By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
Behold the economic miracle of St. Paul!
During former Mayor Norm Coleman's tenure, the city created more than 18,000 jobs and saw $3 billion in investment. The would-be U.S. senator brought hockey to St. Paul and lured big-time corporations like Lawson Software to the once-dormant downtown. And he accomplished all of this without raising taxes one penny. "I've done it for St. Paul. I'll do it for Minnesota!" is Coleman's rallying cry.
The economic renaissance of downtown St. Paul has been praised so often and so lavishly in the past decade that nobody even questions the truth of it anymore. The Pioneer Press's relentless civic jingoism on the subject has been enough to make one wonder if its reporters are being paid directly by the chamber of commerce.
But what if it's all an economic house of cards?
According to the Minnesota Department of Economic Security, there were indeed 18,038 jobs created in St. Paul between 1993 and 2000, a jump of 9.7 percent. What the Coleman campaign fails to mention, however, is that the average increase in jobs statewide during those heady economic times was 20.1 percent. Even Minneapolis, whose two-term mayor was drummed out of office last year, had a better track record than St. Paul, with 28,303 new jobs generated, a rise of 10.1 percent.
This lackluster record of job growth occurred despite the lavish subsidies that Coleman used to entice companies to remain in or relocate to downtown St. Paul. Lawson Software, the supposed crown jewel of St. Paul's renaissance--which Coleman lured from Minneapolis with a brand-new 13-story, $100 million office building as bait--is looking like a dot-com dinosaur. The company's stock has tumbled from a high of $17 per share shortly after it went public last December to a current price of just over $3. Lawson lost almost $2 million in the most recent fiscal quarter and has laid off 345 workers this year, 16 percent of its work force.
Conseco, another beneficiary of St. Paul's largesse, is in even worse financial shape. The insurance and consumer finance behemoth is $6 billion in debt and teetering on the edge of bankruptcy. Its stock is trading at less than a dime per share. BusinessWeek recently proclaimed Conseco's board of directors one of the worst in the country, and last week the company's chief executive officer abruptly resigned. Conseco Finance, the corporation's St. Paul-based subsidiary, laid off 2,000 workers in 2000, 400 of them in St. Paul. The company's in such pronounced straits that it's not even using the $3 million, 8.5-acre parking lot that St. Paul constructed on its behalf. (The city is now trying to sell the land for redevelopment.)
St. Paul's generous corporate subsidies have helped create a glut of office space downtown. According to a July report by United Properties, the vacancy rate for office space in St. Paul's central business district for the first half of 2002 was 21.2 percent, the highest in the state. Jim Miller, a commercial real estate broker, says that the vacancy rate is higher than it's been in a decade and that it's depressing lease rates. This problem will only be exacerbated by the opening of U.S. Bancorp's 350,000-square-foot headquarters just across the Mississippi River from downtown, which the city is subsidizing to the tune of $15 million. "The city's priming the pump now is actually fueling vacancy problems," argues Miller.
St. Paul's citizens will be paying for Coleman's corporate charity well into the future. Between 1993 and 2000 the total indebtedness facing the city rose from $460 million to $619 million--more than this year's entire budget.
"You can't run a city like Norm Coleman did and expect that to be sustainable," says Dan McGrath, executive director of Progressive Minnesota. "Norm Coleman might be a wonderful mayor in great economic times, but look at the economic disaster he's left in St. Paul."
The economic indicators are not rosy for the future, either. St. Paul faced a projected $14 million deficit for 2003--a gap equal to more than a fifth of all property taxes collected by the city. The prospects of either major cutbacks or a large property-tax increase were avoided by Coleman's chosen successor, Randy Kelly, only through some budgetary sleight of hand. Kelly managed to keep St. Paul's property-tax levy flat for the 10th straight year by hiking fees for standard services such as snow plowing and tree trimming and by raiding the city's reserve fund. The budget crunch will only grow more difficult next year with anticipated cutbacks in local government aid from the state, which is facing its own $3 billion deficit.
By that time, of course, Coleman hopes to be safely holed up in Washington, D.C.
Last week, a coalition of nonprofit groups and labor unions, including the Minnesota Alliance for Progressive Action and the Jobs Now Coalition, led a bus tour highlighting some of the more egregious corporate subsidies that were doled out during the Coleman years.
In 2001 St. Paul gave the company $7.8 million to renovate its downtown store. The money consisted of a $6.3 million loan that will be forgiven if the store remains open for 10 years, and a $1.5 million grant for asbestos abatement. Field's (a division of Target Corporation) subsequently downsized its St. Paul store from five floors to three and eliminated 80 jobs. Under the city's living-wage ordinance, corporations that receive more than $100,000 in public dollars are required to pay their employees at least 110 percent of the federal poverty level for a family of four, or roughly $9 an hour. But Target Corp., which had sales of $40 billion last year, was granted a waiver to this ordinance.