DES MOINES — An influential state senator said lawmakers will have to take a harder look at the state’s tax-credit programs this session, including the economic development credits used to entice companies to build in Iowa.
Sen. Joe Bolkcom, D-Iowa City, who was reappointed to chair the Senate Appropriations Committee on Wednesday, held a Statehouse hearing on tax-credit programs Wednesday. He has been a vocal critic of the how the state uses incentive programs to compete against other states for economic development.
“I think it’s time to have a grown-up discussion about this. The current system doesn’t help anybody,” Bolkcom said.
He circulated a copy of a Dec. 5 New York Times editorial titled “Race to the Bottom,” which criticized government spending on incentives and tax breaks for companies, calling it “a foolhardy, shortsighted race to attract companies.”
The daylong session covered a wide range of tax-credit programs from the state. But most of the public comment came from people who were critical of the tax incentives offered to a pair of fertilizer manufacturers in the last year.
Iowa Fertilizer, which is a subsidiary of Egyptian-run Orascom Construction, was offered up to $100 million in tax credits to locate in Lee County after also looking at a site in Scott County. The other, CF Industries, was offered $22 million to locate a plant in Port Neal, near Sioux City. Both received other incentives as well.
“The Orascom fertilizer plant should be renamed ‘Ora-scam,’” Deb Bunka, a member of Citizens for Community Improvement Action Fund, told the committee. “A foreign corporation receiving hundreds of millions of dollars in local and state incentives is a waste of taxpayer money, and we won’t stand for it.”
Bunka was one of a half-dozen members of CCI who spoke at the hearing, all of whom criticized the tax breaks for the fertilizer companies.
“On the public comment, it wasn’t from the public, it was from a political action committee,” said Tom Sands, R-Wapello, chairman of the House Appropriations Committee, who also attended the hearing. “I think it’s very unfortunate that our committee is all of a sudden an avenue to do campaigning and get a political message out.”
Sands said the people in Lee County and Woodbury County — for the most part — aren’t complaining about the incentives offered to the companies and are looking forward to the jobs they’ll bring.
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“The governor’s negotiated two extraordinarily generous deals,” Bolkcom said. “We’ve given $180 million dollars to two companies in order to create 265 jobs; that seems way over the top. I just think we need to strike a much tougher stance in these types of deals.”
Also on Wednesday, Iowa Department of Revenue officials updated the committee on the status of the Fund of Funds – an economic development program that defaulted on its bank loans and had to enter into a legal agreement with its creditors.
The program was created in 2002 to help attract venture capital to the state by investing in venture capital funds nationwide which would be required to have a presence in Iowa.
“The big news here today is winding down the Fund of Funds and basically winding down an economic development program that hasn’t created any jobs,” Bolkcom said.
Sands said while the Fund of Funds could have been better managed, it didn’t seem as if it was given a chance to succeed in the first place.
“We will never really know (if it could be successful) because when it went from $100 million to $60 million, that right there stopped the program,” Sands said.