Iowa pays millions to spur job creation in 2012
Nearly 70 companies promised to create about 2,000 jobs
DES MOINES, Iowa (AP) — It was an unprecedented year for economic development efforts in Iowa, with the state paying out tens of millions of dollars in tax benefits and loans to nearly 70 companies that promised to create about 2,000 jobs.
The deals included two huge fertilizer projects, each involving capital investments exceeding $1 billion. Companies receiving state incentives overall pledged to spend $3.7 billion in the state to build new facilities or expand existing businesses, but critics question whether the money spent per job created is an efficient use of taxpayer money.
The state spent about $12 million on loans to companies expanding or locating in Iowa during the year, according to Iowa Economic Development Authority records. The agency did not immediately have a breakdown of tax credits awards offered this year alone, but said it made more than $151 million in tax credit awards in 2011 and 2012.
The two fertilizer projects drew a large share of the attention this year because of their size.
In February Orascom Construction Industries of Cairo, Egypt , was awarded a state incentive package of $110 million in tax breaks, loans, job training funds, and transportation improvements to build the Iowa Fertilizer Co. on farmland in Lee County. The county pledged to provide $130 million in incentives over 20 years. The project will create 165 jobs.
It was touted by Gov. Terry Branstad as the largest capital investment ever in Iowa at $1.4 billion. The state's financial incentive package also was the largest ever offered for a single project.
That drew criticism from Sen. Joe Bolkcom, a Democrat, who called the state's involvement "the worst economic development deal in state history."
Bolkcom, chairman of the Senate Ways and Means Committee, said the state gave away too much for a project that likely would have come to Iowa anyway.
Just nine months later on the opposite side of the state, fertilizer manufacturer CF Industries Inc. trumped the Orascom project by promising to invest $1.7 billion to expand its facility on the south edge of Sioux City and create 100 new jobs.
The state economic development board awarded the project $1.5 million in loans and tax credits totaling $22 million. The board said it will consider future tax credits of up to $12 million in each of the next four fiscal years.
Economic development officials said both projects were highly competitive and the companies were considering other states, making it necessary for Iowa to be aggressive in its recruitment. They also point to 2,000 construction jobs expected to be created by each of the projects and the transportation and materials handing jobs that will come with the plants. The CF Industries plant, for example, is expected to create about 700 additional jobs.
"The thousands of construction-related jobs that go into creating a project that has an overall cost of over a billion is something that doesn't get counted in the numbers but certainly has an effect on our economy," said Tina Hoffman, spokeswoman for the Iowa Economic Development Authority.
Another critic of economic development spending questions whether taxpayer money should go to profitable companies.
"We want to see economic development that creates more small businesses," said Adam Mason, a spokesman for Iowa Citizens For Community Improvement, an activist group. "These huge sums of money to just a few companies for a relatively few number of jobs just doesn't make sense."
Among the 70 recipients of state incentives this year were smaller companies that didn't get much attention, Hoffman said.
Examples include Quatro Composites of Orange City, which makes carbon fiber parts for aerospace, medical and industrial customers. It received a $1.5 million loan and tax benefits to expand and create 99 jobs.
Clow Valve Co. of Oskaloosa received tax benefits to replace foundry machinery and other equipment, creating six jobs. And Unverferth Manufacturing Co. will expand its Shell Rock factory, which makes farm equipment, creating 75 jobs. It was awarded a $200,000 loan and tax benefits.
Major Iowa employers Pioneer and John Deere also announced expansion projects and received tax benefits this year, with Pioneer's expansion in Johnston expected to add 100 jobs and Deere's project in Dubuque creating 125 jobs.
Hoffman said Iowa workers and the state's business climate can be credited with helping to convince companies to increase operations in Iowa.
"They could go anywhere," she said. "Many have locations elsewhere but the Iowa locations are winning out for those additional lines or investment."
Companies receiving state incentives typically have three years to complete the project and create the promised jobs and must maintain the workforce for another two years, Hoffman said.
If they fail to uphold their promises they could be required to repay the money.