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Iowa Values Fund

Drain, not gain, forecast for big incentive awards

DED disputes claim Iowa will lose money on 2 major project

Associated Press

Des Moines Register

January 28, 2005

[Note: This material is copyright by the Associated Press, www.ap.org, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use requires the prior approval of the Associated Press.]
 


    DES MOINES (AP) — Two big business projects given incentives through the Iowa Values Fund actually will cost the state money in the long run, despite the increased economic activity they bring, according to information gathered by the Legislative Fiscal Bureau but never made public.

    The data, a copy of which was obtained by the Associated Press, says incentives and services offered to Wells Fargo Financial in West Des Moines and Trans Ova Genetics in Sioux County eventually will cost the state more than it will receive in tax revenues.

    While the Wells Fargo Financial project brought 2,000 jobs and millions in new taxes to the state, the cost of the incentives the state gave and of public services that must be provided mean the state will lose $12.8 million over the long term, according to the data prepared by the Fiscal Bureau for the Iowa Department of Economic Development.

    For the Trans Ova project, the longterm loss to the state will be $8.1 million, according to the data.

    The data, compiled by non-partisan fiscal staffers, who advise the Legislature, do not include the total cost of incentives and services or the length of time over which the losses were calculated.

    Critics of the Values Fund said the study supports their views that simply throwing money at businesses won’t help the state grow.

    ‘‘There are no market forces in there. This shouldn’t surprise us,’’ said Senate Co-president Jeff Lamberti, R-Ankeny.

    DED spokeswoman Tina Hoffman said research conducted by her agency show a different picture, and that when all factors are considered, the projects will be winners for the state.

    She said it’s important to consider intangible factors — the Wells Fargo Financial project, for example, goes a long way to making the state a growing headquarters for the financial services industry, while Trans Ova puts the state in the forefront of the growing biotech industry.

    ‘‘It’s more than just incentives about taxes,’’ Hoffman said.

    The Values Fund awarded Wells Fargo Financial a $10 million grant, plus $7.5 million in tax breaks, by declaring it an enterprise zone. Local government pitched in with millions in incentives, as well as providing services to the suburban financial services center.

    Trans Ova got a $9 million grant from the Values Fund, sparking a $36 million investment to create 235 jobs. Local governments also pitched in with their own aid package.

    Gov. Tom Vilsack on Monday will send the Legislature a proposed budget in which he’s expected to make the Iowa Values Fund his economic development centerpiece, asking lawmakers for up to $800 million for the fund aimed at luring new businesses to the state.

    Senate Democratic Leader Michael Gronstal of Council Bluffs said he continues to back the Values Fund but has told lawmakers it’s likely that adjustments will be needed.

    The Legislature this year is faced with a decision on what to do with the Values Fund. Two years ago, lawmakers approved a $503 million package aimed at luring new businesses to the state, but it was struck down by the state’s Supreme Court last year. Lawmakers in special session approved a temporary replacement to finance projects already under way, but Vilsack is seeking a permanent replacement.