September Newsletter

ECONOMIC DEVELOPMENT INCENTIVES CREATE REVENUE FOR IOWANS
Catalysts for Iowa’s Economic Growth
If you read, viewed or listened to the news last week, you are no
doubt aware that Apple is building a massive new data center in
Waukee.
As with many economic development deals, some gave it an “A”
and some gave it an “F.”
For starters, this deal doesn’t cost Waukee or its taxpayers a
single penny. The “investment” by Waukee is foregoing only a
portion of a massive increase in its tax base. The proposed
Apple site is currently used as farmland, and is taxed as such,
bringing in less than $100,000 annually. Once Apple purchases
the site, Waukee will yield $3.75 million annually in property
taxes from the same land. That’s $74.9 million in new property
taxes during the abatement period. And in the first year after
the abatement, the city will get $13.2 million or more per year
— assuming no increase in valuation.
On top of the local property taxes, Apple will contribute up to
$100 million toward a “public improvement fund” for Waukee.
The first project is to be a public youth sports complex.
The net cost for all of this for Waukee? Zero. It is literally all
upside. Giving up a portion of tax that would not have been paid
in order to get a chunk of taxes that would not have been paid is
a pretty easy decision.
So what about Iowa? The state’s role is to be the catalyst for
economic growth. Growth doesn’t “just happen.” Gov. Kim
Reynolds, Iowa Economic Development Authority director Debi
Durham and local leaders such as Jay Byers at the Greater Des
Moines Partnership have been pursuing Apple for nearly two
years. It started with Iowa letting Apple leaders know we
wanted their business — and reminding them their competition
is already here. The decision to award $19.65 million in state
incentives is not easy. It never is. It’s the taxpayers’ money. And
unlike Waukee’s “all upside” proposition, for the state it’s a
strategic investment.
Gov. Reynolds had to examine what the return on investment
would be for all Iowa taxpayers. It’s not just about 50 high-quality
jobs. It’s about spurring economic activity through a
capital-intensive project to create more jobs, more investment,
more business and consumer spending, and more overall
growth. The growth the project generates needs to be able to
pay the taxpayers back with a demonstrated return on the
taxpayers' investment. The governor knew that the project was
guaranteed to generate no less than $19.65 million in sales and
use tax — so the taxpayers are made whole just in the construction
phase of the data centers.
What’s more, the governor knew that at least another $1.1
million in new tax revenue would come back to the state
annually once the data center is operational, as highlighted in
the revenue estimates from U.S. Chamber of Commerce
Technology Engagement Center study just completed in May.
Together, taxpayers will see a return on investment to the
general fund of $10-20 million over the same period that
Waukee taxpayers would gain $74.9 million in property taxes,
not including the additional tax on materials, real estate
transfer fees and other correlated business growth from the
project. The detractors of the deal have exclaimed, “We could
have gotten a better deal. More for less. Why should we use
any incentives?” The substantial return on investment shown
here clearly answers these questions.
Others lament, “If we just had low taxes, we wouldn’t need
these incentives. The deals will just come to us.” If that was the
case, then why didn’t South Dakota with no income tax get the
deal? Why not Kansas (which was considered)? Because having
low taxes doesn’t mean you don’t have to compete to win deals
with great returns like the Apple project.
Smart incentives that have a demonstrated return on investment
are a critical part of Iowa’s economic growth.
Do you have news ?
Would you like to see the latest and greatest news
from your business in Chamber @WORK? Submit
your news to the Dubuque Area Chamber at
office@dubuquechamber.com and include the word
“newsletter” in the subject line.