a sales tax exemption for an Eagan firm whose executives donated to his 2006 reelection campaign.

By Pat Doyle, Star Tribune

Last update: January 24, 2007 - 10:16 PM

On April 10, 2006, seven top executives of Thomson West each wrote $1,000 checks to the reelection campaign of Gov. Tim Pawlenty. That money came on top of $2,000 that another executive of the firm and his wife contributed to the campaign a few months earlier.

The contributions triggered concern Wednesday among DFLers as they considered the governor's proposal to give Thomson West, a legal publishing firm based in Eagan, a tax break on an expansion.

In pitching the break in his budget proposal this week, Pawlenty said that the expansion would create 2,000 high-caliber jobs and that Thomson West might expand in another state if it didn't get government help.

But a veteran DFLer and a government ethics watchdog questioned the propriety of giving the firm, a giant in its industry, a large break and said the timing of the contributions and the governor's tax break proposal creates a troubling appearance.

Sen. John Marty, DFL-Roseville, said that if a sports team gave money to officials, "you wouldn't have to prove it influenced the officiating. The league would kick them out. Here in politics, we're not talking about a championship game, we're talking about megabucks of taxpayer money."It looks bad," said Prof. David Schultz, who teaches election law at Hamline University.

Pawlenty spokesman Brian McClung firmly denied any connection between the contributions and the governor's proposal to exempt nearly $9 million in sales taxes on Thomson West's $100 million construction project. He said Pawlenty didn't become aware of Thomson West's interest in the tax break until late November, when he was briefed by state economic development officials. Those officials first discussed the expansion with Thomson executives in late summer, McClung said.

"The timing of these conversations has no connection to any other activities," such as campaign contributions, he said.

Thomson West executives who contributed to the campaign were unavailable for comment Wednesday.

"Those were all just individual contributions made by the individual executives reflecting ... the candidates that best represent their values and their interests," said Thomson West spokesman John Shaughnessy.

Asked why most of the contributions were made on the same day, Shaughnessy replied, "It just could be that they had some conversation about supporting the candidate."

He stopped short Wednesday of saying that Thomson West wouldn't expand in Eagan without the proposed sales tax breaks. Instead, he said the firm needs roughly $15 million in state or local breaks of one kind or another in order to expand in Eagan. Those breaks could include the sales tax exemption, local tax increment financing and a favorable loan deal.

The firm has considered moving to Ohio or Texas if it doesn't get the government help it seeks in Minnesota, he said.

The governor's budget proposal, released Monday, did not identify the beneficiary of the sales tax breaks, referring to it only as "a major Minnesota employer." DFLers later confirmed that it is Thomson West.

Motivation for giving

Shaughnessy and McClung suggested that the executive contributions may have been motivated by the firm's longstanding associations with Pawlenty, going back to when he was on the Eagan City Council in the 1990s.

He was the only Minnesota candidate the executives gave to in last year's elections. The seven donors who each gave $1,000 on April 10, 2006, are officers of the parent company of Thomson West. They included president and CEO Richard J. Harrington; Vice Chairman Brian Hall; David P. Hanssens, president of consulting services, and Peter Warwick, president and CEO of the North American Legal Division.

The seven who contributed on that date were invited to a Pawlenty fundraiser in April, said campaign manager Michael Krueger.

In addition, Senior Vice President Anthony Abena and his wife, Stacy, each gave $1,000 on Jan. 30.

Sen. Tom Bakk, DFL-Cook, chairman of the Taxes Committee, said he is concerned about the scope of the tax break and wants to know how often similar exemptions of that magnitude have been granted. The tax exemption would cover construction materials, tools, equipment and furniture.

McClung said the state has given breaks to finance big projects by other large companies, such as a Medtronic expansion that began in December 2005. Administration officials say the sales tax breaks could pay for themselves in a couple of years by stimulating more business and subsequent taxes.

Pat Doyle • 651-222-1210

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