Iowa Ideas
Iowa Ideas

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$200 million Apple deal debated during Iowa Ideas panel

Whether taxpayers will benefit at heart of discussion

Sep 21, 2017 at 7:02 pm
    Dave Swenson, an associate scientist with the Iowa State University Department of Economics speaks on a panel in a session covering "Incentives and the Future of Economic Development during the 2017 Iowa Ideas Conference at the DoubleTree by Hilton Hotel Cedar Rapids Convention Complex in downtown Cedar Rapids on Monday, September 21, 2017. (Cliff Jette/The Gazette)

    CEDAR RAPIDS — The Iowa Chamber Alliance’s chief executive on Thursday defended the use of $200 million in financial incentives to lure an Apple data center to Waukee that will employ 50 to 100 people.

    “The state is putting up less than $20 million,” John Stineman, the alliance’s executive, said of the deal to attract the $1.375 billion data center. ”Out of the taxes that will be paid as a result of the construction and operation of the project, the state will get at least 50 percent of its original investment if not 100 percent, which is more likely over the time that the local governments are incentivizing it.”

    The vast majority of the $200 million, Stineman noted, will be provided by the local government in Waukee. The parcels of land put together for the Apple deal yield about $60,000 in annual property taxes, he said.

    “Under the abatement, Apple will be paying 21 percent of the property taxes or $3.2 million per year for 20 years. After that, Apple will be paying $13 million or $14 million per year — assuming no increase in valuation,” he said.

    “There will be jobs that weren’t there before and the taxpayers will come out on top.”

    Stineman’s comments were part of an Iowa Ideas panel on economic-development incentives.

    But Dave Swenson, associate scientist in the Iowa State University Department of Economics and another member of the panel, strongly disagreed with Stineman’s assessment.

    “The taxpayers come out way behind,” Swenson said. “The investment is a tremendous amount of forgiven tax dollars that Apple will not have to pay. The taxpayers never get paid back for the taxes that weren’t paid by Apple.

    “There’s not going to be enough economic activity generated as a consequence of this tax forgiveness to offset the sum of all the taxes forgiven at the local or state level. We are subsidizing something that has to be located somewhere in the United States with an extraordinary amount of subsidy per created job.”

    Mark Nolte, president and chief executive officer of the Iowa City Area Development Group, said the goal of economic development is to build wealth in a community. But that does not happen, he said, when local and state governments pony up financial incentives for large out-of-state companies.

    “The more we play that kind of ‘race to the bottom’ game where we are giving more to outside corporations, we are losing what creates the wealth in a community,” Nolte said. “I am a big fan of investing local and working with companies that value that.”

    The panelists agreed that financial incentives would be appropriate to attract the proposed Mazda-Toyota automotive assembly plant. The 4,000 jobs that would be created as well as suppliers locating near the facility would justify offering tax breaks, tax increment financing and other forms of incentives, they said.

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