Construction bill has a secret list of projects

Some of Minnesota's biggest unions and construction companies are pushing a plan to use state loan guarantees and tax breaks to kick-start a building industry that has been staggered by the recession. But they are keeping under wraps a list of projects that might benefit from it.

With 10 days left before the Legislature's deadline to adjourn, the plan's supporters said that key legislators had been shown a list of projects that might go forward should the fast-moving bill be adopted. The list, however, is not being made public -- a move that is raising some eyebrows over what the Legislature might be financing.

House Majority Leader Tony Sertich, DFL-Chisholm, who introduced the proposal on Monday in the House, said Thursday that he had not yet seen the list of projects. Another legislator, Rep. Keith Downey, R-Edina, complained that he was suspicious because "bills that come fast at the end of the session, presented by lobbyists, automatically raise a couple of questions."

Rep. Joe Mullery, DFL-Minneapolis, raised similar concerns at a hearing this week. "I'm just a little worried," he said. "I'm just looking at this. I can see a stadium, a race track, a casino" being eligible.

After a hearing Wednesday before the House Taxes Committee, the panel's chairwoman, Ann Lenczewski, DFL-Bloomington, said some of the tax breaks in the proposal could also easily apply to the Mall of America, which has been trying to finance a massive second-phase development. While the mall is not formally part of a nearly 70-member coalition pushing for the legislation, some of its lobbyists, including former Senate Majority Leader Roger Moe, have been testifying in behalf of the proposal.

List 'may never be released'

Dick Anfang, president of the Minnesota Building and Construction Trades Council, said the list of possible projects would not be released because doing so would release proprietary information, such as what land parcels an individual developer might be buying to build on. "It may never be released," he said.

Anfang said the list was being shown to legislative leaders in order to "establish credibility" at the State Capitol. The coalition pushing the legislation includes, among others, Ryan Companies, U.S. Bank, Kraus-Anderson Construction and the Faegre & Benson law firm.

"First of all, nobody knows who's going to get the money," Anfang said. "The list of projects that we have are simply an indication of projects that are shovel ready, and could apply."

With backers of the legislation scrambling to find allies as a tax conference committee finishes its work, two of the bill's major components are drawing attention. One would create a $100 million state loan guarantee fund for projects that have a private loan commitment of at least $5 million, provided the guarantee is not for more than 25 percent of the entire loan. Another provision would allow tax increment financing districts that include a new "stimulus project" -- defined as any project begun between June 2009 and January 2013 to help create jobs -- to be extended for 10 years.

Tax increment financing (TIF) districts, a public subsidy tool long favored by developers, allow property taxes generated by a project to be used initially to pay the costs of the development and not go to local units of government. Though TIF districts can provide significant financial help to projects, the local governments may not see the property tax benefits of such a project for years. Proponents of tax increment financing argue that, without the TIF subsidy, the increases in property tax revenue wouldn't occur to begin with, and that projects also provide other benefits, such as jobs and new facilities.

Gauging potential effects

Lenczewski and legislative analysts said the tax increment extensions in the bill could be expensive for taxpayers, and could amount to as much as $1 billion in diverted property taxes at a time when communities may need increased revenues to fund their budgets.

"Some of these TIF districts are delivering, in one project, $10 million a year. You get them for 10 more years, now they get another $100 million out of the property taxpayers," Lenczewski said. Tax increment districts, she added, are "all over the state. The Mall of America's in one. Of course they want a 10-year TIF extension."

What about the Vikings?

At one point last week, the proposal featured language -- aimed at a proposed new Minnesota Vikings stadium -- that would have prevented stadiums from benefiting financially from the legislation. But a Senate committee deleted the language, saying that it was irrelevant because a Vikings stadium costing more than $900 million would be too large to benefit from the proposal.

In testifying before legislative committees in the past week, supporters have said that Minnesota ranks 10th nationally in the loss of construction jobs in the year ending in February, and that state loan guarantee in particular would help bridge a credit crunch that had been created by the recession.

"We should be doing what we can," said Sertich. "Not everything in the bill is popular, and not everything in the bill will probably gain the support of the governor and the Legislature."

But Rep. Jim Davnie, DFL-Minneapolis, said he was leery. "I'm not seeing any criteria here what projects, what developers, would be eligible," he said. "We're buying blind."

Mike Kaszuba • 651-222-1673