State official denounces negative U.S. News report on business climate

Don’t believe everything you read in a magazine. That’s the message Mike Tramontina, director of the Iowa Department of Economic Development (IDED), has for those who read a scathing assessment of Iowa’s start-up business climate in the latest issue of U.S. News & World Report.

Photo by Lisa Yarost, Flickr

The report, written by Matthew Bandyk, ranks Iowa as the second worst state in the nation for launch of a business.

“[Iowa] seems to have the worst impulses of its conservative and liberal tendencies — relatively low investment in the things that make entrepreneurs succeed, and high government interference,” Bandyk opined in his rankings. “For the latter, Iowa has very high capital gains taxes and corporate income taxes, and is also one of the worst states for unemployment taxes on wages. In terms of investment, Iowa is 46th out of the states for adoption of broadband telecommunications services, and the speed of those services.”

Tramontina took issue with those conclusions in a memo sent Tuesday to state legislators.

“The publication decided to take a narrow focus when accessing Iowa’s business climate when, in fact, Iowa is aggressive in supporting entrepreneurship,” he wrote.

Tramontina pointed to the magazine’s description of Iowa tax requirements as one example of how the report was narrow and relied on “case-specific” circumstances in making its rankings.

“If a start-up company is selling solely to Iowa, the income taxes don’t benefit the company, but if they are selling outside of Iowa, in general, there are no income taxes for sales outside of the state,” he said.

There is, however, no dodging the accusation that the state’s broadband services are sub-par when  compared to those of other states.  Last year, the Iowa Utilities Board (IUB) released a report showing that there is increased demand for high-speed Internet access in both rural and urban portions of the state at the same time that  projections for deployment in under-served areas in the next year have decreased.

According to the IUB report, of the 1,231 communities included in the assessment reponses, 1,156 — or 93.9 percent — have access to at least one type of high-speed Internet technology. Of those communities, 925 are rural and 231 are urban. Current deployment schedules at that time indicated that only two more communities would have access to at least one type of broadband by June 2008.

“The rural and non-rural communities without high-speed Internet access are most often unincorporated areas that are not the primary community within the exchange or zip code,” report authors explained.

Since the year 2000, however, Iowa has made great strides in bringing high-speed access to rural communities. At that time only 28 percent of rural Iowa had access. As of 2007, the IUB reports that 96 percent of rural communities have access — a percentage that now exceeds the 86 percent saturation in urban areas of the state.

Tramontina was also quick to point to other reports that rank Iowa as one of the best places to do business:

• All nine of Iowa’s largest cities were listed as Best Places for Business by Forbes in 2008.
• CNBC ranked Iowa second in Cost of Doing Business and 11th in Business Friendliness in 2008.
• Milken Institute’s Best Performing Cities: Where American Jobs Are Created, which assesses economic growth and job creation at the city level, ranked Des Moines at 25th and included both Council Bluffs and Cedar Rapids in the top 100. In an assessment of smaller cities, it gave Iowa City 25th place, Dubuque 54th and Waterloo 69th.
• Site Selection Magazine ranked Iowa 6th in the country in 2008 based on total new and expanded facilities, capital investment, new job creation, percentage growth, three-year growth change and placement in the publication’s other annual municipality and business rankings.

Tramontina also touted his own department.

“The U.S. News & World Report articles does not reference state assistance in their assessment, and the state of Iowa has been working hard to foster the development and growth of entrepreneurs,” Tramontina said. “Looking beyond traditional economic development practices, IDED created the Innovation and Commercialization Division in 2007 to foster entrepreneurship and develop the talent pool required of the 21st century Iowa workforce.”

According to Tramontina, applications from 80 companies were submitted to this new program since November 2007, and 40 received funding of up to $150,000 to develop capacity in advanced manufacturing, biosciences and information technology industries.

Bandyk did not respond to the Iowa Independent’s request for a comment.