Tax incentives to lure big companies to settle in your region have become, for many states, a cost of doing business… a cost that’s oftentimes worth it in the end.
Unfortunately, not every deal goes as planned. And while some economic development agencies are able to incorporate safeguards to protect their precious funds in the event of trouble, there are just as many times where taxpayers are left holding the bag.
Iowa residents are unfortunately seeing the dark side of a deal the state made with a company called Poet DSM Advanced Biofuels when it built a plant in Emmetsburg in 2014. The facility was intended to process ethanol that utilized crop waste like corncobs, husks and stalks -- leaving the corn itself for food production.
According to the AP, Poet is the nation’s largest ethanol producer, but the company hit hard times when it says a combination of government actions and the pandemic reduced ethanol demand. In July, the plant was idled.
When the project first kicked off, the state of Iowa pledged $20 million in funding that came as a mix of forgivable loans and grants, tax credits and sales tax relief. But the deal required Poet to keep at least 35 employees at the location through 2024.
The Iowa Economic Development Authority recently approved a settlement agreement with Poet, but it’s pretty one-sided: Poet obviously won’t be eligible for any of the tax credits it had yet to earn -- which amounts to about $2.5 million -- and the economic development agency will not seek to be repaid for the money Poet had already received.
And if Iowans feel ripped off, so can the rest of us: the federal government kicked in $100 million for the plant.