Wednesday, September 26, 2007

First JOBZ, then SEED 

Governor Pawlenty has a brand new program for rural economic development. Leo Pusateri at True North details what's in the Strategic Enterpreneurial Economic Development program, or SEED. Part of the initiative has the usual attempts at leveraging informational advantages governments have, so it creates trade shows and an Office of Entrepreneurship. That sort of thing may or may not help businesses, but at $2.1 million proposed it's small beer.

But the plan also creates a set of tax credits and micro-lending initiatives for rural businesses. Micro-lending is a fad in international development, even to the extent of creating a network of private loans from households to the developing world. But are we really to believe many entrepreneurs in Battle Lake, say, are being inhibited by not having a bank lend them $20k when they have a solid business plan? And should the government give a 25% tax credit to someone who invests money in an "angel" fund? These things are becoming a bit of a fad in economic development. The tax credits go to people with high net worth -- those are the angels -- and thus will be subjected to a good deal of demagoguery by the Left.

Likewise, SEED expands on JOBZ by adding grants for developing main streets and infrastructure in rural Minnesota. I've noted before that JOBZ is more about job- shifting than it is job creation. But even if the money was attractive, do we think the population drain in outstate Minnesota is going to be solved by an extra $70 million in loans and grants? That strikes me as unlikely to make much of a difference.

All this, of course, is an attempt to deal with the disappointment that both Republican and DFL leaders have had with the impact of JOBZ on outstate Minnesota counties. (Notice the targeting of SEED to rural MN.) In floor debate in the Senate last March,
[Senator Tom] Bakk said the eventual elimination of the Job Opportunity Building Zones (JOBZ) program is an admission of error on his part. Bakk was the Senate sponsor of the proposal four years ago. The program was intended to help economically depressed communities across Greater Minnesota, he said. Reports from the Dept. of Employment and Economic Development have indicated that economically depressed communities have not benefited, he said. Bakk said he has learned that the business tax climate has very little to do with a business�s decision about whether to expand or relocate in the state. The real obstacles to economic development are transportation, workforce availability, and other infrastructure matters, he said. (Link added.)
It's worth noting, by the way, that the Legislature is doing a review of JOBZ, with a report due in February. It will be very interesting to see how that review affects the chances of the Legislature's approval of SEED.

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