St. Anthony: Code42 jobs subsidy up for approval

The Minneapolis City Council on Friday will consider a jobs-subsidy package for Code42, the 350-employee Minneapolis software firm that plans to add 400 jobs in a $70 million expansion.

Code42, which has grown from $10 million in revenue to $40 million since 2010, makes file-sharing and data-backup products for businesses and consumers.

The proposed $3 million subsidy would come over several years from the Minnesota Department of Employment and Economic Development to the city, which plays an administrative role. The council's community development committee recommended the package on Nov. 3.

First, the department would make a $1 million forgivable loan to match $1 million from Code42 for software and equipment over the next two years as it adds 150 permanent jobs at its headquarters on the Mississippi River at 1 SE. Main St. The company would have to pay back a proportionate amount of the loan at 2 percent interest if it failed to meet the employment goals.

Code42 plans to invest $25 million in a new headquarters and related investments and add another 250 full-time positions over time through a 2016 move to the eight-story MoZaic East office-retail complex that Ackerberg Group plans to build in the Uptown neighborhood. Code42 would get up to $2 million from the Minnesota Job Creation Fund, after completing its hiring and investment in that phase.

Code42 Chief Financial Officer Jason Bristow said the company was contacted by economic developers from Twin Cities suburbs as well as other states, but chose to stay because "our employee population loves the urban quality of Minneapolis." The median salary of a Code42 worker is about $80,000.

Code42, considered one of the state's most-promising software companies, is getting strong response to existing and new products. Greater MSP CEO Michael Langley of the regional business recruitment-and-retention agency said Code42 is at the center of growing local IT cluster of small businesses in the Twin Cities.

The job creation fund, launched in January, is billed as a "pay for performance" program that subsidizes business growth after meeting minimum requirements for job creation and private investments. The Department of Employment and Economic Development has awarded $15.8 million to 26 companies who have committed to 1,700 jobs and investment of $313.6 million.

The owners of Franklin Street Bakery, an integral part of the commercial revival of E. Franklin Avenue in the Phillips neighborhood, are considering a move to a larger site.

"There's no story yet," said co-owner Wayne Kostroski. "Nothing will happen for six months to a year. I don't get a sense that the city wants to expand here."

In 2003, Franklin Street opened a $4 million bakery and retail shop that employs 100-plus workers and helped turn one of the city's most booze-infested, crime-ridden corners at 11th Avenue S. and E. Franklin into a nice commercial hub that includes Roger Beck wholesale florist, the Ancient Traders Market and a new headquarters in an abandoned building for Project for Pride in Living.

Kostroski has been able to acquire only one of two adjacent lots for expansion. The bakery is considered an industrial plant, and is at odds with city regulators over parking and other issues. Erik Hansen, a veteran economic developer with the city, said last week that he's going to try to find a resolution.

"Franklin Street continues to grow," Kostroski said. "We're keeping an eye out for how to meet that growth, through expansion of the current facility or [another location]."

Franklin Street still owes the city about $200,000 from a loan the city assumed from the former developer of the project.

The latest elections were marked ad nauseam by so-called third-party groups funded by big-money interests. Minnesota and other small-business owners want policies that "level the playing field" between small employers and big corporations that donate to election campaigns as allowed by a several-year-old U.S. Supreme Court decision, according to a poll commissioned by Small Business Majority.

The poll, conducted in mid-September by Greenberg Quinlan Rosner Research, found more than three-quarters of small employers say big businesses have a significant impact on government decisions and the political process. Only about a quarter say small businesses have a significant impact on the process.

Minnesota small employers overwhelmingly believe more disclosure is needed about special interest groups that finance election campaigns. And 94 percent want legislation requiring special interest groups that use paid TV and mail ads during elections to publicly disclose the sources of the funds. Nearly 90 percent support changing election-finance laws to permit only contributions from individuals.

More information at www.smallbusinessmajority.org.

Little Red Wing Shoes has bested behemoths like Mayo Clinic, U.S. Bank and Target to win the "Minnesota Brand Madness" tournament-style competition among Minneapolis-St. Paul Business Journal readers, who picked it among 64 Minnesota companies and brands.

Red Wing Shoes edged another small-but-formidable name, Dunn Bros Coffee. The shoe manufacturer put some internal muscle into the poll, encouraging employees, Facebook fans and Twitter followers to show their support. But maybe that's how they have thrived as one of the last domestic shoe manufacturers.

"We certainly were proud that some small-town folks could pull it out," CEO Dave Murphy told the Business Journal last week.