How are zones designated under JOBZ?
The law authorizes the Commissioner of the Department of Employment and
Economic Development (DEED) to designate ten zones. After consulting with the
Commissioner of Revenue, the commissioner is to designate zones based on a set of
need indicators and success indicators. The need indicators are essentially ten
criteria that measure various forms of economic distress of the area, while the
success indicators are a set of eight criteria intended to gauge whether a
proposed zone will succeed in stimulating economic activity. Then Commissioner Matt
Kramer designated ten zones on December 18, 2003. In addition, he also
designated one agricultural processing zone at that time under the separate
authority for that program. The law authorizes designation of up to five
agricultural processing zones. A description of the agricultural processing zone
program is available.
Who can apply for zone designations?
The law authorized local government units (cities, counties, towns, regional
development commissions, the Iron Range Resources and Rehabilitation Agency, and
federally designated economic development districts) to apply for zone
designations. They could do this individually or jointly and could form joint
power entities to apply for and operate zones. All of the applications were
filed jointly on behalf of multiple local government units to facilitate
locating parts of each zone ("subzones") in multiple cities and counties, given
the statutory limit of ten zones.
What size and other geographic limits apply to zones?
The law limits the maximum size of a zone to 5,000 acres. (This is about the
size of 1,000 typical city blocks.) A zone can be divided up into an unlimited
number of noncontiguous subzones. These subzones are not subject to a minimum
size requirement; they can be as small as a city lot or a parcel. Moreover, the
subzones can be located in different cities or counties. All zones must be
located outside of the seven-county Twin Cities metropolitan area.
How long does a zone designation apply?
The maximum duration of a zone is 12 years. For the zones designated in December
2003, this means the designation and zone benefits end December 31, 2015.
An applicant may request a
shorter duration limit for a zone. However, all of the applications requested
and the designations provided for
12-year durations. The law does not explicitly authorize this, but it is
possible that the business subsidy agreement could provide that the business
will receive zone benefits for a shorter period than the full duration of the
Has the legislature provided for extensions of the JOBZ duration limits?
Yes, the legislature has passed three laws provided for extended durations the
tax incentives under the JOBZ for certain types of projects.
- Ethanol projects. In 2006, the legislature provided that
three years of additional tax benefits could be provided to qualified businesses
that operate ethanol plants. This
allows these businesses to receive benefits through December 31, 2018. To qualify, the business subsidy
agreement must be executed after April 30, 2006.
- High technology glass manufacturing plant. The 2009 Legislature enacted a five-year extension (allowing tax benefits
through December 31, 2020) for a glass manufacturing plant that produces glass
using an electrochromatic process to change tinting of the glass to provide
variable shading and save energy. To
qualify, the facility was required to be in a county with an unemployment rate
of 10 percent or more or greater than 10 percent above the state average and
include the company headquarters.
The business is located in the city of Faribault and business subsidy agreement
was entered into in April 2010.
- Automotive recovery zone ("CARZ"). The 2010
Legislature authorized a special form of JOBZ incentives to encourage the Ford
Motor Company to continue to operate its plant in St. Paul.
This authority allowed a five-year extension
of the availability of a modified menu of tax benefits. To qualify, the business subsidy
agreement was required be entered by November 2011. This is unlikely to occur, since the
company has announced its intent to close the plant at the end of 2011 and no
negotiations had occurred or agreement entered been entered into by October
What zones have been designated by DEED?
Commissioner Matt Kramer designated ten JOBZ zones on December 18, 2003. These
zones contain about 29,000 acres in 325 subzones. (The acreage now designated
likely varies because of modifications made to the zones.) Nearly all of the
counties outside of the seven-county metropolitan area contain designated
Can zones be modified after they are designated?
Yes, the law authorizes the commissioner to modify zones as a remedy for
failure to meet the zone's performance goals.
Minn. Stat. sec.
469.320, subd. 3. In addition, the commissioner has taken the position that
DEED has authority to modify zones on application by the zone administrator.
These modifications can take the form of "swapping" acres in and out of zones
and subzones or, if that is not feasible, adding new area. Here is a link to
DEED's description of the modification process:
www.deed.state.mn.us/bizdev/PDFs/jobzZoneModifProc.pdf (Note: this is
a PDF document).
As a policy matter, DEED is willing to approve adding new area to a zone only
if "there is a qualified business ready to locate on the requested parcels."
DEED has approved several modifications to zones since 2003.
Do prevailing wage requirements apply to business receiving JOBZ incentives?
Yes, the Attorney General has issued an opinion that qualified businesses are
subject to the prevailing wage law, because they qualify for exemption from
sales tax. This restriction cannot be avoided by the business electing to pay
Who is responsible for administering JOBZ?
JOBZ is essentially a local program; most administration falls to the zone
and subzone administrators, as well as other local officials (e.g., county
officials who administer the property tax elements of the program). This
includes marketing the program to businesses, entering business subsidy
agreements for businesses locating in the zone, and annually reporting on
performance to the state. At the state level, DEED is
responsible for oversight and most administration of the program. It sets the
parameters for the program (within the authority under the law), designates the
zones and approves modifications, receives the annual reports and evaluates the
zone performance, and so forth. The Department of Revenue (DOR) administers the
state tax aspects of the program. The DOR commissioner collects repayments, pays
refunds, can waive a repayment obligation, and so forth. In addition, DOR
provides administrative guidance on the tax features of the program,
including administration of the property tax elements.
What reporting requirements apply under JOBZ?
Successful applicants for zone designation are required to annually report to
DEED on their progress in meeting the zone performance goals under the
development plan and in complying with the business subsidy law.
Minn. Stat. sec.
469.320, subd. 1. DEED is not explicitly required to report to the
legislature on the overall JOBZ program, but has indicated it will make results
publicly available. It has posted periodic updates on completed deals in JOBZ
zones on its web site. Here is a link to reporting on completed business subsidy deals:
What special audit requirements apply to JOBZ?
The law directs the Tax Increment Financing, Investment and Finance Division
of the Office of State Auditor to annually audit the creation and operation of
all zones and business subsidy agreements. This requirement was enacted by the
2005 Legislature and no funding was provided for the function. As of 2011, audits have not been yet been done under this authority.
What enforcement authority does DEED have over JOBZ?
The law authorizes the commissioner of DEED to take any appropriate actions
in response to evidence that a zone or subzone is not meeting its performance
Minn. Stat. sec. 469.320, subd. 3. These include modifying zone boundaries or
terminating the zone. Before doing so, the commissioner must consult with the
affected local government units and notify them of the proposed actions. They
may appeal the commissioner's order under the administrative procedures act's
contested case procedure. The law establishes special rules that determine how
qualified businesses in an area removed from a zone are to be treated---in
general, they are allowed to continue qualifying for tax incentives based on
activities that pre-dated removal of the property from the zone.
Minn. Stat. sec. 469.320, subd. 3.