Business

Should we pay people to move to Iowa?

One Iowa town already tries workforce incentives

“You have to really think about what it’s incentivizing, what other things could be happening based on that incentive and certainly how to fund it long-term,” says Jennifer Daly of ICR Iowa. (Jim Slosiarek/The Gazette)
“You have to really think about what it’s incentivizing, what other things could be happening based on that incentive and certainly how to fund it long-term,” says Jennifer Daly of ICR Iowa. (Jim Slosiarek/The Gazette)
/

Some government officials and economic development leaders across the United States have taken the phrase “you couldn’t pay me to live there” as a challenge.

More municipalities increasingly are starting programs giving away cash, paying down student loans, offering mortgage support and even gifting land to get qualified workers to live in their cities and communities.

It’s a sign of the intensely competitive labor market across the United States at a time where there are more job openings, at seven million nationwide, is higher than the unemployed Americans — 6.1 million.

Available workers are hard to come by as well in Iowa. The state’s most recently reported unemployment rate is 2.4 percent, the lowest since the turn of the century.

So can paying people to live in Iowa be the key to solving its workforce shortage?

Free money, free land

Those cities giving incentives are spread across the country, from major metros to tiny towns.

Baltimore, for example, uses a lottery to give 30 prospective homeowners a $5,000 forgivable loan each year. Grant County, about 50 miles northeast from Indianapolis, offers college graduates moving to the area a $5,000 homebuyers loan or 20 percent of their rent each month, up to $2,500.

Starting in January, Vermont will give a $10,000 grant every year to each of the first 100 people who move into the state and work remotely for an out-of-state employer, as will Tulsa, Okla.

ARTICLE CONTINUES BELOW ADVERTISEMENT

North Platte, Neb., set up a matching program among its chamber of commerce and local businesses to pay employees $10,000 to start working there on top of their salary. Marquette, a town of 641 in central Kansas, offers a free plot of land to anyone to build a home on it.

Perhaps the most aggressive bid to attract workers is from New Haven, Conn., That city is offering prospective residents $10,000 in downpayment assistance to buy a house, $30,000 for homeowners to make their residences more energy efficient, and free tuition to graduates of the New Haven public school system who go on to a public community college or four-year school in Connecticut.

An Iowa case study

The strategy already has been in Iowa for a few years. In 2014, Newton earmarked just more than $3.5 million to give to homeowners seeking to buy or build a property in the Jasper County city worth at least $160,000.

Eligible homeowners receive $10,000 cash once they close on their property, and the city pays construction loan interest for developers who build homes in anticipation of a buyer.

Frank Liebl, director of the Newton Development Corp., said single-family housing starts in the city were in the single digits from 2010 to 2013. But those numbers jumped to more than 50 in the years since the city council started the incentive.

“We were sitting here for years, and we couldn’t get any builders to come here and build new homes,” he said. “... We couldn’t get developers here because they thought we were a dying community because (Maytag) left. We just encouraged people to give us a look here.”

Part of that strategy banks on vacant lots in Newton costing a fraction of a similar-sized lot in Des Moines or its suburbs, making it an attractive place to build for a commuting family 30 minutes away from the state capital’s downtown district.

Today, more people commute into Newton than commute out, Liebl said — a rare occurrence for the city.

However, the rise in available housing hasn’t directly translated to having people to fill those residences. Several new companies opened shop in Newton after Maytag closed its washer-dryer plant there in 2007, replacing almost all of the jobs lost from that plant closure.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Thank you for signing up for our e-newsletter!

You should start receiving the e-newsletters within a couple days.

“Now our biggest problem is we have to find a workforce,” he said. “We have all these new jobs, and our unemployment right now is at 2.3 percent and, earlier this year, we dropped to 2.2 percent. That’s the lowest it’s been in 17 and a half years.”

That worker shortage could intensify, as Liebl believes the new homes will draw retailers and businesses to Newton, similar to the wave of business activity seen in the other Des Moines suburbs in recent years.

What about the corridor?

Jennifer Daly, president and CEO of ICR Iowa, said her organization has had discussions about what an incentive package to lure workers to the region might look like, but no plans have been set.

Putting together an incentive program similar to what other municipalities have done likely would take more than a year, she said.

“You have to really think about what it’s incentivizing, what other things could be happening based on that incentive and certainly how to fund it long-term,” she said.

However, she does believe an incentive package could help entice some workers to the area in the near-term as part of a broader set of strategies to recruit people to move to the Corridor.

Jasmine Almoayed and Wendy Ford, economic development managers for Cedar Rapids and Iowa City respectively, both told The Gazette that their cities haven’t discussed setting up a worker incentive.

A question of effectiveness

Almost every city and state in the United States already competes in the ongoing race for economic development in the form of enticing companies to set up shop near them.

Haifeng Qian, a University of Iowa public policy professor who studies economic development, said research shows efforts to lure businesses to an area are mostly ineffective compared to other factors in site selection.

He pointed to Maryland, which offered $8.5 billion in incentives to Amazon.com as the corporation took bids for its second headquarters. The e-commerce giant ultimately decided to split the highly prized investment between Long Island City, N.Y., and Arlington, Va.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Qian believes the same issue would be manifest in giving incentives directly to workers, particularly wealthier families and college graduates who are more likely to prioritize quality of jobs, quality of life outside work and the distance between them and their friends and family over a one-time payment.

However, Qian said exploring alternate forms of economic development, particularly in education and college graduate retention, could yield more people coming to or staying in an area over time.

“For instance, helping recent college graduates defray their tuition loans takes into account both the need by beneficiaries and the skills needed for local economic development,” he said.

“Incentives to encourage people to move into distressed neighborhoods also make sense in terms of community development and could also benefit economic development in the longer term.”

Statewide

State officials don’t appear to be looking at paying people to move to Iowa any time soon. In an emailed statement, Jacque Matsen, Iowa Economic Development Authority marketing and communications director, said the department’s research suggests the top reason for people moving is for a better job, so IEDA focuses on incentivizing high-quality jobs and marketing those to potential residents.

State Sen. Mark Lofgren, R-Muscatine, chairs the chamber’s Economic Development Appropriations Subcommittee. He said there are various housing grants and initiatives the state already has in place, and he thinks the major state tax cut signed into effect earlier this spring will draw interest from companies and people alike.

However, he doesn’t think direct payments to entice workers into Iowa would fit into the state’s entire economic strategy.

“As far as doing something like that, I don’t believe so. It’s more of an overall thing we’re trying to do,” he said.

The city of Newton’s housing initiative will sunset in 2020, at which time its city council will decide whether to renew the program or tweak it.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Regardless of that decision, Liebl believes the program ultimately was successful as a marketing tool for a city that struggled to attract attention.

“We just encouraged people to give us a look here and, last time I counted, we have 11 different builders here in Newton,” he said. “That’s a positive.”

• Comments: (319) 398-8366; dan.mika@thegazette.com

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.

CONTINUE READING

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.