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City prepares to give mystery company millions

By   /   April 3, 2014  /   No Comments

By Paul Brennan | Iowa Watchdog

DES MOINES, Iowa—West Des Moines city officials have cued up $36 million in local and state tax incentives for a company, but won’t tell its citizens who that company is.

“I shouldn’t say anything,” West Des Moines Mayor Steven Gaer told Iowa Watchdog. “The company has asked us not to.”

The code name is Project Alluvion, a proposed data center. At its March 24 meeting, the City Council voted unanimously and without discussion to make $18 million in infrastructure improvements and to apply on behalf of the mystery company for another $18 million in state sales tax rebates from the Iowa Economic Development Authority’s High Quality Jobs Program.

According to a document the city has prepared for the IEDA, when completed Project Alluvion will create 84 permanent jobs and have a minimum assessed value of $255 million.

But according to the mayor, the company’s plan depends on getting $18 million in sales tax rebates on construction materials, the maximum amount that can be awarded through the High Quality Jobs Program.

“If it’s not approved, the company has said it would reconsider locating here and might look at other locations,” Gaer said.

Those tax rebates, instead of engineering considerations, also determined how much the city is going to spend on infrastructure improvements for Project Alluvion. The rebates require a matching amount to be spent by the city. To get the company $18 million from the state, the city will have to spend $18 million on the project.

“It’s called manipulation by extension,” Iowa State University economist David Swenson told Iowa Watchdog. “The company manipulates the local officials and the local officials manipulate the state on behalf of the company.”

WHAT'S IN A NAME? The city  of West Des Moines is ready to provide millions in tax dollars to a company, but won't tell its citizens that company's name.

WHAT’S IN A NAME? The city of West Des Moines is ready to provide millions in tax dollars to a company, but won’t tell its citizens that company’s name.

Withholding the name of the company as long as legally possible is part of this strategy, Swenson said.

“It makes it easier for the company to manipulate local officials,” he said. “The company can threaten to move to a different place, but because of the secrecy the local officials can’t assess the seriousness of the threat. If the company was actually to go public with its information, then local officials in the first location and in the other possible locations would be able to compare notes and decide what’s reasonable.”

Iowa is “ripe for this sort of manipulation,” Swenson said.

“In the last 30 years a culture has been created in state and local government that believes economic growth requires support with tax dollars,” he said.

“It’s grown to the point that whatever the last offer of government support was — however generous or stupid it was — becomes the standard for what’s expected going forward.”

That’s the case in West Des Moines. What’s happening there is a repeat of what happened in Altoona in 2013.

In that case, a company wanting to build a data center hid behind the name Project Catapult, while it negotiated with the city to line up $18 million in city financed infrastructure improvements, as well as city support for the matching amounts in state sales tax breaks. When the matter finally came before the IEDA, Project Catapult was finally revealed as Facebook.

Facebook got the incentives it wanted from the city and state.

The identity of the company behind Project Alluvion will be revealed when IEDA considers the tax rebates for the company later this month at a public hearing.

Project Alluvion’s tax rebates originally were supposed to be considered at an IEDA hearing on March 28, but the item was removed from the docket at the company’s request.

Normally this would be the indication of a problem with the project, but according to the document the city prepared for the IEDA, Project Alluvion has “no outstanding issues.”

Asked what happened, Gaer would only reply, “I have no comment.”

Contact Paul Brennan at pbrennan@watchdog.org

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Paul Brennan reports on politics and public policy for Iowa Watchdog. Before joining Watchdog.org in December, 2013, Paul wrote for numerous publications from Washington D.C. to Los Angeles (and many places in between), covering a wide range of topics, from skateparks to cloning. Paul lives in Des Moines.

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