A study recommending that Iowa bulk up its financial incentives to attract more businesses and jobs is the wrong course of action for the state, according to the Iowa City-based Iowa Policy Project research group.
The study, commissioned by the Iowa Chamber Alliance and released Wednesday, compared the Iowa’s economic development competitiveness with states such as Nebraska, Minnesota, South Carolina, South Dakota and Texas.
The Chamber Alliance is a group of 16 chamber and economic development groups.
Deloitte Consulting of Chicago, which performed the study, offered five recommendations to improve the Iowa’s economic development efforts.
The suggestions included:
- Increasing the cap on Iowa’s economic development tax credits. The existing cap is $120 million and the Iowa Economic Development Authority wants it raised to $185 million.
- Evaluate options to offer a “Deal Closing Fund” or more discretion to the Iowa Economic Development Authority in awarding direct financial assistance. The agency has roughly $15 million available and wants that raised to $25 million.
- Consider allowing the sale, refund or transfer of economic development tax credits.
- Consider expanding Iowa’s Brownfield/Greyfield Redevelopment Tax Credit program that is used to assist with development of contaminated land.
- Consider enhancing Iowa’s data center incentives. Iowa is currently locked in a battle with Nebraska to land a large data center.
But Peter Fisher, research director with the Iowa City-based nonpartisan Iowa Policy Project, believes most of the Deloitte recommendations are heading in the wrong direction.
“Why don’t we just admit that we don’t have a cap on tax credits if we’re going to raise it every time the incentive amounts that we want to hand out approach the cap?” Fisher asked. “The idea is to have some kind of restraint so we’ve got to be more efficient and selective in terms of who we give money to.
“The recommendation for a ‘deal closing fund’ causes me great concern. The state managed to find an enormous amount of incentives for a fertilizer plant, millions of dollars per job, without any ‘deal closing fund.’
“Having the ability to give more money more quickly raises a lot of red flags for me. I think we end up giving away to much money when we do things quickly and behind closed doors.”
John Stineman, executive director of the Iowa Chamber Alliance, said Iowa competes fairly well for corporate expansions, but it could be doing much more.
“The approach and programs we have are working and the proof is in the projects,” Stineman said. “The question is, how many projects are we missing out on because we simply do not resource economic development efforts at a competitive level?”
The study found that Iowa lags only behind Texas in terms of useful economic development incentives.
However, with regard to the overall financial value of the state’s incentives and the potential to impact decisions, Iowa falls significantly behind neighboring and other leading economic development states.
