What do Brau Brothers Brewing Co., Minnesota Rubber and Plastics and Walmart have in common?

They all received subsidies from state or local governments in Minnesota in recent years, along with hundreds of other businesses, according to Good Jobs First, a Washington, D.C. nonprofit that tracks subsidies in an effort to promote government and corporate accountability.

With $250,000 in grants and loans, Marshall helped bring Brau Brothers Brewing into its city limits in 2013 from a nearby town. Minnesota Rubber and Plastics, a manufacturing company, was approved for $200,000 in loans and grants to expand in a facility in Meeker County in 2011. And Mankato agreed to provide Walmart with $5.3 million worth of grants, tax abatements, and contributions to infrastructure in 2005 to support construction of a distribution center for the benefit of the tax base and "creating high-quality job growth,” according to DEED.

These are just three examples of payments made by Minnesota governments to try to entice businesses to start, move or expand. All told, from 2005–2013, Minnesota governments (state and local) paid out at least $1.2 billion to private organizations via various subsidy programs, according to Good Jobs First.

So who got the money? And is it worth it?

What is a subsidy

By textbook definition, government subsidies are direct or indirect payments by governments to organizations or individuals, designed to incentivize some behavior, whether that’s installing solar panels, revitalizing an underdeveloped part of town, training workers or creating jobs. In theory, they provide benefits to both the organization that receives them and the public.

MinnPost looked at subsidies recorded in Good Jobs First’s Subsidy Tracker between 2005 and 2013, the most comprehensive data available.

Good Jobs First obtains subsidy data from government websites as well as public records requests. More recent data isn’t available for Minnesota for a couple reasons: because comprehensive public reporting  lags somewhat behind, and because Minnesota’s Subsidy Tracker data were last updated in 2015.

The Tracker also excludes subsidies whose values were not publicly available, including 213 subsidies that were part of Minnesota’s Job Opportunity Building Zones (JOBZ) program. It also may not include all subsidies authorized by local governments.

Even given those limitations, state and local Minnesota subsidies totaled at least $1.2 billion.

Those subsidies come from a lot of different forms — from tax breaks, to business loans, grants and other forms of assistance and out of a lot of different sources.

By sheer number, the biggest fount of subsidies in the Minnesota Subsidy Tracker data is local governments looking to lure in or bolster businesses. Local subsidies not related to JOBZ numbered 450, and were valued at more than $318 million between 2005 and 2013.

Another big source of subsidies was the Minnesota Investment Fund, which funnels state funds into cities, counties, townships and tribes to expand businesses or retain workers in industrial, manufacturing and technology fields. This accounted for $8.1 million in subsidies between 2005 and 2013 in Subsidy Tracker. Companies that received subsidies under this program include Thin Film Technology, Magnum Machining and Ever Cat Fuels.

The St. Paul Strategic Investment Fund, aimed at attracting businesses to St. Paul, accounted for $2.8 million in subsidies in the data. Recipients include Memorial Blood Centers, Gander Mountain and BioMedix.

Minnesota’s Special Incumbent Worker Training Program helps businesses invest in training. It spent at least $847,000 on subsidies from 2005 to 2013, according to Subsidy Tracker. Companies that received training reimbursement include Reviva, Viracon and Deli Express.

The Metropolitan Council’s Fiscal Disparities Program gave tax breaks valued at $250 million to help expand the Mall of America (described below) in this time period, according to Subsidy Tracker. The Fiscal Disparities Pool, which pools a percentage of tax revenues from the seven-county Twin Cities metro area, was created in 1971 in with the goal of to promote smart and equitable growth.

How much do Minnesotans pay

Minnesota and local units of government within its borders spend an average of at least $239 million — or $45 per capita — on subsidies each year, according to a 50-state investigation by the New York Times. That puts Minnesota far behind Alaska ($704 million per year or $991 per capita), but  ahead of Nevada ($33.4 million per year or $12 per capita). Minnesota’s most subsidized industries are agriculture, finance and telecommunications.

With the exception of South Dakota, all of Minnesota's neighbors spend more per capita on government subsidies than Minnesota does. Wisconsin spends at least $1.53 billion per year, or $268 per capita; Iowa: $233 million or $73 per capita, and North Dakota, $32.9 million or $49 per capita.

The lion’s share of Minnesota government subsidies — 80 percent of the dollars in Subsidy Tracker entries between 2005 and 2013 — went toward a few giant economic development deals, some of which have multiple sources. This type of subsidy is specifically tailored to help businesses expand or relocate in a given spot. The five biggest subsidies in Subsidy Tracker in the 2005 to 2013 timeframe were as follows:

• Rochester's Destination Medical Center, for which the legislature approved economic development subsidies worth $585 million, contingent on private investment. The Mayo Clinic’s CEO had said the clinic could expand in another state without subsidies to develop Rochester.
• In 2013, the Legislature approved $250 million in tax breaks for Triple Five Group, the Mall of America’s owner, to assist with a $1.5 billion expansion for the mall.
• In 2010, Essar Steel Minnesota was approved for $72 million in state grants and loans to build a taconite and steel mine — about $66 million in grants and $6 million in loans. In 2015, a competitor asked the state to force Essar to pay back the money “because it says the project has failed to meet construction and project timelines and other promises,” the Star Tribune reported. Essar Steel Minnesota has since filed for bankruptcy.
• Otter Tail Ag Enterprises received more than $26 million worth of subsidies from Otter Tail County in 2007, according to Subsidy Tracker. The Fergus Falls ethanol company filed for bankruptcy in 2009 and was acquired by Green Plains Inc. in 2011, according to Bloomberg.
• Medtronic Inc. sealed a $22.9 million tax increment financing deal with Mounds View in 2005 to help it build a new facility. In 2014, the company announced it would move its headquarters to Ireland because of lower taxes (it still has some of its operations and jobs in Minnesota).

Why isn't the $498 million in state and local subsidies for the Vikings stadium factored in? The bonds for that deal weren’t sold until 2014.

Is it worth it?

Economic development subsidies tend to be popular with public officials, who can trumpet returns on the initial investment in the form of an expanded tax base and the creation of jobs for their districts. And their popularity makes sense from a local perspective — why would a city want to lose out on a major business to a neighboring city — or state?

But experts say if you zoom out, they often create more neutrals and negatives than positives.

Arthur Rolnick, former senior vice president at the Federal Reserve Bank of Minneapolis and a senior fellow at the Humphrey School of Public Affairs criticized subsidies’ tendency to create bidding wars between localities and states.

Complaints of such a competition emerged recently when Greater MSP, an economic development partnership aimed at fostering the Twin Cities' business community, was accused of pitting metro cities against one another for Prime Therapeutics, a pharmacy benefits manager. Greater MSP disputed that was the case.

It’s not just luring new businesses that can present problems: it’s also not uncommon for established businesses to threaten to move to another city or state because of a sweet subsidy deal. When they use this tactic — and they often do — it’s tough to know whether they’re bluffing or not. And sometimes, they do leave for greener pastures.

The Pioneer Press reported this month that Newport-based Diversified Manufacturing Corp. will move 13 miles southeast of its present location to Prescott, Wisc. in June, where the company has been offered free land, a tax increment financing deal and other assistance.

Despite a competing offer from Cottage Grove, where some of its jobs are located, the company opted to cross the border.

“There is nothing that our cities have to offer that is in any way lucrative or can be considered a good incentive program,” the company’s owner told the paper. “Wisconsin and the Dakotas are very aggressive in luring Minnesota companies, and I mean really aggressive. They give you the sun, the moon, Jupiter and parts of Mars.”

Jobs and a larger tax base can be easy to sell from the parochial, local perspective, Rolnick said, but researchers have often found the net effects to be negative.

In many cases, Rolnick said, they fund projects that businesses would have undertaken anyway: In the case of the Mall of America’s expansion, the owner of the mall acknowledged the project could have gone forward without the tax breaks, though — the company said — not at the same level of density.

Furthermore, a 2004 study by University of Iowa regional planning professors found that economic development subsidies didn't seem to create jobs or provide fiscal benefits to states.

“If the state funds locally targeted incentives, the state is merely spending money to move taxpaying firms from one place to another; once again the local fiscal effects cancel out, but now the entire incentive cost is a state loss. And these fiscal losses are not trivial; the cost per job could be massive,” the authors write.

While economists tend to say no — they’re not really worth the money, it’s difficult to get good numbers to do the analysis that would tell us for sure, adding another layer of uncertainty, Philip Mattera, research director of Good Jobs First, said. States vary greatly in how stringently they require companies and subsidy-givers to track the creation of jobs and economic impact, he said, though Minnesota is better than most.

Still, “Even in Minnesota, there’s no comprehensive, centralized reporting,” Mattera said. “There isn’t a single state where there’s comprehensive, central reporting.”

In 1995, the state passed a law requiring the reporting of many state and local subsidies, including job creation and wages. But there is no mechanism for enforcing that requirement, said Shane Delaney, a DEED spokesman.

The state also faced criticism over a lack of transparency in its JOBZ program, which made summary data public, but kept confidential information that would make it possible to determine which businesses got tax breaks and whether or not they were working, the Star Tribune reported.

The Minnesota Legislature replaced JOBZ with a new Job Creation Fund in 2013, under which businesses will receive subsidy money after they show they have met goals.

Even when numbers on the effects of subsidies are available, Mattera said, they’re somewhat squishy: calculations that claim to show the economic impact of a project may not account for other costs to taxpayers, such as increased demand on infrastructure.

“If a big new facility comes to town, you may need to make infrastructure improvements, you might need more fire and police and other kinds of services. If a lot of people move to the town as a result, you might need more schools and other facilities like that,” he said.

Correction: A previous version of this story mischaracterized the recipient of an economic development deal in Rochester. The deal will help develop the Destination Medical Center, which is a public-private partnership of the Mayo Clinic and other developers, as well as the City of Rochester, Olmsted County, and the State of Minnesota.