A whopping $4 million per job.
That's what Apple stands to gain in state and local tax incentives, under a deal unveiled last week with much fanfare from state and local officials, including Gov. Kim Reynolds. It should be a wake-up call to lawmakers that, finally, the state must give an honest review of how cash is doled out under the guise of economic development.
The $208 million incentive package is the cost of luring multinationals, proponents said. It "puts Iowa on the map," they pledged. It's a good deal for taxpayers in Waukee and Iowa at large, they swore.
No doubt, it must be rewarding to stand next to the CEO of one of the world's largest tech giants. It's noteworthy that Apple executives highlighted Iowa's robust renewable energy sources when detailing the company's decision to open a data center west of Des Moines.
But Apple is contractually obligated to create only 50 jobs when it's all said and done. That's $400,000 per job, under the state's $20 million portion. The jobs are relatively high-paying, which is all well and good. And Apple joins Google, Facebook and Microsoft in Iowa's burgeoning tech-management economy.
Yet there's a central question all Midwestern states should be considering right now, one that's hammered home in Iowa by the Apple deal: Is this really the cost of doing business or are coastal multinationals benefiting from regional desperation?
Take the widely lauded Foxconn deal in Wisconsin. That state shelled out $3 billion. It was only afterward that a legislative analysis concluded Wisconsin wouldn't get its money back until at least 2043.
If the answer is "yes," then officials had better ensure taxpayers that they'll get a full return on the investment. They must pledge to claw back any public funds if a project falls short. And, over the long haul, states must come up with a way to actually fund services while handing out these incentives.
Detractors immediately panned the idea after last week's announcement. And the criticism wasn't solely from your typical anti-corporate welfare liberals. State Rep. Pat Grassley, a Republican and chairman of the powerful House Appropriations Committee, took to Twitter and maligned the $400,000 per new job state taxpayers are expected to dole out. And it was handed to a company that posted more than $42 billion in earnings in the last fiscal quarter.
The timing of the Apple deal is, perhaps, its greatest weakness. Iowa's budget is a mess. Reynolds is mulling calling lawmakers back for a special session to grapple with the plunging revenues. This past spring, the Legislature couldn't even provide a 2 percent bump to school funding. Medicaid is a shambles and the companies operating it say they're bleeding cash. And too many state roads and bridges are well beyond their operational lives.
Grassley's resistance is founded in intellectual and philosophical honesty. There's nothing fiscally conservative about blowing a bigger hole in the state budget.
An incredible lack of public input only furthers doubts about how Iowa's $20 million portion got offered up. The whole thing was announced Thursday only after Iowa Economic Development Authority rubber stamped the deal. Not a single public hearing was held. Not a single outline of the plan was released prior to the big announcement. Sure, business deals require discretion. But, even so, an agreement in principle should have a public vetting when taxpayers are on the hook.
It's even less clear exactly what taxpayers in eastern Iowa -- hundreds of miles from Apple's new data center -- actually get out of the deal. From a Quad-Cities perspective, that $20 million could have provided equity for the school funding formula for a year. The deal poses even more questions for Waukee, where $200 million in tax breaks and incentives will bolster enrollment at its schools but also scrubs a massive increase in assessed property value from the tax rolls.
In his tweetstorm, Grassley doubled-down on his call for a full-blown review of incentives, which are estimated to cost hundreds of millions. Tax reform is key to any long-term success, he said, which must include asking tough questions about the state's generous incentive packages.
At the very least, Grassley is half right. The incentives handed out by Iowa are costly, secretive and, probably, far too generous to firms with world renown.
Last week's Apple deal should rouse all state lawmakers. They should ask the hard questions. They should grapple with the tough answers. And, ultimately, they should reform a system that puts everyone on the hook without first asking them.