Iowa may pare business incentive programs
By Charlotte EbyDes Moines Bureau | Posted: Tuesday, January 06, 2009
DES MOINES -- State officials have used an array of financial incentives in recent years to help lure new jobs and business firms to Iowa, leading to $7.7 billion in private capital investment so far.
But with the state facing a grim budget picture, it's unclear whether the state will be able to fund those incentive programs at the level they have in the past.
Some in the Legislature say economic development programs such as the Iowa Values Fund, the state's top economic development program, should face the same scrutiny as other state programs fighting for scarce dollars.
Troy Price, spokesman for Gov. Chet Culver, said Culver is still formulating his budget proposal for next year and would not say whether it would include cuts to the values fund.
Others believe now is the wrong time for Iowa to scale back its focus on economic development when the economy is in retreat.
John Gilliland, senior vice president for the Iowa Association of Business and Industry, said Iowa has to continue to be aggressive.
"I think what we're seeing is other states are actually paring back their economic development packages, and so it really presents an opportunity for Iowa," Gilliland said.
The values fund and other related programs administered by the Iowa Department of Economic Development have awarded loans, forgivable loans or tax credits to 553 projects from 2003 through June 2008.
Mike Tramontina, director of the Iowa Department of Economic Development, isn't deterred by the state of the national economy, saying his department will continue to attract new businesses and new industries as they have in the past.
Tramontina cites the state's success in attracting "green-collar" jobs in the renewable energy industry, especially in wind energy and biofuels.
"We expect that those sectors of the economy are going to continue to grow and that Iowa has a lot of advantages, natural advantages," Tramontina said.
State Sen. Bill Dotzler, D-Waterloo, expects to see funding for the values fund cut, although he'd rather see the funding preserved. Dotzler said Iowa would lose out in landing some new companies to other states if it were to stop these incentive programs altogether.
"If you're going to play in the economic development field, you need to be competitive," Dotzler said.
He points out Iowa's efforts have been focused on high-wage jobs in areas such as advanced manufacturing, renewable energy and new technologies.
"By targeting how you use your economic development dollars, you can get a better return for your investment in the long run, and really benefit the people of the state, because it is the people's money that we're investing," Dotzler said.
Rep. Chuck Soderberg, R-Le Mars, sees a danger in reducing state incentives meant to grow the state's economy and create jobs at a time when businesses are struggling to stay open. But he said in tight budget times, health services have to be the state's top funding priority.
"We have to really lay out the wants and the needs, and the needs definitely are the health-related services," said Soderberg, who serves on committees that both help steer the state's economic development policies and set spending plans.
Sen. Ron Wieck, R-Sioux City, believes the discussion on economic development spending is a good time to reexamine the Iowa Values Fund and make changes if they are needed.
Not all of the firms that have received incentives from the values fund have had successful results.
So far, 38 firms have returned a portion of the award through the Iowa Values Fund because they weren't able to meet job creation goals, according to state economic development officials.
One of those companies was Le Mars ice cream maker Wells' Dairy, which initially was awarded $2.9 million to create or retain 475 jobs. The company ended up returning $1.25 million of the state award after they fell short of the jobs goal.
When lawmakers first considered creating the values fund, Wieck questioned whether it was a strategy the state should employ.
"I still have a question about that. You've got government picking winners and losers," Wieck said.
At a glance
The issue: With budget dollars tight, it's unclear whether state economic development programs will see the funding levels they've enjoyed in the past. The Iowa Values fund, the state's top program to lure new businesses and encourage job creation, has had a $50 million annual budget in the past.
What's proposed: Gov. Chet Culver and legislative leaders haven't yet laid out their spending proposals.
Likely outcome: Key lawmakers say state economic development programs could see cuts next year.
But with the state facing a grim budget picture, it's unclear whether the state will be able to fund those incentive programs at the level they have in the past.
Some in the Legislature say economic development programs such as the Iowa Values Fund, the state's top economic development program, should face the same scrutiny as other state programs fighting for scarce dollars.
Troy Price, spokesman for Gov. Chet Culver, said Culver is still formulating his budget proposal for next year and would not say whether it would include cuts to the values fund.
Others believe now is the wrong time for Iowa to scale back its focus on economic development when the economy is in retreat.
John Gilliland, senior vice president for the Iowa Association of Business and Industry, said Iowa has to continue to be aggressive.
"I think what we're seeing is other states are actually paring back their economic development packages, and so it really presents an opportunity for Iowa," Gilliland said.
The values fund and other related programs administered by the Iowa Department of Economic Development have awarded loans, forgivable loans or tax credits to 553 projects from 2003 through June 2008.
Mike Tramontina, director of the Iowa Department of Economic Development, isn't deterred by the state of the national economy, saying his department will continue to attract new businesses and new industries as they have in the past.
Tramontina cites the state's success in attracting "green-collar" jobs in the renewable energy industry, especially in wind energy and biofuels.
"We expect that those sectors of the economy are going to continue to grow and that Iowa has a lot of advantages, natural advantages," Tramontina said.
State Sen. Bill Dotzler, D-Waterloo, expects to see funding for the values fund cut, although he'd rather see the funding preserved. Dotzler said Iowa would lose out in landing some new companies to other states if it were to stop these incentive programs altogether.
"If you're going to play in the economic development field, you need to be competitive," Dotzler said.
He points out Iowa's efforts have been focused on high-wage jobs in areas such as advanced manufacturing, renewable energy and new technologies.
"By targeting how you use your economic development dollars, you can get a better return for your investment in the long run, and really benefit the people of the state, because it is the people's money that we're investing," Dotzler said.
Rep. Chuck Soderberg, R-Le Mars, sees a danger in reducing state incentives meant to grow the state's economy and create jobs at a time when businesses are struggling to stay open. But he said in tight budget times, health services have to be the state's top funding priority.
"We have to really lay out the wants and the needs, and the needs definitely are the health-related services," said Soderberg, who serves on committees that both help steer the state's economic development policies and set spending plans.
Sen. Ron Wieck, R-Sioux City, believes the discussion on economic development spending is a good time to reexamine the Iowa Values Fund and make changes if they are needed.
Not all of the firms that have received incentives from the values fund have had successful results.
So far, 38 firms have returned a portion of the award through the Iowa Values Fund because they weren't able to meet job creation goals, according to state economic development officials.
One of those companies was Le Mars ice cream maker Wells' Dairy, which initially was awarded $2.9 million to create or retain 475 jobs. The company ended up returning $1.25 million of the state award after they fell short of the jobs goal.
When lawmakers first considered creating the values fund, Wieck questioned whether it was a strategy the state should employ.
"I still have a question about that. You've got government picking winners and losers," Wieck said.
At a glance
The issue: With budget dollars tight, it's unclear whether state economic development programs will see the funding levels they've enjoyed in the past. The Iowa Values fund, the state's top program to lure new businesses and encourage job creation, has had a $50 million annual budget in the past.
What's proposed: Gov. Chet Culver and legislative leaders haven't yet laid out their spending proposals.
Likely outcome: Key lawmakers say state economic development programs could see cuts next year.
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