Values Fund looks at funding criteria
Companies will now have to meet minimum salary requirements to receive financial assistance from the Grow Iowa Values Fund, the fund’s board decided last week.
At its meeting on Oct. 22, the board approved a final version of administrative rules that will govern how it operates. To be considered for funding under those rules, at least half the jobs a company promises to create must have starting salaries at least 10 percent higher than the average wage for the area in which the jobs are to be located. Award amounts will be limited to a range of $3,000 to $7,000 per job, depending on the average salary level of the jobs created.
The Values Fund board also approved a $10 million down payment on what they hope will be a total allotment of $25 million to Iowa’s three Regents universities to fund expansion of biotechnology and business incubators.
Board members were also briefed on a new economic model which estimates that the three projects they’ve funded so far will bring $1.5 billion in new income to the state over the next 10 years.
Created by the Legislature earlier this year, the Values Fund has been mandated to create 50,000 new jobs in Iowa over its expected seven-year life. In addition to paying direct incentives to companies, the fund is also required to provide money for university research, workforce training and quality-of-life projects.
Some board members opposed the rules’ minimum salary requirement as too restrictive, saying it would result in projects being lost to other states. Others supported it as necessary for meeting the legislative mandate to increase the wealth of the state.
“It’s probably as good a compromise as we can find, given the different forces that are pulling at us,” Michael Blouin, director of the Iowa Department of Economic Development, told the board.
The new rules provide for payment of incentives of up to $3,000 per job if the average salary is at least 110 percent of the lower of the county or regional average wage. The amounts increase on a sliding scale, with incentives of up to $7,000 per job if the average salary is at least 150 percent of the area’s average.
In its first four months, the board has provided $20 million in funding to three projects under emergency rules that did not include the salary guidelines. That includes $10 million to Wells Fargo & Co., $9 million to Trans Ova Genetics and $1 million to GCommerce Inc. Together, these companies estimate they’ll create about 2,500 new jobs within the next four years.
Though GCommerce would have qualified for the $6,369 it will receive per job created, Wells Fargo and Trans Ova both received more than they would have under the new rules. Trans Ova will receive more than $28,000 per job if it achieves its anticipated expansion of 315 workers over the next four years.
However, biotechnology companies such as Trans Ova represent opportunities to create entire new industry clusters in Iowa, said state Sen. Bill Dotzler, an ex-officio member of the board.
“What this (fund) was about was trying to move the state forward and create some jobs that were going to have some real impact,” he said. “We can’t just look at the dollars per job. We have to look at the effect it will have on the entire community.”
In other business, the board approved grants totaling more than $10 million to the three Regents universities over the next two years, with a pledge to fund the remainder of its $25 million commitment if future sales tax revenues provide sufficient funding.
About $4 million each will go to the University of Iowa and Iowa State University over the next two years to assist in expansion of their biotechnology facilities, with the remainder to the University of Northern Iowa to provide funding for a business incubator facility.
The big picture of how the Values Fund’s investments may help grow the state’s economy came more into focus last week, with the introduction of a model for estimating projects’ economic impacts.
According to the model, developed by a team of Iowa economists, the state’s total revenue stream will increase by $1.5 billion over the next 10 years as a result of assisting Wells Fargo, GCommerce and Trans Ova. The total outlay of state and local government dollars, including the Values Fund’s share, is about $80 million.
Collectively, the investments are expected to yield $1.43 billion in added personal income for Iowans over the next decade, and generate about $67 million in new state and local taxes revenues during this period.
The figures show that the fund is on track toward meeting its legislative goals to “expand and stimulate the state’s economy, increase the wealth of Iowans and increase the population of the state,” Blouin said.
“The constant reference is to grow the income of Iowans, and in these three instances, we’re on track,” he said.
In the future, the model will be used to assist the IDED staff and the Values Fund board in evaluating projects before they are approved, Blouin said, as well as to measure the results of the projects after approval.