Iowa Economic Development Authority is on the lookout for a 'win-win'
Agency estimates it has contributed $9 billion to state economy
The Iowa Economic Development Authority is hunting for winners.
“We’re looking for industries that are win-win. We have the raw materials and logistics, but we also get benefits from those organizations. They provide high-quality jobs,” said Tina Hoffman, the communications director for the authority.
“We’re looking for that sweet spot of where it makes sense to be here and it also helps our economy.”
Since 2011, the High Quality Jobs Program has awarded $41.9 million in direct financial assistance and $357 million in tax credits. Roughly 29,000 jobs, direct and indirect, have been created in Iowa as a result, with an estimated $9 billion pumped into the economy, according to the state.
When he took office in 2011, Gov. Terry Branstad repackaged the state’s incentive programs, replacing the Iowa Department of Economic Development with the Iowa Economic Development Authority.
Durhmam recalled that an Iowa official faced charges alleging he had allowed six movie producers to abuse the film tax credit program — he later was found not guilty of the charge. But Durham said from there, the business tax credits in Iowa needed to revamp its image.
The new model was based on an accumulation of surrounding states’ systems, with hopes of creating a more transparent partnership between the public and private sectors.
The authority has been led by Durham, the former president of the Siouxland Chamber of Commerce, to strengthen Iowa’s economic climate by promoting business growth within the state.
The High Quality Jobs Program is one of the vehicles for growth used by the authority. It is the accumulation of two assistance programs — tax credits and direct financial assistance, which incorporates loans and forgivable loans.
Over the past six months, the economic authority has offered financial assistance to several area businesses.
NextStep.io, a Cedar Rapids-based company that is developing a web dashboard to help people better use activity trackers, was awarded $75,000 to expand its sales.
CEO and co-founder John Schnipkoweit said the funding will go toward hiring personnel to work on the sales and supports teams. Right now, the company does not have anyone dedicated solely to sales.
The money will have to be paid back within five years, after 12 months of deferred payments.
Freund-Vector Corp. in Marion, a manufacturer of pharmaceutical processing equipment, also is working to expand. Under the contract obligations from the state, it will hire 12 new workers at $22.93.
The business will receive $151,500 in tax benefits.
“We need the expansion in order to continue our business or to grow the business,” said Tatsuo Matsugaki, vice president of finance administration.
The application process requires filling out a two-page project questionnaire about the companies’ projects, what it entails, the budget, the number of jobs an expansion will bring, and the workers’ benefits.
From there, selected businesses fill out the 10-page application for financial assistance that features more in-depth questions regarding the nature of the project.
Once applications are complete, they are presented to the board on a monthly basis. The board makes a decision on the award.
The two sides exchange contracts that include obligations the companies must meet to receive the aid.
Timelines can be renegotiated if construction delays progress.
The organization partnered with Venture Net Iowa to give companies feedback on their application and business models during the process, including information such as what other markets to study, how they could go about business if chose to expand in the future — something he found helpful.
“You get more than putting in an application, you get a tangible report back,” Schnipkoweit said.
But the process is not perfect.
The authority’s Hoffman said during the recent recession, businesses were forced to break contracts because they couldn’t hire the number of workers agreed upon.
Direct financial assistance results in repayment, while tax credits result in extra taxes on the company.
On occasion, the authority doesn’t receive full repayment and must take legal action when contracts are breached.
When a company goes out of business, losses are written off by the authority. Hoffman said because awards are given in one year for businesses to expand, with projects taking between three and five years to complete, and involve loans that can be paid off in the following years, she said she couldn’t provide a number of investments that have been written off.
In one highly publicized example, Vetecra, formerly AgSugar International Inc., owes Iowa more than $208,000.
In 2011, the company received a $250,000 grant from the state based on two ethanol-related devices. In June 2012, the authority ordered Vertecra to repay the grant due to “non-compliance with contract covenants” and “material misrepresentation.” The company agreed to repay the debt, but a check was returned to the authority in November 2013 for “non-sufficient funds.”
The remainder of the debt has yet to be repaid.
Yet Durham believes the authority overall has improved Iowa’s economy.
“We’re growing from within, and we’re smart about it,” Durham said.
The U.S. Chamber of Commerce Foundation ranks Iowa as No. 8 in the nation for overall growth, up two positions from last year. But according to the same foundation, Iowa ranks 46th in entrepreneurship and 32nd in business climate.
Still, larger companies have made plans to put down Iowa roots. Microsoft, Facebook, and Google have announced plans to expand in Iowa.
“Everybody’s paying attention,” Durham said.