By Sara Quam
Border city legislation's future looks brighter to Luverne and to everyone who supported it. It is now in both Senate and House tax bills and is on its way to the conference committee - almost a sure bet to be signed into law.
Last year, the same legislation made it into only the Senate tax bill. However, no one is looking back because the legislation could be so valuable to the city.
"This will change the rules of economic development for Luverne. It will level the playing field across the border," City Administrator Matt Hylen said.
The provision aims to compensate for tax disparities between Luverne and South Dakota by providing incentives to businesses coming to Luverne: state sales tax and local property tax exemptions, a corporate franchise credit, a new industry payroll credit and payment in lieu of taxes.
As recently as last week, the outlook was bleak for the legislation. Luverne Mayor Glen Gust went to St. Paul to lobby Wednesday and stayed through the week.
"It's a great economic development tool for the city," Gust said.
At first an amendment including border city provisions didn’t make it into the Senate’s tax bill as proposed by State Sen. Arlene Lesewski - a Republican in a DFL-controlled Senate.
So DFL Sen. Jim Vickerman introduced the same amendment in the DFL Tax Bill and it passed.
Lesewski voted for the DFL bill in order to support Luverne's special legislation that was outlined in it. Both DFL and Republican senators from Greater Minnesota and from the metropolitan area spoke in favor of the amendment.
Gust said, "Sen. Lesewski and Sen. Vickerman helped other legislators understand the real competitive issues Luverne is faced with. They made a very strong case for the amendment."
With the tax bills now in conference committees, slight differences between the House and Senate versions will be negotiated.
Gust said the entire procedure was exciting to witness and participate in.
"It's good for Luverne, good for Rock County, and it's good for the state." Gust said, citing research that says 25 jobs created will pay the money back to the state.
The city isn't sure exactly how the businesses would access the tax incentives, and each case will likely be approached separately. State money is used for all of the tax incentives, except for local property tax exemptions. But all available incentives don’t have to be used just because they are available. The process the city takes will mean public hearings and input.
Luverne Economic Development Authority Director Tony Chladek said, "It'll certainly be one of those tools I can throw out there," when he's making contacts with prospective businesses.
Gust said the legislation will emphasize the already high quality of life in Luverne. He also said it should help stop businesses from moving and encourage others to stay. Tri-State Insurance Company has said it will move to South Dakota, and Luverne Truck Equipment Company and Luverne Fire Apparatus Company have already relocated there.
The House of Representatives version of the tax bill included border city privileges for Luverne earlier in the session, largely due to the efforts of Rep. Richard Mulder.
Background on border city legislation
City leaders started more closely analyzing Luverne's economic situation in 1999. Then a city intern conducted a study that proved initial perceptions right. To back up that study, which could be seen as biased, the city hired Maxfield Research to complete its own study. The results were similar.
Both studies concluded that Luverne's situation as a border city is partially due to Interstate 90, which makes travel to South Dakota so easy. And businesses have an easier time with taxes in South Dakota.
When here, for example, Luverne Truck Equipment Co. employed 75 workers; since moving to Brandon, it employs 250. Luverne Fire Apparatus Co. now employs 70 people and in Luverne employed just 35.
A Maxfield Research study compared border cities (Luverne, Sioux Falls, Brandon), regional cities (Luverne, Pipestone, Marshall, Windom, Worthington), western Minnesota border cities (Luverne, Breckenridge, Ortonville and East Grand Forks) and non-border cities of similar size (Luverne, Glencoe, Redwood Falls and Stewartville).
In short, Luverne falls behind in all of the categories.
The research company showed that Luverne has experienced slower economic growth than other border cities. It is illustrated best in a comparison with Brandon, once a smaller city than Luverne.
Brandon's population surpassed Luverne's through the '90s while Luverne's stagnated.
In comparison to regional cities, Luverne is behind most in household growth, job retention, gross sales and taxable property.
The study says "Luverne's decline in employment is unmatched among all" western border cities. Another shortcoming Luverne has compared to other western border cities is gross sales. Sales stayed constant from 1990 to 1996 while other border cities had an increase.
Non-border cities of similar size compared favorably to Luverne based on population and household growth, employment, gross sales and taxable property.