Bill proposes to cut state economic development funding to Iowa's four biggest counties

DES MOINES — Iowa’s four most populous counties — Polk, Linn, Scott and Johnson — would no longer receive state economic development funding under a bill that received its first legislative hearing on Wednesday.

House Study Bill 310 would imposes a three-year moratorium — beginning July 1 — on all tax incentives, loan programs and grant funds administered by the Iowa Economic Development Authority for projects in the four counties.

IEDA administers a range of programs to support economic development, job creation and community development through financial and technical assistance, with a focus on both rural and urban areas. Some programs work with businesses directly, while others work with local governments on community projects.

Opponents of the bill, including representatives from Professional Developers of Iowa, the Iowa Chamber Alliance and the Iowa Travel Industry Partners, argued the bill could hinder economic growth and regional development. Republican House lawmakers who represent rural communities said the bill aims to address economic disparities by focusing incentives on rural areas they say have been historically underserved.

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“I think it's important to realize that everything we've been talking about and everything we've been doing in this building to revitalize rural Iowa has not worked,” said Rep. Derek Wulf, a Republican from Hudson, who chaired a subcommittee hearing on the bill Wednesday.

“It has not worked, folks, and what we need to do is have transformational change,” Wulf said during the legislative hearing. “Is this the perfect answer? I don't know. We'll continue to have that discussion, but something has to happen.”

Rep. John Wills, a Republican from Spirit Lake, argued rural areas need economic incentives while the foremost populous areas are already well-developed.

“I think that the rural areas are areas that need to have economic development,” Wills said. “I think that the four most popular populous areas of the state already have economic development, … and I don't think that that's going to stop just because we stopped economic incentives to go to those areas.

“I think that these areas have the infrastructure now. They have the sewer, they have electricity, they have the roads, they have everything that they need to continue to grow,” Wills continued. “What needs to happen for our rural areas to grow and advance is for economic incentives to be concentrated in those areas.”

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The pair of Republicans moved the bill forward for further discussion by the full House tax policy Ways and Means Committee.

The City of Cedar Rapids, Linn County Board of Supervisors, Cedar Rapids Metro Economic Alliance and City of Des Moines are registered against the bill.

A representative for the Iowa Taxpayers Association said the group still was evaluating the bill and is concerned about fair treatment of taxpayers.

Largest counties contribute 42 percent of Iowa’s goods, services

Roughly one-third of Iowans, or more than 1 million people, live in the four counties, which contribute 42 percent, or about $85 billion, of the total $200 billion value of all goods and services produced in the state, according to U.S. Department of Commerce and U.S. Census Bureau data.

The four counties also contribute about $1.5 billion of the $4.3 billion in state general fund revenue raised from personal income tax and $1.2 billion of the $2.8 billion in sales tax collected by the state in 2022, according to Iowa Department of Revenue data.

“If you look from 2011 to now, the spread (of IEDA financial assistance awards) is all across the board,” said Dustin Miller, executive director of the Iowa Chamber Alliance. “And in fact, the largest grouping is in cities (with populations) from 5,000 to 30,000 with 156 awards. Actually, the lowest amount of awards are in the larger communities. But to be fair, that those awards tend to be larger just because they're larger projects,” like the planned $750 million data center project in Cedar Rapids.

Miller told lawmakers the bill would harm areas of the state that are often “drivers” of the state’s economy that ultimately benefit surrounding counties. The alliance, which is registered against the bill, represents the state’s 16 largest chambers of commerce and economic development corporations.

“Happy to talk about what is the best way to try and incentivize differing development, but at the same time, just want to be cognizant of the fact of ‘don't kill the golden goose,’” he said.

IEDA data shared by Wulf showed that in fiscal year 2024, 21.7 percent of direct funding and tax credits went to the four counties, with Linn County receiving a total of about $18 million, followed by Polk County at $17.3 million, Johnson County at $5.3 million and Scott County at $790,000. Linn and Polk counties were among the top 10 counties receiving IEDA assistance in FY2024, with only Boone County above them at about $21 million.

Sara Allen with Iowa Travel Industry Partners, expressed concerns about the bill's impact on tourism and regional development. The group was registered against the bill

Miller said there has been “massive movement towards regionalization” across the state. He gave the example of Ames Chamber of Commerce and Economic Development Commission working in collaboration with the city of Boone, Boone County Economic Growth Corporation and IEDA to bring a new state-of-the-art dairy production facility to Boone.

Daisy, a leading sour cream, cottage cheese and dip maker, plans to invest $626.5 million to build a 750,000-square-foot manufacturing facility in Boone's industrial park, creating 106 new jobs to start — a number anticipated to grow to 255 as demand increases. The IEDA board approved $7 million in direct financial assistance as well as tax benefits for the company.

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Rep. Elizabeth Wilson, a Democrat from Marion who also served on the subcommittee, declined to sign off on the bill. Wilson said economic development investments should be considered using a regional lens instead of being based on county populations.

“I think this idea of regionalism is actually … I think it’s a really good idea, and I think it has a lot of merit,” Wilson said. “And for that reason, the way that it stands, I would have to be a no.”

Doug Struyk, a lobbyist representing the City of Des Moines, called the bill “shortsighted and not in the best economic interest of the state.” Struyk said a moratorium would take Iowa out of the running for businesses looking to expand or relocate.

“We have one benefit, which is we have a population of workers — a lot of projects need bodies to be able to fill the slots,” he said. “We believe removing the largest four counties from the ability to receive these incentive funds removes the ability for many projects to even consider Iowa. When they’re considering Iowa — they’re not just considering Des Moines, they’d be considering many other areas in the state.”

The legislation now heads to the full House Ways and Means Committee for consideration.

Bill’s supporters want to ‘tip the scales’ for rural Iowa

Rep. Bobby Kaufmann, chair of the committee and a Republican from Wilton, told reporters Wednesday the bill's proponents hope it will spark a broader conversation about the use of state tax credits and economic development strategies to support rural communities.

“Rural Iowa, through farming and agriculture and manufacturing, provides a robust amount of tax dollars. Rural Iowa doesn't always feel like our small towns and our rural counties get their fair share,” Kaufmann said. “This was just our attempt — members came to me and said, ‘Can you explore what this might look like to tip the scales the other way?’ — this bill was our initial exploration on that.”

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