A new study suggests Iowa, in order to land more business expansion projects, should bolster its economic incentive programs. The Iowa Chamber Alliance commissioned the study by Deloitte Consulting and arranged a teleconference today to discuss the report.
Josh Timberlake, a Deloitte Senior Manager, says the study found Iowa’s economic incentive programs are “fairly user friendly and flexible” compared to other states. “But, in terms of financial value, there are some other states which simply have the ability to offer more meaningful money to attract or retain projects that are considering the state,” Timberlake said.
The study compared Iowa’s programs with five other states: Minnesota, Nebraska, South Dakota, South Carolina and Texas. Timberlake said South Carolina and Texas are consistently ranked as highly competitive states for economic development.
The study recommends Iowa lawmakers revisit the current $120 million a year limit or “cap” placed on business tax credits. “The reality is in some cases it doesn’t take but one or two really large projects to come along that can essentially absorb that entire cap,” Timberlake said. “Frankly, (Iowa’s cap) doesn’t leave a lot of room for other projects that might also be very beneficial for the state to make a concerted effort to go after.” Iowa Economic Development Authority Director Debi Durham has requested the yearly cap on state tax credits be raised to $185 million.
John Stineman, executive director of the Iowa Chamber Alliance, said the report confirms what he suspected — that Iowa is “on the right track” with its economic incentive programs. “But, it also makes the case that we don’t necessarily resource our economic development incentives at a competitive level,” Stineman noted. “And that’s problematic.”
Stineman claims Iowa “punches above its weight class” in its approach to economic development. “Really, the question is how many projects are we missing out on because we simply don’t resource our economic development efforts at a competitive level? That’s obviously the question we’re hoping we can address within the Iowa legislature,” Stineman said.
Some Iowa lawmakers have been critical of a move to award more than $100 million in state tax credits to an Egyptian company for a fertilizer plant in southeast Iowa’s Lee County. In light of that controversial decision, Stineman was asked if there’s an “appetite” for increasing incentives. “I think there is,” Stineman said.
“No one project ought to determine the future for Iowa’s economic development approach. Further, I would say that there is significant support for the project that was singled out and criticized. There is far and wide support for that project as a wise use of state resources.”
Iowa Chamber Alliance members include chambers and economic development organizations in Ames, Burlington/West Burlington, Cedar Rapids, Council Bluffs, Des Moines, Dubuque, Fort Dodge, Iowa City, Marshalltown, Mason City, Muscatine, the Quad Cities, Sioux City and Waterloo/Cedar Falls.
(from Iowa Chamber Alliance news release)
Key findings of the study include:
· Iowa is at a competitive disadvantage in the availability of discretionary funds to help close deals as well as in offering corporate tax exemptions.
· Iowa performs at peer level in property tax exemptions, sales and use tax exemptions, and research and development tax credit programs.
· Iowa has a competitive advantage in its workforce development incentive programs.
· Other states have caught up to and begun to pass Iowa in data center and technology incentive programs – an area where Iowa was considered a leader previously.
The recommendations from Deloitte Consulting include:
· Consider increasing the cap on Iowa’s economic development tax credits
· Evaluate options to offer a “Deal Closing Fund” or more discretion to the Iowa Economic Development Authority in awarding direct financial assistance
· Consider allowing the sale, refund or transfer of economic development tax credits
· Consider expanding the Brownfield/Grayfield Redevelopment Tax Credit program
· Consider augmenting Iowa’s data center incentives.
