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EDITORIAL: Record deal demands accountability

The CR Gazette Editorial Board –

In terms of economic development in Iowa, the numbers are unprecedented.

Orascom Construction Industries plans to build a $1.4 billion fertilizer plant in Lee County, the largest capital investment in the state’s history. To keep the plant from being built in Illinois, Iowa Gov. Terry Branstad and development officials pledged up to $110 million in state tax breaks and other assistance, while Lee County added $133 million in tax breaks. The company also will save $360 million in interest payments by borrowing construction funds through a government program created to help businesses in counties that were declared disaster areas in 2008.

The project will create 165 plant jobs and employ hundreds during construction. Spinoff investments are possible. Farmers will benefit from a nearby fertilizer source. And Lee County, with an unemployment rate above 8 percent, certainly needs a boost.

It’s also the largest package of government development incentives anyone can remember in Iowa. Unprecedented, even. But it’s the precedents that give us pause.

Iowans, over the years, have seen lots of dollars and tax breaks handed out to lure or keep various businesses, most attached to big promises of future benefits. Trouble is, for taxpayers, announcements are common but accountability is not. Ground gets broken, ribbons get cut. But after that, tracking is lacking. And now that we’ve set a new precedent by dramatically raising the bar on how much we’re willing to invest in private projects, accountability must improve, dramatically.

We also think the Orascom deal should spark a conversation in this state over how much authority the state’s economic development leaders should have to hand out massive incentives packages. Our elected lawmakers wrestle for months to craft a state budget plan, balancing many needs with limited revenues. But our appointed economic development board can hand out more than $100 million in tax breaks to one company with single swift vote. That’s a lot of budgetary power.

The $110 million question posed by this saga: How far are we willing to go? Are Iowans comfortable with pulling out all the stops to win the state vs. state bidding wars for jobs? Should there be limits?

The governor argues that if Iowa cut corporate income taxes and commercial property taxes for all businesses, we wouldn’t need to provide huge assistance packages.

We agree that overall tax reform is preferable to the infamous “picking winners and losers,” and we’re eager to see details of Branstad’s plan. But we’re skeptical that tax reform would end the economic development arms race, pitting one state against another.

Orascom is a game-changer. Iowans should decide if they want their leaders to keep playing the game.

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