By CP Staff
By Olivia LaVecchia
By Chris Parker
By Jesse Marx
By John Baichtal
By Olivia LaVecchia
By Jesse Marx
By Olivia LaVecchia
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.
In 1997 St. Paul issued $11.3 million in bonds to expand the World Trade Center parking ramp to a 1,200-car capacity. The project was undertaken at the behest of Principal Financial Group, owners of the World Trade Center. At the time, Principal was pledging to invest $42 million in the World Trade Center and Town Hall, with plans that included a 14-screen movie theater and restaurants. After the parking ramp renovation was completed, the rights to operate it were turned over to Principal Financial for 20 years. Since the city remained the deed holder, however, the company could operate the ramp without paying property taxes. Principal Financial then sold the World Trade Center and left town, never delivering on its promise to build an entertainment complex. The company continues to operate, and generate revenue from, the city-built parking ramp.
In 2000 St. Paul spent $3 million to purchase and develop an 8.5-acre vacant railroad property beneath the Lafayette Bridge to provide Conseco Finance with 1,000 parking spaces. In return the company promised to move an additional 600 employees to St. Paul, bringing its total downtown work force to 2,000. The next year, before the lot was even completed, the company reversed course, announcing that it was laying off 2,000 workers, including 400 in St. Paul. Despite this, city officials continued to proclaim that the parking lot was a good deal. The lot is not currently being used and the city is now trying to sell the land to developers. "St. Paul is left with a undeveloped, polluted site," summarizes Carrie Thomas, policy director for the JOBS NOW Coalition.
In 1997 St. Paul lured Lawson Software from Minneapolis with the promise of a brand-new $101 million, 13-story downtown office building. Three years later the city sold the office tower to developer David Frauenshuh, who held a 25-year lease on the property, for just $53.5 million. The city retained ownership of the parking ramp and retail space, both of which have struggled to generate revenue. In recent months Lawson's financial outlook has darkened considerably. The company'stock price has plummeted to less than $4 per share and 345 employees have been laid off this year. The St. Paul Companies, which agreed to rent three of the office tower's 13 floors, has also struggled financially. Because of layoffs, the insurance company never even moved into Lawson Commons. According to spokesman Pat Hirigoyen, two of the three floors are currently subleased.
In 1997 Norm Coleman announced that Minnesota Mutual (now Minnesota Life) would nearly double the size of its headquarters in downtown St. Paul, a $90 million investment. What's more, the company promised to do so at almost no public expense. As details of the deal emerged, however, it became clear that the cost to St. Paul taxpayers would not only be substantial, but impossible to calculate. To purchase and prepare the site for construction, St. Paul borrowed $15 million from Minnesota Mutual, then turned around and sold the piece of property to Minnesota Mutual for one dollar. To pay back the loan, the city is obligated to fork over property taxes generated by the new building, plus interest, until 2026. In the end, according to an analysis of the deal done by the Pioneer Press, the loan plus additional building expenses could cost taxpayers $39 million.