Iowa Chamber Alliance 2011 Agenda

2011 IOWA CHAMBER ALLIANCE AGENDA

The Iowa City Area Chamber of Commerce is a member of the Iowa Chamber Alliance, a non-partisan coalition that represents 16 Chambers of Commerce and economic development organizations throughout the state. The Iowa Chamber Alliance provides insight and leadership on key issues most important to growing Iowa’s economy and encourages state government initiatives that are innovative and original. For 2011, the Alliance has identified four major statewide priorities with key issues in these areas. Included among these key issues are: promote economic growth through a public/private partnership, focus on 21st century government, improve Iowa’s education system to meet the workforce needs of Iowa’s economy and continue to invest in a sustainable and green economy.

STATEWIDE ISSUES

Promote Iowa’s Economic Growth

• Public/Private Partnership

— State economic development through a public/private partnership

In light of the dynamic changes in the world’s economy, the Iowa Chamber Alliance continues to recommend a public/private partnership for state economic development efforts. A public/private partnership model can help renew the focus on economic growth and business development in the state by utilizing expertise in both the public and private sector, developing a business model focused on seizing opportunities and implementing programs that provide a greater return on investment. The public/private partnership should focus on regional outreach, interact with local communities and assist with new opportunities and marketing.

• Innovative and Transformative Government

— 21st century government

Today’s state government continues to operate and utilize the same systems and strategies that have been used for decades. Leaders in state government, including the governor and the legislature, need to be more innovative and responsive and demand transformative government to deal with the challenges of the 21st century. To begin to transform state government, Iowa may want to consider the strategies cited in a report by the IBM Center for the Business of Government titled “Four Strategies to Transform State Governance.” These include:

Anticipatory Governance – Governing with foresight and long-term strategic and financial planning.
Results-Focused Governance – Governing with more emphasis and higher priority on deliverable outcomes for citizens.
Collaborative Governance – Governing effectively and efficiently within executive agencies, the three branches of government, among states and with federal and local governments as equal partners.
Transparent Governance – Governing with greater openness in operations and performance, both internally and externally.

The Alliance believes government at all levels must determine if the business model used when it was created is sound into the 21st century. Government must be efficient and innovative and in a position to serve the needs of its citizens and businesses in the most effective manner.

— State finances

A stable business climate includes sound fiscal management and financial and regulatory policies. The State Legislative Services Agency projects a revenue and expenditure gap of nearly $1 billion for fiscal year 2011. The Iowa Chamber Alliance believes the state needs to scrutinize all expenditures and utilize processes such as Lean to ensure every expenditure is allocated in the most efficient and cost effective manner. State expenditures must also be reviewed and strategically evaluated based on best practices, the impact and return on investment.

• Business Climate

— Preserve Iowa’s business foundation

The Alliance believes that Iowa’s business foundation must be protected. We support Right-to-Work and the current workers’ compensation system. We oppose mandatory wage rates, adding items that can be negotiated to Iowa’s public employee collective bargaining as well as the adoption of a combined corporate income tax reporting structure in Iowa.

• Property Tax

— Provide tax relief for commercial and industrial properties

Property taxes are non-competitive for commercial and industrial properties in Iowa. In the latest 50-State Property Tax Comparison Study,* Iowa’s urban commercial property tax rates have remained the same from the previous year at 2nd highest. However, Iowa’s rural commercial property tax rates have moved up from 7th in 2008 to 2nd highest in 2009. Iowa’s industrial property tax rates are not much better, ranking 10th highest in the U.S. for urban areas and 7th highest for rural. Meanwhile, several neighboring states are enjoying more competitive commercial and industrial property tax rates.

Delaying reforms to Iowa’s property tax system is increasing the tax burden on commercial and industrial payers. Iowa’s commercial and industrial property owners are taxed on 100% of their assessed value, while residential property owners pay taxes on approximately 46% of their assessed value due to an assessment limitation (rollback).

An alternative to consider is to establish a Commission to redesign Iowa’s property tax system. The Commission would submit its plan to the legislature and governor, who could either accept or reject the plan but not modify it. Inaction by the legislature would make the plan law.

*Source: Minnesota Taxpayers Association, April 2010 Report for payable year 2009

• Income Tax

— Simplify the income tax system

The Alliance continues to call for simplification and the overall reform of the state income tax formula, including the reduction of the corporate income tax rate. Publications and statistical data used in marketing Iowa continue to show a skewed view of the true tax liability of companies and individuals by showing the combined rate of tax.

The state should flatten and adjust the current income tax structure. This change would allow the state to maintain its income tax revenue stream while eliminating the confusion in marketing our state to prospective businesses. Eliminating federal tax deductibility to reduce confusion in marketing our state should not be done without taking into account the potential federal tax increase, which could result in Iowans paying more state income taxes. The federal income tax relief should be reviewed when considering Iowa's tax reform. Additionally, the Alliance would like to prevent the rollback on the federal income tax relief since increasing taxes on businesses and individuals during economic hardship would be counterproductive.

• Entrepreneurship

— Restore Venture Capital Tax Credits

Expanding entrepreneurship in Iowa can provide a key role in driving business innovation. There are several challenges entrepreneurs face, but none greater than raising capital. Emerging technologies developed by entrepreneurs are often deemed too risky. Angel investors can provide the capital, connections and guidance needed in the early-stage development of projects.

The Alliance supports extending the existing Seed Capital Fund Investment Tax Credit, which expired in 2008, and replenishing the tax credits. Continuing these tax credits will help offset the risk involved in investing in high-tech, cutting-edge businesses.

The Alliance recognizes that many tools offer the potential for fostering entrepreneurship. Iowa’s business organizations, in partnership with the Iowa Department of Economic Development, must further identify the best practices to encourage the formation of angel groups and investors, including strategies used in other states, developing a comprehensive implementation plan and monitoring its effectiveness.

— Maintain Research Activities Credits

This economic development tool has proven effective in generating and retaining high-paying technical positions in innovative companies throughout the state. The state’s investments have resulted in private sector investments totaling nearly $1 billion. Without research activities, companies cannot survive.

Attract and Retain a Highly Skilled and Educated Workforce

• Workforce Development

— Enhance PreK-12 education through bold, innovative initiatives

To improve Iowa’s education system to meet the workforce needs of Iowa’s new economy, the Alliance supports legislative solutions to better equip students to compete in the global marketplace and strengthen accountability. A time of economic and budgetary challenges is the ideal time to pursue innovative policies to improve student achievement. To this end, the Alliance supports:

Establishing state-level 21st century learning standards that meet or exceed federal standards as well as assessments focused on student achievement.
Aligning the Iowa curriculum with career pathway maps to build stronger connections between the PreK-12 education system and the Iowa business community.
Improving and enhancing existing technology tools to better connect the workforce needs of businesses to school curricula and students assessing future career pathways.
Fully implementing a career ladder to provide teachers enhanced merit-based compensation and more professional development opportunities for career advancement to enhance recruitment and retention of quality teachers.
Increasing the utilization of flexible and innovative school reform models such as charter schools.
Increasing focus on science, technology, engineering and mathematics (STEM) learning.
Implementing initiatives to improve graduation rates.
Evaluating reform efforts to further implement year-round school and lengthen the school day and school calendar year, which could arguably improve student achievement, reduce juvenile crime, improve current workforce productivity and better prepare Iowa’s future workforce.

— Strengthen workforce training, retention and recruitment to meet future workforce needs

Today’s economic climate demonstrates the need to properly retrain workers to meet the skills demanded of Iowa businesses. Iowa will face a significant shortage of skilled workers, and the state will need to focus on retaining and recruiting skilled workers. Iowa’s workforce will need to adjust as the
economy dictates.

Rebuild and Improve Iowa’s Infrastructure

• Road Use Tax Fund

— Implement TIME-21 (Transportation Investment Moves the Economy in the 21st Century)

With eight percent of Iowa’s roads carrying 61% of the traffic and with the rate of revenue to the Road Use Tax Fund decreasing, continuous investment in Iowa’s public roadway system is essential to support economic growth. Recent studies project that the need to preserve and build new roads and bridges
in Iowa will far exceed available revenues.* The Iowa Legislature established an additional funding formula in 2007, creating the TIME-21 Fund.

In 2008, the Legislature began funding TIME-21 with a boost in revenues by increasing vehicle-related fees. Revenues for this formula are distributed among the state/primary road fund (60%), counties/secondary road fund (20%) and cities/street construction fund (20%).

The Alliance supports full funding of the TIME-21 formula. With insufficient current revenues, the state should consider additional alternatives to raise revenue specifically for road infrastructure.

— Revise the current Road Use Tax Fund (RUTF) formula to mirror the TIME-21 formula and expedite completion of high-priority projects

On a per-capita basis, the current RUTF formula allocates the most dollars to the least traveled roads and the least dollars to more highly traveled roads. The Alliance recommends a more equitable funding formula so a larger percentage of road use tax dollars will be allocated to the primary state road system.

*Source: Iowa Department of Transportation

• Rail Service

— Continue to expand rail infrastructure

Iowa has taken significant steps to expand rail infrastructure in the state. Expanding passenger rail service and investing in the freight rail system provides critical infrastructure for transporting people, commodities and commercial goods. The Alliance supports continued efforts to implement the Iowa Department of Transportation (IDOT) Rail Service plan for passenger rail and continued investment in the IDOT Rail Revolving Loan and Grant Fund.

Sustain and Revitalize Iowa Communities

• CAT and RECAT Programs

— Continue funding and remove caps on CAT and RECAT

A matching fund supporting visionary community projects or destination attractions is important to grow local economies, attract visitors and retain businesses and workers for those businesses. Some funding is currently available through Iowa’s Community Attraction and Tourism (CAT) and River Enhancement Community Attraction and Tourism (RECAT) programs administered through Vision Iowa.

The Board may make a multi-year commitment to a project up to a maximum of only $4 million in any one fiscal year that funding is available. The caps are limiting the program’s impact and should be removed.

• Great Places Program

— Fund the Great Places program at $3 million

The Great Places program was created in 2005 with a mission to encourage unique ways of thinking about the sense of place and economic activity. It was designed to encourage innovation, entrepreneurship and community or regional sustainability. In order for a “place” to receive the Great Places designation, they must submit to a strategic planning process and create a vision for how to attain their goals by demonstrating community buy-in and the necessary social capital to bring the plan to fruition.

An Economic Impact Study completed in 2010 by Iowa State University found the Great Places program is unique to Iowa and is a strong engine for economic growth and sustainability in the chosen places. In performance measures ranging from demographics to economic measures, the majority of Iowa Great Places out-perform their peers in Iowa and across the Midwest. Retail sales growth, increases in hotel stays, business growth, and employment growth are evident in almost all of the first nine Great Places.

• Sustainability – A Green Economy

— Fund the Iowa Brownfield Redevelopment Program at $3 million per year and raise the cap on the tax credit program

Communities need accessible funding for environmental site investigations prior to acquiring nuisance brownfield sites or sites that are preventing future redevelopment investment. Funding the Iowa Brownfield Redevelopment Program allows sites that would normally be considered environmentally hazardous an opportunity to gain new use and life. The Alliance also supports raising the cap on the Brownfields and Grayfields Redevelopment Tax Credit Program, enacted during the 2008 legislative session to encourage green sustainable redevelopment efforts and to revitalize economically obsolescent and energy-inefficient structures and commercially blighted areas.

— Create state infrastructure and incentives for locating and growing companies that are involved in the production of and utilize various types of renewable energy in Iowa

Iowa is particularly well-suited to lead the emerging renewable energy industry. The state is the nation’s leading producer of biomass, and Iowa has some of the nation’s highest average wind speeds. Sunshine used in growing crops can also be harnessed as solar power. In addition to these recognized renewable energy sources, Iowa is also investing in fuel cell storage and waste-heat capture, which can be combined with other energy sources or used as a stand alone provider of power.

Though Iowa has the potential to become the renewable energy leader, it will need to create and deploy the right mix of policies and incentives to take advantage of all the opportunities in the industry. Iowa has made strides with incentives and policies in the wind industry, and as a start these can be expanded to include all forms of renewable energy.