SSTI Digest

An initiative in Iowa to disperse tax credits worth 20 percent of equity investments into pre-qualified businesses or seed capital funds has reached its $10 million cap and will not be continued in the next fiscal year. The Iowa Venture Capital Credit – Qualified Business or Seed Capital Fund was started in 2002 with a cap of $10 million, and as monitored by the Iowa Department of Revenue, all credits have been issued.   Efforts in the most recent Iowa legislative session to increase the monetary cap of the program under House Bill 2484 by an additional $3 million did not succeed. The discontinuance of the initiative comes as the practice of utilizing tax credits in Iowa for various activities has grown dramatically over the last several years. However, the scrutiny of the tax credit programs has grown, as well.   SSTI reported on an Iowa Department of Revenue study tracking the growth of the state’s R&D Tax Credit Program (see the April 30, 2008 issue of the Digest), and in a report released in April on tax credit liabilities, the department claims the amount of tax credits awarded in FY 2001 was just over $100 million, but…

Legislators in Alaska, Iowa and Oklahoma recently approved funding for several TBED-related initiatives within state operating and capital budgets for the upcoming fiscal year. Alaska Legislators Create Renewable Energy Fund The 2008 legislative session wrapped up earlier this month, resulting in statewide support for renewable energy following the passage of the fiscal year 2009 operating (HB 310) and capital budget (SB 221).   Lawmakers agreed to Gov. Sarah Palin’s proposal supporting alternative energy projects in the upcoming fiscal year and beyond with the passage of HB 152, which creates a renewable energy grant fund and recommendation program to be administered by the Alaska Energy Authority (AEA) and establishes a seven-member advisory committee.   The legislation requires AEA, in consultation with the advisory committee, to identify criteria to evaluate the benefit and feasibility of energy-related projects and develop a methodology for distributing funds. The capital budget agreement includes a "$50 million capitalization of the fund" for the grant program in FY09, AEA notes. AEA will solicit projects…

Two weeks ago, Idaho Gov. C.L. “Butch” Otter vetoed legislation to repeal state R&D income tax credits for Idaho companies. Among his reasons for the veto, Gov. Otter claimed removing the credits would put Idaho at a competitive disadvantage because surrounding states over similar incentives. Was he right? It is true most states offer R&D tax credits to their corporate residents at this point. Little has been known about the credits’ impacts or effectiveness on recruitment, however. Most of the academic research on the topic has focused on the federal R&D tax credits and competition among nations.   On the state level, in theory at least, a rationally acting, research-intensive firm can be expected to select a location within a state that has an R&D tax credit over another state without one – all other things being equal. Note: The italicized phrase is a critical but impossible one that is required for these kinds of conclusive statements.    A recent research paper published in Economic Development Quarterly begins to shed some light on the effectiveness of state R&D tax credit…

Publisher's Note: SSTI notes with much sadness the March 5 passing of Indiana State Sen. David Ford, following a battle with pancreatic cancer. David was a good friend not only of SSTI's, but also of the tech-based economic development community across the nation. In addition to being a tireless and cheerful advocate for investing in science and technology, he was also a gentleman in the true sense of the word, and we miss him greatly. David Abbott, executive director of the George Gund Foundation, was elected the new chairman of the Northeast Ohio-based Fund for Our Economic Future. Abbott replaces Robert Briggs of the GAR Foundation, who had served as chairman since the Fund was formed in 2004. Birgitte Ahring has joined Washington State University as the director of the Center for Bioproducts and Bioenergy and as the Battelle Distinguished Professor, based at WSU Tri-Cities. Eddie Ashworth, president of Research Park Corp., the managing entity of the Louisiana Technology Park, is resigning to become undersecretary of the state Department of Social Services. The Tucson-based BioIndustry Organization of Southern Arizona, known as Bio-SA, has…

In recent years, Iowa, like many midwestern states, has experienced a boom in ethanol production. Iowa's natural competitive advantage in growing and processing corn has helped it to move to the forefront of the emerging biofuels industry. The state provides numerous incentives and assistance programs through its Department of Natural Resources to help spur the creation of ethanol-related companies and jobs. A new report by Iowa State University economist David Swenson, however, argues that even if these programs are successful at building a strong ethanol industry, the overall economic impact of this success would be smaller than predicted.   Swenson argues in The Economic Impact of Ethanol Production in Iowa that many projections of the economic impact of corn ethanol suffer from improper input-output modeling and frequently overestimate the number of jobs that could be created by the industry. He found that the ethanol boom that occurred between 2000 and 2005 did not lead to the creation of many construction jobs. Instead, much of that construction work was undertaken by out-of-state firms that brought specialized workers with them. …

With the rapidly rising cost of health insurance, entrepreneurs frequently find themselves unable to pay their premium in the early stages of business ownership. Often, this means going without health insurance or abandoning plans to launch a new firm. The North Central Iowa Alliance (NCIA) has announced a new initiative to lower this barrier facing new business owners. The Helping Entrepreneurs Launch Program at North Central Iowa (HELP @ NCI) will make health insurance available to qualified entrepreneurs in the region during the first three years of their business' existence.   The program will be launched in partnership with the North Iowa Area Community College John Pappajohn Entrepreneurial Center, which will offer a regional feeder system for HELP @ NCI along with its other services for entrepreneurs. Though the program is offered at no cost to participants, business owners will be made aware of the expenses so that they can incorporate health insurance into the business planning.   HELP @ NCI will be funded through a $50,000 grant from the Iowa Department of Economic Development and through $15,000 in matching…

Gary Carter is stepping down as the executive director of the Tax Increment Financing Commission in Kansas City to become a senior vice president of Davenport One, a regional economic development agency in Davenport, Iowa.

Randy Weiss will serve as an entrepreneur-in-residence within the University of Iowa Research Foundation.

Curtis Brown announced that he will resign as executive director of the Mason City Economic Development Corp., effective July 11, to become the economic development coordinator for the City of Ankeny, Iowa.

The 2007 Iowa state legislative session has looked very favorably on TBED. One of the centerpieces of Iowa Gov. Chet Culver’s campaign last year was his pledge to "develop the next-generation energy ecomony in Iowa" through a $100 million state fund (see the Feb. 19, 2007 issue of the SSTI Weekly Digest). The Iowa Power Fund was approved by the state’s General Assembly late last month and closely resembles Gov. Culver’s original plan. For the first year, the fund will be capitalized with an initial $25 million from the state and an additional $25 million annually over the next three years.   The authorizing legislation also calls for the creation of a board to oversee the distribution of the funds and a new Office of Energy Independence. The board is authorized to make grants and loans that will accelerate in-state R&D and knowledge transfer and will improve the economic competitiveness of the state’s renewable energy industry. Iowa’s Office of Energy Independence will coordinate all state efforts to promote the use of renewable energy sources and to lead the development of a strong biofuels industry.   The General…

Gov. Chet Culver has appointed Mike Tramontina as director of the Iowa Department of Economic Development.

Incentive packages to attract companies are nothing new in economic development. In recent years, though, incentives have been used to recruit technology companies, and these incentive packages are growing in scope and complexity, with some in the hundreds of millions of dollars. Two recent reports that take a close look at experiences in North Carolina and Iowa may be of interest to communities and states using incentive packages to recruit companies to their area.   North Carolina In 2004, Dell accepted an incentive package to build a computer assembly plant in North Carolina. With the state’s contribution over a 15-year period valued at $242 million, plus an additional $40 million provided by its counties, the North Carolina Department of Commerce argued the package was reasonable because the investments would stimulate 8,086 jobs. Researchers at the North Carolina Budget and Tax Center and the Corporation for Enterprise Development analyzed the incentive package, however, noting differences between North Carolina’s offer and Virginia’s $37 million offer for the same project. Virginia believed its project would yield 4,113 jobs while…