Bringing jobs into the state and its communities is somewhere on the list of every person who’s in office and every person who’s ever run for office. Jobs mean income, an improved quality of life, an increased tax base, and a domino effect on just about every facet of local and state budgets.
Politicians, economic development officials, elected officials, and just about everyone else has their respective toes curled when they hear a large employer is moving within their boundaries.
Apple announced this past week that they were building a large data center in Waukee, a town of about 14,000 just west of Des Moines. Apple, one of the world’s richest companies, will get $20 million from the state and another $194 million in abatements from the City of Waukee.
Man, that’s a lot of money. It’s more than Lee County gave Orascom in 2012 to secure the construction of the fertilizer plant south of Wever at a cost of just over $2 billion. The Apple Data Center planned for that area carries a $1.4 billion price tag. But many Democrats are clamoring for leadership change and a cap on the incentives that are being paid to bring these jobs into the state and its counties.
I spoke with Iowa 2018 gubernatorial candidate Nate Boulton on Sunday afternoon to get his take on what he calls “corporate coupons” the state is using to attract business. I also spoke with State Senator Rich Taylor and Fort Madison Mayor Brad Randolph about balancing the value of landing these types of employers while at the same time being good stewards of public funds.
Boulton said he didn’t think the state should do away with all tax credits because it does keep us competitive with other states, but he said the current system isn’t working.
“There are certain technology credits that we need to keep with regard to cutting-edge technologies because that keeps Iowa competitive, he said. “But we have to get out of this transactional system where we give a certain number of dollars for a certain number of jobs, because the ratios are way out of whack and there’s no promise for growth,” Boulton said.
“In some cases we’re even bringing in competition for our good long-term employers – companies that are already providing good jobs. I think the first thing the state legislature needs to start looking at is caps on these credits and exemptions so we aren’t in situations where the incentives end up being four times as expensive as originally intended.”
Boulton said there also needs to be accountability in the system so if the credit isn’t resulting in the jobs or wages that were part of the agreement then governmental agencies would have a sunset or other ways to get out of it.
He said the state needs to get back to focusing on providing what these companies need in the way of skilled labor resources.
“We need to focus on getting back to emphasizing what attracts these companies and that’s quality of life and a skilled work force. If we have that, we’re going to be competitive without being the lowest bidder – because there’s always going to be a lowest bidder,” Boulton said.
Randolph said that Fort Madison’s basic economy is strong, and he believes in the potential of economic incentives to a point.
“You always have to look at the employers we have as far as retail, industry, and commercial that have been part of the Fort Madison fabric and framework for years. They are great employers for our community and have been great community partners,” he said. “We tend to take that group for granted – those companies that are paying taxes, employing our residents and contributing to our community in a ton of different ways like payroll, payroll taxes, and all those things that go with being an employer.
He said most of the time it’s easier to help or entice an existing building to expand, than it is to try to attract a new one, but he said the city, and its various economic development groups, stand at the ready when a potential customer shows interest in the area.
Randolph mentioned a previous negotiation with a company that wanted to locate in Fort Madison, but was demanding a 100% rebate on their property taxes over 20 years as an incentive to build in the Fort Madison city limits.
“I have some trepidation probably in giving out incentives because I look at the businesses and individuals that are here contributing. Then I look at a new possibility and you’re going to give it all away to a new business and we’re paying the taxes. We decided we couldn’t do it because I had to hold the line. At some point you have to look at what impact it will have on the city.
“Sometimes we think that we’re always looking for the next big catch. I think we’ve done a pretty decent job of still being ready when there’s a potential of someone locating here. We’ve been quick reacting and business friendly that way, but we need to understand that it’s easier to expand an existing business than entice a new one. Having said that, we always try to build on what we have. Competition is extremely tough and every community has a similar set of incentives to offer.
State Senator Rich Taylor said recent incentives are just too much to be giving out.
“We have to have a change of leadership. We can no longer follow this path of ignoring the problems that help loans in favor of corporate tax welfare. We’re ignoring the needs of the people and giving handouts to corporations. It just has to stop,” he said.
“We gave Apple $213 million in abatements. That means if we hire those 50 people and pay each one of them $150,000 per year for 30 years, that’s in essence what we’ve given away. It’s too much and we’re not doing our homework. And we have the resources that they’re looking for. The young people that are getting themselves well educated to take these jobs. We have the land, the renewable energy – we have things to offer other than these large incentives and corporate charity.”
“It’s a delicate dance in an effort to get wins and you can’t be shortsighted. At what cost do you ‘win’?”, Randolph said.
He said Fort Madison has used Tax Increment Financing, which is an incentive that, in a nutshell, allows the business developing or redeveloping property in a district to keep the property taxes on the improved property for a certain number of years to help offset the costs of the improvements. There are some nuances in the system, but basically the property taxes for a certain amount of time, typically 20 years, are abated.
Some instances such as the Iowa Fertilizer Plant have resulted in a payment in lieu of taxes at a much discounted rate, through the TIF or incentive period. Governmental bodies are getting creative with TIF models and use them on almost all development. Recent projects in Fort Madison, including Boulders Inn and the soon-to-open Fareway Grocery, received abatement incentives and, in some cases, cash to locate here and in Boulder’s case, expand in Fort Madison.
Randolph said those deals can be complicated. But incentives used for Siemens worked very well for the city because the incentives were paid off early and now more of the Siemens real property taxes are landing in city and county coffers for public improvements.
Well, as the song goes, “It’s tricky.” We all love to see progress, but it’s impressive that we have someone giving a balanced look at how these incentives impact our communities. It’s also impressive that, at one point, we just said no. There are no guarantees. There’s no guarantee that the fertilizer plant will be functional in 20 years and we would have lost those property tax dollars, but in the same breath you have to consider they – and Boulders – and Fareway – and Siemens, for that matter, may not have even been here to begin with.