The Slippery Slope

  • $7 million in public support for 11 jobs.
  • An energy industry segment that is “cute” according to Bill Gates and will never provide the megawatts we need.
  • The smoky intersection between laissez-faire lobbying, former government officials, elected officials, private-sector business, public subsidies and fraud.
  • A lack of fairness in trade – instead of rewarding those that are working the hardest we pay attention to those making the most noise.
  • Taxpayer subsidized rebate programs that over promise and under deliver.

We’ve seen this before. The dirty evolution of the economic development hierarchy in Minnesota, other states and at the federal level. And I’m sorry to say controls are not improving, it appears to be getting worse. Try and keep your food down with this read:

Some call Silicon Energy rebates a win, while others cry foul.
http://www.startribune.com/local/307268181.html

Our business community should be focused on reining in those that are working to undermine a fair economic playing field. Unique incentives, paid lobbyists, and over subsidizing economic activity with little upside all at taxpayers expense must be reversed.

SMALL TOWN ADMINISTRATIONS VS AMAZON.COM

They just keep pulling up to the trough.

Amazon.com is opening a new distribution center in a small town near where I live in Minnesota. Sounds like a good thing, doesn’t it? I’m not so sure.

Let’s add it up: Low-paying warehouse jobs. Significant tax breaks with local municipalities. And a new small-town neighbor that isn’t very neighborly, doesn’t pay its fair share and is a multinational monster of a company. How local will they be? Not very.

Oh, they may spin a veneer of support but we all know that headquarters is where the decisions are made and the small towns will get left out.

Subsidies by state and local municipalities have run amok. It’s gamesmanship by amateurs using taxpayer dollars. You have small town governing administrations and would-be politicians in office for a few years at a time with little experience. They are tasked with negotiating with titans of industry representing the largest companies in the world, in this case Amazon.com. Who’s going to win that discussion? Add on the feverish climate of doing anything for large companies that promise jobs and you have to wonder, will a small town get a fair shake? Do they have the experience to be doing this kind of negotiating?

I don’t believe so. A $6.4 million tax increment financing package is just the start of what Amazon.com will take from the small community near where I live.

http://www.startribune.com/business/300852681.html

http://www.startribune.com/local/south/304062531.html

The Inconsistencies of Big Government

Big government eventually destroys itself. Ultimately everyone learns to start pulling up to the trough. Case in point, Cirrus aircraft is now asking the Minnesota government for money. Take a look at the article:

http://www.kare11.com/story/news/2015/02/16/cirrus-wants-4m-in-state-money-for-jet-line/23485871/

I suppose smart private companies like this keep pitting government entities against each other in a shell game of subsidies. Eventually we all lose.

The last sentence is the harbinger: 500 planes at $2 million each is $100 million of existing preorders. The company already has a $4 million subsidy lined up from the city of Duluth. How can they not afford a $6 million note to carry the rest of their physical plant needs to fulfill these orders?

If all private industry used the same approach we would all go broke. Currently my company needs to invest $3 million in a new building in Blooming Prairie, Minnesota. Should I pull up to the trough? Why don’t we all pull up to the trough and continue to push our society into the red?

At some point, the madness of our current governmental economic development system has got to change.

The Inconsistencies of Big Government

Big government eventually destroys itself. Ultimately everyone learns to start pulling up to the trough. Case in point, Cirrus aircraft is now asking the Minnesota government for money. Take a look at the article:

http://www.kare11.com/story/news/2015/02/16/cirrus-wants-4m-in-state-money-for-jet-line/23485871/

I suppose smart private companies like this keep pitting government entities against each other in a shell game of subsidies. Eventually we all lose.

The last sentence is the harbinger: 500 planes at $2 million each is $100 million of existing preorders. The company already has a $4 million subsidy lined up from the city of Duluth. How can they not afford a $6 million note to carry the rest of their physical plant needs to fulfill these orders?

If all private industry used the same approach we would all go broke. Currently my company needs to invest $3 million in a new building in Blooming Prairie, Minnesota. Should I pull up to the trough? Why don’t we all pull up to the trough and continue to push our society into the red?

At some point, the madness of our current governmental economic development system has got to change.

I’m glad they were honest and used the word ‘perks’.

Polaris Industries Inc. will receive $80 million in combined state and city subsidies for its new plant in Huntsville, Ala. View the article here: http://www.startribune.com/business/288292431.html.

The Alabama spokesperson described the subsidies as ‘perks and tax breaks’. We all love perks. I even looked it up in the dictionary: Extra money, privileges, fringe benefits, you get the point.

First Polaris leaves Wisconsin and heads to Mexico. Now this iconic manufacturer is leaving the Midwest and heading south to Alabama. Why? They were stolen. At taxpayers expense.

Why do we the taxpayers continue to pay exorbitant amounts in support of this tangled web of large-scale government economic development? We all know the facts: 98% of jobs in this country are tied to small and medium-size businesses. For this reason I have consistently posited that if we are going to have government economic development programs they should focus on small and medium-sized businesses.

Per the article, Polaris looked at scores of sites before selecting Alabama. I wonder what their most significant criteria was? Perks. At the taxpayers expense. Doled out to another large corporation sporting influence and control and pitting one state against another.

What if that money had gone to developing 20 sites for 20 small businesses instead of one large corporation?

Think about it and give me your feedback.

Politicians: Think Rural. You’re On the Hook

Here’s a thought: Opportunity abounds when party power changes hands in the legislature. And, in Minnesota that doesn’t happen often. We, like many states, have seen a chasm erupt between rural and urban. The work force, economic and political concentrations have turned to the urban core. But we still have a lion’s share of elected officials representing the rural areas.

So, what did we do in Minnesota? The rural areas ended up in a powerful position during the most recent election. The urban areas remained DFL but the rural electorate was able to put enough GOP candidates in power, flipping DFL districts, giving the GOP control of our House.

This has created payback time. Rightfully so. We need more focus on returning jobs, infrastructure to support manufacturing and opportunity in outstate Minnesota.

Look here: http://www.startribune.com/opinion/284933311.html

Lori Sturdevant is spot on. And this is in alignment with my most recent post regarding development of qualified labor for rural Minnesota.

Will the GOP find a way to repay voters in rural Minnesota? You bet they will. Because we vote.

Let’s Invest in Something Rural Minnesota Needs: Qualified Labor

I read an article in Twin Cities Business about Minnesota’s economy and how businesses are struggling to find talented employees.

The state of Minnesota will spend $165 million on economic development in fiscal year2014 and 2015. Almost $98 million will go to business and community development and $42 million will go to vocational rehabilitation. The latter is code for workforce training. I’m suspect on the vocational rehabilitation because I believe most of the money is lost on administrative and office costs across the state and very little of those dollars actually provides meaningful technical skill training for people.

If the government is going to invest in the economy, invest in something I need: qualified labor in rural Minnesota.

I have job openings but no good candidates to fill the positions. Applicants I do receive are not qualified, they have no skilled training!

I implore our leaders to focus on rural projects and rural workforce development and make sure that the dollars are invested in hands-on training. Don’t allow the dollars to be lost on bureaucracy.

And make sure those that are showing up are genuinely interested and want to apply and better themselves. We all do better when we all do better.

Sometimes, I Think It Would Be Better To Just Give Everyone In The State $1000

Seriously. Another state program masked as a brilliant idea: The Minnesota State Small Business Credit Initiative. Leave it to government to screw up a good thing.

Have you ever spoken to small business people and asked them if the Small Business Administration was a good source of assistance (financial, technical, consulting)? The answer is always no. Your last option should be the small business administration. Dammit that pisses me off! It’s the opposite of what it should be. The SBA should be here for us. It should be a good resource.

But it’s not. Why? Because the SBA is so difficult to work with. Every time you turn around you have to turn your underwear inside out. It’s not worth the effort. It’s been destroyed by bureaucrats and as a result has become the resource of last resort for small business. Ridiculous.

Here we go again: The Minnesota State Small Business Credit Initiative.  $15.4 million into four state programs: the Capital Access Program, Emerging Entrepreneurs Fund, Small Business Loan Guarantees and the Angel Loan Fund. I think the intention of supporting startup companies is the right idea. The trouble with the government programs like this one is they are so complex and contain so many stifling requirements it doesn’t make sense for legitimate businesses to pursue the help. This is the same story as the SBA.

This particular program provides only 10% for every dollar of investment the business owners put in. Additionally, you need to be certified by their program and an accredited investor among other myriad requirements. Guess what government? If I’ve got $1 million to invest I’m damn well going to avoid your quagmire of bureaucracy to get $100,000 of supplemental capital. I can get that a lot easier a lot of other places. You can have your 0% interest rate.

So, I suspect marginal businesses will be attracted to this opportunity and the results will be marginal. Significant resources will be lost to bureaucracy and administration. Wastefulness will abound. Another large economic development program bites the dust.

The elected officials have it right. The idea is good. The execution is terrible once the idea gets in the hands of the bureaucrats. They craft a policy in such a way that it can’t be successful.

Sometimes, I think we should just give everyone $1000 and see what happens.

Big Government Spending Helps French Manufacturing Company Profit, Not Americans

I’ve been following what was once the feel-good story of a small town Minnesota business on the heels of revolutionizing energy efficiency in buildings. However, after the company received taxpayer funds as part of a federal loan development program, the company was sold to a French-based company. What happened?

Sage Electrochromics of Faribault, Minn. developed “smart glass” for windows. Smart glass electronically tints glass to adjust to sunlight conditions resulting in energy reduction. In 2010, Sage received more than $31 million in tax credits to help this business grow.

Through government program funding, Sage CEO John Van Dine noted, “Global market potential and energy savings are enormous. Sage aspires to be a global leader in a new glass technology.” Fast-forward to 2012.

Two years after receiving tax credits through a largely inactive federal program, French glass and building materials giant Saint-Gobain bought-out Sage. While the factory will remain based in Faribault, Minn., Saint-Gobain took over the company— taking with them the technology and potential. And, one year after selling his stocks of Sage, CEO Van Dine stepped down to “focus on more charitable efforts.”

The short of it, the government dumped millions into a taxpayer-funded program that failed. It was supposed to position a small Minnesota-based company as a global leader. Instead, the government provided tax credits to a company that is now owned by a French manufacturing giant.

And, it hits home.

The Mall of America recently announced that SageGlass panels will cover several thousand square feet of skylight space at the mall’s new entrance. With the company’s expansion now complete mostly due to federal support, it has the “capability to meet most architectural needs,” according to Derek Malmquist, a marketer for Sage Electrochromics. What does this mean? Big government spending has cost taxpayers millions, and has paved the way for a French-based company to use American technology and tools to gain global leadership and profits.

 



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