Another voice: Subsidizing Server Farms in Iowa

Posted June 10, 2015 by iowapolicypoints
Categories: Uncategorized

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by Kasia Tarczynska, Good Jobs First

Facebook just announced a third expansion of its $1.5 billion data center in Iowa. This followed a similar move by Google for its server farm in the state. These developments are fruits of the effort by officials to encourage big-name tech companies to locate in Iowa. This private investment, however, does not come free. For example, the $1 billion Google expansion is supported by $19.8 million in state subsidies. Since 2007, Iowa has offered almost $100 million in state tax credits and refunds to Facebook, Google, and Microsoft.

Google data center facility in Council Bluffs, Iowa. Credit: Google

Google data center in Council Bluffs, Iowa. Image via Google

Subsidies to server farms raise a lot of questions and controversy.  A key issue is whether the tech companies should get subsidies at all, given that their location decisions are based primarily on the availability of cheap electricity (preferably renewable), plenty of land, cooler climate, access to water, and lack of natural disasters. These make places like Iowa seem a natural choice.

Because data centers are capital intensive projects, they usually create a small number of jobs and thus per-job subsidies tend to be quite large.

Despite these factors, Iowa still throws lots of money at the industry.  Here is a quick look at Iowa’s subsidies to the three tech giants:

Google, located in Council Bluffs

2007- The company received $1.4 million in state tax credits and $48 million in local property tax abatements. Google was the first big-name tech company to locate a data center in the state.

2013 – The Iowa Economic Development Authority approved another $16.8 million in tax credits for a second Google facility.

2015 – The company received an additional $19.8 million in state sales and use tax refund for an expansion. Google will also pay only 20 percent of local property taxes for 5 years.

Altogether, Google promised to invest $2.5 billion but create just 70 jobs.

Microsoft, located in West Des Moines

Microsoft’s state subsidies started on a small scale, $568,000 in 2008 and $131,242 in 2011.

2013 – The company was awarded $20 million from the state’s High Quality Jobs Tax Credit program for a $679 million investment.

2014 – EDA approved $20.3 million in state tax credits to Microsoft for another round of expansion. The city chipped in $18 million for construction and infrastructure improvements on the site. $3.5 million in Tax Increment Financing was committed to build a water facility that will be used by Microsoft, and others, to cool servers.

Facebook, located in Altoona

2013 – After an intense and secretive competition with Nebraska, Iowa won Facebook’s server farm.  The company was approved for $18 million in tax credits for creating 31 jobs and investing $1.5 billion (the EDA report lists Facebook under Siculus, Inc, a Facebook initiative). The company also enjoys discounted water rates and has received money through Tax Increment Financing.

There is one additional thing that stands out: Google, Microsoft, and Facebook are rich tech companies that easily can afford any costs related to construction and operation of those server farms.  As one journalist put it: “Google needs a tax break like Bill Gates needs food stamps.”

Kasia Tarczynska is a research analyst at Good Jobs First, http://www.goodjobsfirst.org. She has a Masters in Urban Planning and Policy from the University of Illinois at Chicago. This blog originally appeared on the Good Jobs First blog at this link.
Good Jobs First is a national policy resource center for grassroots groups and public officials, promoting corporate and government accountability in economic development and smart growth for working families.

New expectations on minimum wage

Posted May 4, 2015 by iowapolicypoints
Categories: Economic Opportunity, Organization

Tags: , , , , , , , ,

What, you won’t give us $10.10? OK, we’ll take $12.

Now, we’re talkin’!

At a time when progressive positions are compromised before they are given a chance to help the economy, boost family prosperity and lessen growing inequities, minimum-wage proponents have drawn the line at an unusual place in the sand: ahead of the one before.

It’s a bold stroke when the House and Senate leaders are against any increase in the current minimum of $7.25 an hour. The national minimum wage has been stuck there since July 2009 — and in Iowa even longer, since the state minimum rose and stopped there in January 2008.

Seven-plus years later, inflation has put minimum-wage workers in Iowa behind where they were in 2007 and 2008.

In 2013, Senator Tom Harkin of Iowa and Congressman George Miller of California teamed up to promote $10.10, calling $7.25 “unconscionably low.” But it has not happened.

Last week, Senator Patty Murray of Washington and Congressman Bobby Scott of Virginia introduced legislation to raise the minimum to $12 by 2020, in five steps. It also would eliminate the $2.13 tipped wage and index the new minimum to inflation.

Here’s an Iowa fact sheet, and here are reports from the Economic Policy Institute and National Employment Law Project.

150428-MWgraphic12

For some a $12 minimum wage will still sound too low. For some it will sound too high — which is why the debate retreated to $8.75 in Iowa this year, and that cannot even get a vote in the Iowa House.

Pushing the debate ahead to a place where it will affect more workers — 436,000 in Iowa, or 42 percent more than the 306,000 affected with a minimum at $10.10 — is where this needs to go. It may increase pressure to the point where we see more candidates taking a stand and votes taken in Washington and more state capitols.

Owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project
Basic RGBThe Iowa Policy Project is a nonprofit, nonpartisan organization. IPP is a 501(c)3 organization and contributions to IPP are tax-deductible as permitted by law.

Budgeting in the dark

Posted April 13, 2015 by iowapolicypoints
Categories: Budget and Tax, Organization

Tags: , ,

April 15 is more than Tax Day. It’s also Budget Day, the date by which Iowa school districts are required to certify and adopt their budget for the year starting July 1.

And that’s important, because Iowa schools consider themselves bound by law.

This stands in stark contrast to the General Assembly. The Legislature and Governor, you see, have not told the school districts yet how much money they will have for this budget that must be set by Wednesday. By law, they’re about 14 months late … and counting.

You read that right. Lawmakers were supposed to tell school districts in February 2014.

If schools were really getting the “first bite at the apple,” as some are so fond of saying, this number would have been set. Instead, schools are left wondering how much of the core of the apple will be left when legislators finally get their act together.

Those first bites are already gone — to backfill property-tax cuts, or to provide giant subsidies to multistate corporations that pay no income taxes to our state, or to let millions slip through corporate tax loopholes while our Legislature looks the other way.

The budget deadline is here, and schools don’t know how much they will be permitted to spend, how much of it will be state aid, or how much to levy in the property tax share of that budget.

How, then, do districts respond?

The safest approach for school districts is to assume the worst. This will differ around the state; for many, it means no increase in state aid or per-pupil budget growth.

Because budgets are a mix of state aid and property tax, and you’re assuming no state aid increase, you’ll be setting a levy at its highest amount. If state aid comes in higher, you will lower your levy to the authorized amount — but your overall budget may still be too low to meet the needs you have identified.

While these little tricks keep your district within the law, they do nothing for the spirit of transparency, to enable everyone to be part of the process.

  • District residents don’t really have a clear picture of what their levy will be, so what can they expect to learn, or say, at the required public hearing?
  • District teachers and board members trying to negotiate contracts in good faith through the winter and early spring have no firm numbers to discuss.
  • District administrators trying to plan for fall classes may not be sure whether they will be able to keep current staff levels, or be able to add staff to meet increases in enrollment, special needs, or demands for achievement in cutting-edge fields of study.

All we know as April 15 approaches is that districts, one way or another, will meet the letter of the law. No thanks to state legislators.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
Editor’s Note: Mike Owen has been a member of the West Branch Community School Board since 2006.

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Avoid snap judgments on SNAP use

Posted April 10, 2015 by iowapolicypoints
Categories: Budget and Tax, Economic Opportunity, Organization

Tags: , , , , , ,

Legislators have enough to do finding answers to real problems. However, some seem ready to invent problems so they can come to the rescue.

Case in point: the Missouri representative who wants to stop food assistance recipients from buying steak.

Photos, please, of this actually happening. Because common sense tells us that other than some unusual case or two, it’s just not the way people allocate their meager food assistance benefit.

Why? Let’s look at the average benefit in Iowa from SNAP — the Supplemental Nutrition Assistance Program, formerly known as Food Stamps.

People who qualify for SNAP are making less than $2,200 a month in a three-person family, about $2,600 in a four-person family. On average, their SNAP benefit as of March was about $1.18 per person per meal. That’s why they call it “supplemental” assistance: On its own, SNAP is not enough to keep bellies full, let alone fully support good family nutrition.

SNAP is there to help people piece together what they need to get by. SNAP is part of a mix of resources that includes a share of a low-wage family’s own earnings, and probably the help of a local food pantry.

During the Great Recession, SNAP clearly helped Iowans. In our slow recovery from the last national recession, the number of SNAP recipients rose to over 423,000. As things have gotten better, that number has steadily fallen and was under 393,000 as of last month — a decline of 7 percent. That’s the way it is supposed to work.

But for those who still need it, SNAP is there. This critical point should not be missed by distractions like the bill in Missouri, or others that may crop up — even in our state.

The fact that SNAP exists says more about us as a nation than do snarky shoppers who stalk the poor in the checkout line.

Do we really want people who don’t even believe in SNAP to nitpick what people can buy with it? Because those are often the people attempting to call the shots on what goes in the shopping cart.

I’m not buying what they’re selling. They can check my cart.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
 Hear Mike Owen and KVFD’s Mike Devine discuss this issue in this April 9 interview.

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Keeping Ahead of the Kansans

Posted April 9, 2015 by iowapolicypoints
Categories: Budget and Tax, Economic Opportunity, Organization

Tags: , , , , , , , ,

As state legislators consider drastic cuts in Iowa’s income tax, they would do well to consider the experience of our neighbor Kansas, which enacted a huge income tax cut in 2012, and cut taxes again in 2013. These cuts have dramatically reduced state funding for schools, health care, and other services.

It is instructive to consider as well the experience in Wisconsin, where a large personal income tax cut took effect at the start of 2013, with similar results: subsequent job growth of 3.4 percent, farther below the norm than Kansas’ 3.5 percent from the implementation of its tax cuts.

None of this should come as a surprise. Most major academic research studies have concluded that individual income tax cuts do not boost state economic growth; in fact, states that cut income taxes the most in the 1990s or in the early 2000s had slower growth in jobs and income than other states.

Businesses need an educated workforce, and drastic cuts to education are likely to make it difficult to attract new workers, who care about their children’s schools at least as much as they care about taxes.

2010-PFw5464Posted by Peter Fisher, Research Director, Iowa Policy Project

See Fisher’s Iowa Fiscal Partnership Policy Snapshot on this issue.

 

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Maximum focus on minimum wage

Posted April 1, 2015 by iowapolicypoints
Categories: Economic Opportunity, Organization

Tags: , ,

There are lots ways to look at the minimum wage issue. Some make sense, and some do not. There are good numbers and bad numbers, the latter usually tainted by ideology or politics.

Any discussion about the minimum wage in Iowa — whether on the floor of the Iowa House or Senate, or outside the Capitol in any coffee shop or street corner — should focus on the clear, central realities of this issue, with reliable and credible numbers.

How much?

Iowa’s first minimum wage passed in 1989, almost half a century after the first federal minimum wage of 25 cents an hour took effect in 1938. That first Iowa minimum wage was phased in over three years.

So the minimum wage has long been established in public policy as a floor for wages. But it’s a sinking floor.

  • The wage has not been increased in Iowa since January 1, 2008, when it went to $7.25.
  • Had it kept up with inflation since 1992, the Iowa minimum wage would now be $7.91 (February 2015).

The latter shows just how conservative is the legislation pending in the Iowa Senate. A minimum wage bill would raise the wage to $8 in July — about where it would be had the original state minimum been indexed to inflation in 1992 — and bump it to $8.75 a year later. Given that this issue is only rarely reviewed in the Legislature and that the wage is not indexed, it would not take long for inflation to catch $8.75 and certainly we’d be seeing another debate in a few years.

The $8.75 proposal from the Senate is a considerable compromise from the $10.10 federal minimum proposed a couple of years ago by Senator Tom Harkin and President Obama, and from the $15 sought by people trying to bring the minimum closer to a “living wage.”

For whom?

An increase to $8.75 would benefit:
•   12 percent of Iowa workers
•   112,000 Iowa workers directly*
•   69,000 Iowa workers indirectly*
•   181,000 Iowa workers in total — about 3 1/2 times the number of people working at the current minimum.

150205-MWgraphic

The minimum wage matters

No matter the politics, what no one can deny is that the minimum wage is not enough — not nearly enough — to get by. Many Iowa families in Iowa depend greatly on that wage.

When minimum-wage workers account on average for 44 percent of their family income, it is certain that any increase will benefit a large number of Iowa working families.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

 

* Estimates from Economic Policy Institute. Indirectly affected workers have an hourly wage just above the proposed minimum wage. They would receive a raise as employers adjusted pay scales upward to reflect the new minimum wage.
See our two-page fact sheets on:

Iowa impact of $8.75 minimum wage

Iowa impact of $10.10 minimum wage

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Start with ‘zero’ on credits

Posted March 11, 2015 by iowapolicypoints
Categories: Budget and Tax, Organization

Tags: , , , , ,

It was​ fascinating Tuesday to see Iowa lawmakers talking about zero-based budgeting — starting every budget from scratch — when they have refused to do the same with tax credits.

Spending on tax credits — including millions to companies that don’t pay any state income tax — just keeps going on and on.

And on.

And on.

Companies basically get to appropriate state money to themselves. Quite a deal if you can get it.

If the state were to sunset business tax credits, as recommended in 2010 by a special governor-appointed Tax Credit Review Panel, lawmakers could review each one and decide which are actually producing a public benefit, whether any of them are money well spent. If so, they could renew the credit. If not, we could put our resources where they make more sense for all Iowans.

Maybe a part-time legislature could start with a zero base on tax credits before we talk about it for an entire state budget.

Owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project

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