Pawlenty proposal links rural areas, small business

The economic development program would aim to spur entrepreneurship and job growth in outstate areas.

By Mark Brunswick, Star Tribune

Last update: September 25, 2007 - 9:36 PM

Gov. Tim Pawlenty on Tuesday outlined a proposal for rural economic development aimed at stimulating small business and entrepreneurship.

The program, with the acronym SEED, will provide tax credits, "micro" loans, and revenue bonds to small businesses and rural communities.

Pawlenty will be seeking legislative approval for the plan in 2008, asking for $20 million from the state's general fund and an additional $50 million in one-time bonding. The program would target 64 outstate counties that have either experienced population declines or unemployment rates above the state average but would not be limited to those areas.

Pawlenty said the program recognizes that most economic growth in new jobs is occurring in early stages and smaller businesses. It also recognizes that needs in rural and outstate Minnesota may be different from those for larger companies and metro businesses.

"In order to have a healthy state we need to have access to jobs and economic opportunity across the whole state," Pawlenty said. "People will not stay in parts of the country where they don't have access to a job or an economic opportunity."

In all, the Strategic Entrepreneurial Economic Development program will involve 22 new or expanded state programs. It will include $13.5 million to encourage entrepreneurship and private investment. Investors would receive a 25 percent tax credit if they invest in regional funds focusing on emerging businesses or new technologies. Loans of $10,000 to $50,000 would be available for new and expanding small businesses, and matching grants would provide access for entrepreneurs at qualified research and education institutions.

Bonds would be available to improve critical infrastructure needs for water, sewer, or street repairs or improvements.

In 2003, Pawlenty established the JOBZ tax break program for larger businesses that expanded or located in distressed regions. The program he announced would extend the eligibility window for businesses in certain areas.

Lee Egerstrom, a researcher who has studied the state's economic development programs, applauded the focus on small business but was critical of JOBZ, which he said has only shifted jobs from one area to another.

"It's long overdue for the state to stop treating small business like the black sheep of economic development," said Egerstrom, of Minnesota 2020, a think tank founded by former House Minority Leader Matt Entenza. "Helping small business is the key to growing and retaining jobs in rural Minnesota communities."

Mark Brunswick • 651-222-1636

Mark Brunswick • mbrunswick@startribune.com

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