A tale of two counties

by Gigi Wood and Tim Kenyon

CORRIDOR – The results of the Iowa legislative session disappointed several Cedar Rapids business leaders but pleased many in Johnson County.

Budget concerns took the greatest concentration from state lawmakers resulting in less time devoted to issues related to business and other sectors.

“We could have focused more on businesses, especially in improving the environment not only for starting businesses but for growing companies and creating more jobs,” said Rep. Nick Wagner (R-Marion). “The tax credits change went the wrong direction and doesn’t help how business might perceive Iowa. Companies like Rockwell Collins, Pioneer or John Deere will do expansions no matter what, it’s just more a matter of where. We’d like it to be here.”

Mr. Wagner, who works at Bankers Trust in Cedar Rapids, wants to see rules change to encourage more business.

“We’re not competing so much for other companies, it’s more about competing for plants that may be built elsewhere,” he said. “We could make it easier from a regulation standpoint.”

On the other hand, Sen. Rob Hogg (D-Cedar Rapids) said lawmakers performed well overall despite extreme budget constraints.  

“We entered the session with having lost $700 million revenue over the last two years. We had a lot of pressure to make changes including tax credit reform,” said Mr. Hogg, a Cedar Rapids attorney. “We didn’t throw the baby out without the bathwater. We preserved it for long-term economic value.”  

The tax credit funding decreased about 22 percent for fiscal 2011, which starts July 1.

He said infrastructure improvements will go a long way to help businesses, particularly those in the Corridor affected to varying degrees by the June 2008 flood.

Work on the Veterans Memorial Building, the Iowa City wastewater facility, the Linn County Administration building and the former Cedar Rapids federal courthouse are among Corridor projects to benefit from infrastructure improvement funding approved by lawmakers, he said.

Al Beach, director of the Kirkwood Small Business Development Center in Marion, said most of his clients haven’t caught up yet with the session’s outcome, but a $5 million small-business loan fund is quickly gaining attention, Mr. Beach said.

“It’s for businesses that are at least two years old, and by the looks of things that is going to be a good program. We’re quite pleased the Legislature mandated that it goes through the SBDC,” he said. “We like that. We don’t anticipate on getting details much earlier than Aug. 1 on how to apply or what standards to use.”

The gap-financing program will offer an interest rate under 4 percent, which should appeal to many businesses seeking help, Mr. Beach said.

Mr. Beach had a mixed reaction to SBDC funding. The Legislature restored funds cut last year; however, that puts them at the same level as in 2009, and the fiscal 2011 needs are much greater, he said.

Cedar Rapids city officials were not happy about not getting approval to increase the hotel/motel tax by 2 percent. They wanted the increased funds to go toward the $17 million local match expected to be needed for the $52 million U.S. Cellular Center expansion proposal, which includes a new adjoining convention center.

Marilee Fowler, the new president of the Cedar Rapids Area Convention and Visitors Bureau, plans to push for the change next session.

“It was very disappointing. The city was behind it to get opportunities to move the community forward economically, and now we’ve got to wait another year,” Ms. Fowler said. “I hope in the next year we can work with legislators and educate them more about how that would help the events center, which benefits the Corridor economically.”

Cuts in the tourism budget were unfortunate, as well, she said.

“It’s a time of year when people are thinking of summer travels. It hurts resources, but that’s being felt all over the country at tourism offices,” Ms. Fowler said.

Brad Hart, chairman of the Cedar Rapids Area Chamber of Commerce board, noticed a couple of positive developments when the session ended.

The chamber is set to get $1.2 million in state funds for its proposed new building, the Regional Economic Commerce Center. As more funding rules are determined, the chamber will be eligible to compete for additional monies, too, Mr. Hart said. The commerce center would replace the chamber and Priority One office at 424 First Ave. NE downtown.

Additionally, Mr. Hart said networking among Linn county groups improved.

“Relationship-wise, the city, county and chamber did a better job to gain support of trade unions,” he said. “For infrastructure, the needs are numerous and we had several trips with reps from the union, chamber, city and county working together showing unity. We need to work together more like that even though there will always be some issues that we have to agree to disagree on.”

Rep. Kraig Paulsen, the Iowa House Republican leader, said too much burden is being placed on property taxpayers, especially commercial landowners.

“In this budget for the next fiscal year we’re right around a $180 million increase,” Mr. Paulsen of Hiawatha said. “We’ve spent too much money and I’m extremely concerned about property-tax increases in the future. It absolutely needs to be corrected. The truth of the matter is property taxes need to come down as we have the fourth highest commercial property taxes in the nation.”

Mr. Hogg noted the affect schools have on Iowa’s long-term economy.

“We need to look for opportunities to connect Iowa students to Iowa jobs of the future,” he said. “This year, we focused on the budget, disaster recovery and prevention. Hopefully we’ll broaden it next year.”

Johnson County

One of the best news items coming out of the legislative session for Johnson County was likely the passage of distillery legislation.

Jeff Quint, owner of the new Cedar Ridge Winery and Cedar Ridge Spirits in Swisher, and Scott Bush, president of Templeton Rye in northwest Iowa, lobbied for the Iowa Native Distillery bill, which allows craft distilleries in Iowa to sell spirits to tourists visiting Iowa distilleries. Previously, Mr. Quint could produce the spirits on site, allow visitors to sample it but could not sell it.

Cedar Ridge Winery, a 7,200-square-foot, $2 million wine and spirits production and tourist attraction, opened last year.

“(The legislation) is basically what we’ve been working on the last five years,” Mr. Quint said. “We finally got passed legislation that will allow distilleries in the state of Iowa to sell product to visitors starting July 1. We think it will spawn several new distilleries in the state over the next decade, and why not, since most distilled spirits are made from corn.”

The change will likely mean growth for sales at the Cedar Ridge Winery, he said.

“That was a long overdue bill that will help his company,” said Mark Nolte, business development director with the Iowa City Area Development Group (ICAD).

Mr. Nolte said there were a few pieces of legislation that ICAD followed this year. One was Iowa’s status as a right-to-work state, which prohibits agreements between unions and employers that make membership or payment of dues a condition of employment.

“We were thankful that nothing was done in that aspect and the Legislature realized how important that is to our ability to attract and retain companies,” he said.

ICAD also followed the start of discussions of a statewide shovel-ready site program and funding for entrepreneurial start-up assistance.

“I think they committed to initial funding for (shovel-ready program) and we’re hoping in subsequent session they can figure out a way to direct infrastructure monies to cities to help make sites shovel ready but this is a great first step,” Mr. Nolte said. “It was a tough year for anything that looks like new spending.”

The Iowa City Area Chamber of Commerce was most encouraged by additional funding dedicated to passenger-rail service between the Quad Cities and Iowa City. Lawmakers earmarked $6.5 million toward passenger rail, to show the state’s commitment to adding the route.

“This allows us to leverage federal funding, which requires a 20 percent match,” said Nancy Quellhorst, president and CEO of the chamber. “We’re told the Iowa Department of Transportation application is one of the most robust and well positioned for the second round of federal funding. So it was really critical that we had this display of commitment from the Iowa Legislature.”

Another important issue exempted regent universities from the Legislature’s centralized reorganization bill, which called for centralized spending by state institutions, such as the University of Iowa.

“This would have done considerable harm to many local businesses who rely heavily on the UI spending,” she said.

Rep. Larry Marek (D-Riverside) said the session ran smoothly because lawmakers decided to focus on the budget, instead of controversial issues.

“I’m pretty pleased with how it went. Our biggest problem was the funding we had available; we were about $650 million short of what we had a year and a half ago,” he said. “Considering that I think we came out pretty well.”

He said funding for education, health and human services, veterans services and flood recovery turned out better than expected with shrinking tax revenues.

“We were able to do that without any raise in the state taxes,” Mr. Marek said.

He said transparency needs to improve when it comes to issues such as the school board association and misuse of public funding.