What it will take to keep jobs in Minnesota, and add more

In his State of the State address last week, Gov. Tim Pawlenty reiterated the importance of job creation and proposed ways to make it easier to do business in Minnesota. Unfortunately, Pawlenty's "jobs creation bill" is only the beginning. Not only do these measures face an uphill battle in order to get passed in the DFL-controlled Legislature, Minnesota needs to do even more if we are going to be competitive with other states that are successfully growing jobs right now.

Historically, Minnesota has not been a business-friendly state, due to the tax situation, the cost of doing business and lack of incentives. And it is only getting worse. In my business, which helps firms that are looking to relocate, we've seen a growing number of Minnesota companies that have gotten fed up and have expressed interest in taking their operations to a state with a lower cost of doing business.

What can be done to promote a turnaround in Minnesota and not only keep jobs here but attract new business and bring in additional private-sector jobs? The key is to look beyond taxes at two additional, critical areas.

First, the governor and Legislature must empower communities to raise their own money for economic development and allow them to set their own rules for how this money is used. For example, the state could allow communities to adopt a .25 or .5 percent sales tax and use the revenue for economic development. This gives the communities the flexibility to build an industrial park or invest directly into companies that will bring jobs.

The other critical task at hand is for Minnesota to invest in companies that create jobs. In addition to making the tax structure more favorable to business, the state must develop job creation grants and incentives that allow Minnesota to compete with other states that currently offer attractive economic incentive packages. Businesses will be more attracted to states that have made an investment in their economic future.

Our state leaders should consider the benefits of supporting businesses through performance-based incentives or grant programs. These incentives are not just giving companies money to lure them to the state; they allow a company that is already here to grow. The state or community is paid back within three to five years for its investment. These businesses pay income tax, property tax, inventory tax, sales and use tax, payroll tax, unemployment insurance -- all at a local level. Every payroll dollar helps the community as the employee visits the local drug store, the pharmacist will go the dry cleaner and so on, with taxes being collected at every stop. Ultimately, a quarter of that dollar stays in the community. If a new employer in town has a $10 million payroll, the subsequent income to the city, county and state is pretty substantial.

There has never been a more critical time for Minnesota's leadership to step up and make the changes necessary to dramatically affect the future of business in our state. Even in our current economy, a large number of American and foreign companies are growing and looking to locate within the United States. Luring these businesses to our state or persuading others to stay is going to take a long-term investment on the state's behalf -- yet it is a worthwhile investment that will ultimately reap tremendous dividends.

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Dana Olson is president and CEO of Ecodev, which provides site selection analysis services and economic development consulting tor companies that seek to relocate or expand.

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