Minnesota legislators who regularly complain that North Dakota and South Dakota lure business away with lower taxes are considering renewing a law in effect since the mid-1980s that gives five western Minnesota communities money to compete with their neighbors to the west.
Deputy City Manager Scott Hutchins of Moorhead told House and Senate committees Wednesday that his community, Dilworth, East Grand Forks, Breckenridge and Ortonville use tax reductions to attract businesses that otherwise could have gone to one of the Dakotas. Money also is used to keep firms in their communities.
“These disparities have only grown greater over time,” Sen. Kent Eken, D-Twin Valley, said.
Lawmakers discussed the bills Wednesday, and in both chambers they are expected to be folded into overall tax bills due to pass before the May 18 legislative adjournment date.
The current two-year state budget provides $750,000 a year to the five cities, and bills sponsored by Eken and Rep. Deb Kiel, R-Crookston, would up that to $1 million.
“We actually could use more than a million,” Eken said.
In Moorhead alone, more than $300,000 in tax cuts is used to provide businesses aid to make up for Minnesota’s more expensive workers’ compensation program.
Hutchins provided legislators a workers’ comp comparison showing the per-employee premium for a sugar refinery worker in Minnesota is $5,458 while North Dakota charges $957. To help make up that difference, Moorhead used the state program to lower American Crystal Sugar taxes $25,000 last year.
The five cities also help some of businesses because Minnesota taxes are higher than North Dakota. For instance, a Fargo business would pay nearly 20 percent lower property tax rates than one in Moorhead and a Grand Forks business would pay 8 percent less than in East Grand Forks.
East Grand Forks used some of its money to help build a $5 million, 67-bed hotel. Dilworth provided aid to a dentist business expansion and to lure an international corporation, which will have 100 employees, that conducts prescription drug trials.
Kiel said the five cities are the only ones on the border with one of the Dakotas, or in Dilworth’s case adjacent to Moorhead.
“They are right there,” she said. “It is easy to go across the border.”
Kiel said that the bill could help East Grand Forks attract businesses that support the Grand Forks Air Force Base’s new mission of controlling drone aircraft. The border cities bill, she said, could put East Grand Forks on more equal footing with Grand Forks when recruiting businesses.
Strong support for the Kiel-Eken provision came from Bloomington Democratic Rep. Ann Lenczewski, who when she was House Taxes Committee chairwoman included the program in her tax bills.
“With a big (state budget) surplus, we might have a chance to prioritize this,” she said. “This is extremely important.”
Senate Taxes Chairman Rod Skoe, D-Clearbrook, said: “We have a couple hundred businesses, more or less, that participate.”