The Job Opportunity Building Zones (JOBZ) program began in 2004 as a way to stimulate economic development in rural Minnesota. The program creates tax-free zones, mostly outside the seven-county metro area. Businesses in the zones pay no state or local taxes for up to 12 years.
Former state Rep. Rob Leighton says JOBZ discriminates against other businesses that don't get those tax breaks. Leighton is an attorney representing ten businesses and individuals who believe they've been harmed by competitors in the JOBZ program.
"The JOBZ program permits them to not have to pay real estate taxes, income taxes, corporate taxes. And you can imagine that if your trying to compete with a fellow business that's in the same area of business you are that would be a big disadvantage. So, each of these plaintiffs feel they've been directly harmed economically because of it. And they believe they should be treated equally."
This is the second legal fight waged against JOBZ. A Ramsey County judge dismissed a lawsuit last fall that also challenged the constitutionality of the program. The judge said the plaintiffs failed to show their taxes went up because of the programs. That ruling is still being appealed. Leighton says the plaintiffs in the new lawsuit won't have a problem showing how they've been harmed.
"We're asking that the plaintiffs be able to show their damages. And that they be able to receive repayment of any taxes that they would have paid while competing businesses in the same area were receiving these tax breaks," Leighton says.
Gov. Pawlenty's spokesman Brian McClung offered another firm defense of JOBZ. The Republican governor fought off a DFL effort to kill the program during this year's legislative session. McClung describes the program as a solid success that's created thousands of jobs.
"Does JOBZ create a tax situation that is favorable for some businesses? The answer is yes. And we've designed it so in order to bring more economic opportunities to areas of Greater Minnesota that need them. We can't have all of the growth in Minnesota occurring just in the metropolitan area. We need to make sure that there's access to good jobs in Greater Minnesota, and JOBZ has been a success in doing so."
McClung says the judge's ruling last fall should have settled the legal questions regarding JOBZ. He says courts in several states have supported similar programs and tax breaks.