Iowa Development Waters Still Safe for Pirates

Anti-piracy provisions newly incorporated into Iowa’s TIF law need to be implemented for all economic development subsidies.

Peter Fisher
Peter Fisher

The Iowa Economic Development Authority (IEDA) just announced that it has awarded $304,000 in state tax incentives to Putco Inc. to move from Story City to a location about 35 miles away in Polk County. The Polk County Board of Supervisors will hear a proposal on Wednesday that the board add $363,000 in tax abatements to the incentive package.

Why is the state helping to finance the piracy of jobs from one place to another in Iowa? This is not economic development for the state, and in fact appears to be counter to any reasonable interpretation of state law.

The Iowa Code, Chapter 15A.1 (2), dealing with economic development, states that “funds should not be used to attract a business presently located within the state to relocate to another portion of the state unless the business is considering in good faith to relocate outside the state or unless the relocation is related to an expansion which will generate significant new job creation.”

According to  The Des Moines Register, the alternative under consideration by Putco, a manufacturer of car and truck accessories, was a new site in the Story City area, not out of state. Furthermore, the IEDA project report shows no “jobs retained,” as there would be if an out-of-state move had been threatened.

And the new jobs to be created? Five. Over the past 10 years, almost 84,000 new jobs were created every year by establishments expanding in Iowa. Against that number, how in the world can five jobs be judged a “significant” addition?

As the Iowa Fiscal Partnership has argued previously, the “new jobs” exception in Iowa’s anti-piracy statute is so vague as to constitute a loophole large enough to drive a moving van through. In fact, the Iowa Legislature apparently agreed with this assessment. The Tax Increment Financing reform bill passed by the General Assembly and signed by the Governor includes an anti-piracy provision devoid of any job expansion loophole; a move is a move.

Firms will still move facilities from time to time, but they need not be subsidized by taxpayers to do so, as was the case with the $18 million or more provided by Coralville to entice Von Maur away from another location in Johnson County. Such moves won’t be subsidized by TIF subsidies anymore.

Unfortunately, the basic anti-piracy statute that applies to all economic development subsidies, quoted above, was not amended, leaving state agencies and local governments free to interpret “significant job creation” as loosely as they please, for any subsidies other than TIF. One wonders what the folks at IEDA feel is the limit. Three jobs? One job? Given the rather wobbly record of firms receiving state incentives in the past — job creation targets are often not met — it is quite possible that in the end this move will result in no net increase in jobs at all, above the 40 currently employed in Story City, or even a loss in jobs if the new facility is more automated and firm sales fail to meet expectations.

So it appears that taxpayer-subsidized piracy is alive and well in Iowa. The restrictions newly incorporated into TIF law need to be made part of the general law on economic development subsidies. If property tax payers should be protected from such abuse of public funds, why not state taxpayers generally?

Posted by Peter S. Fisher, Research Director