Film tax credit fallout continues

Mismanagement of Iowa’s state film tax credit program has led to more personnel changes at the Iowa Department of Economic Development this week. On Monday three longtime employees of the department were dismissed: general counsel Melanie Johnson, Jeff Rossate, and Amy Johnson. The Des Moines Register reported,

Rossate, as division administrator for business development, was the direct boss for film office manager Tom Wheeler. Johnson was Rossate’s No. 2 as the coordinator of the business development division.

The Des Moines Register reported on Saturday that e-mails showed those officials were privy to some of the worst problems facing the film program in the two months before it was suspended.

Amy Johnson had been serving as interim director of the film office before she was dismissed. IDED announced Tuesday that attorney Jessica Montana will be the new interim director of the film office. Montana has worked on IDED’s regulatory assistance team since 2007.

I wonder whether the latest dismissals will complicate the criminal case against Wheeler and two film producers. Wheeler was fired from IDED shortly after the scandal broke, and earlier this month the Iowa Attorney General’s Office charged him with non-felonious misconduct. His defense attorney will now be able to claim that Wheeler’s boss and others knew about problems with the film tax credit program.

No matter what happens with that case, I don’t envy IDED director Bret Mills, who needs to sort out this mess. Mike Tramontina resigned as IDED director when the film tax credit scandal broke, and Fred Hubbell served as interim director of the department until Governor Chet Culver appointed Mills in late December. The Iowa Senate confirmed Mills unanimously this month.

Here’s hoping state legislators will put the film tax credit program out of its misery. A bill is pending to suspend the tax credit until July 2011, but the program was ill-conceived from the beginning and doesn’t deserve to be revived. There are a lot better ways for the state to spend up to $50 million a year.

Meanwhile, the Des Moines Register reports today,

Eleven film companies are suing Iowa’s Department of Economic Development, saying they believe certain documents that have not been released since the scandal broke – including expenses and budgets they reported to the state – should be kept confidential.

Scott Brennan, an attorney for the film companies, said Tuesday there is a difference between public curiosity and public interest in the ongoing probe. His clients believe they were guaranteed “by contract and by statute” that certain trade secrets would be kept secret.

The attorney general’s office and the Register argue that the records – first requested last fall – are public under state law and should remain so because they are of significant public interest. The two sides met in court for the first time Tuesday.

According to a brief filed Tuesday by Michael Giudicessi, the newspaper’s lawyer, “Whether evidenced by the very requests of the Register and other news organizations for access, the suspension of the film tax credit program by the governor’s office, the conducting of an independent audit by the department, the vast and increasing amount of taxpayer dollars involved or the ongoing terminations … it is clear that the public interest is not served by any degree of continuing secrecy.”

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Year in review: Iowa politics in 2009 (part 2)

Following up on my review of news from the first half of last year, I’ve posted links to Bleeding Heartland’s coverage of Iowa politics from July through December 2009 after the jump.

Hot topics on this blog during the second half of the year included the governor’s race, the special election in Iowa House district 90, candidates announcing plans to run for the state legislature next year, the growing number of Republicans ready to challenge Representative Leonard Boswell, state budget constraints, and a scandal involving the tax credit for film-making.

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Culver appoints new economic development director

On Monday Governor Chet Culver appointed Bret Mills as the new director of the Iowa Department of Economic Development. Mills will replace Fred Hubbell, who agreed to serve as interim IDED director this fall after Mike Tramontina resigned due to problems with Iowa’s film tax credit.

Up to now, Mills has been director of the Iowa Finance Authority. Also on Monday, Culver appointed Joe O’Hern to replace Mills as IFA director. For the last three months, O’Hern has been interim deputy director of IDED.

In addition, Culver announced plans to move the HOME Investment Partnership program from IDED to the Iowa Finance Authority: “This not only will help streamline our housing efforts, but it will ensure that IDED is staying true to its mission: attracting new businesses, growing current companies, and retaining and creating jobs statewide.”

The press release from the governor’s office contains more background on the HOME program and short official bios of Mills and O’Hern. Given their qualifications, they should have no trouble being confirmed by the Iowa Senate.

The film tax credit fiasco sparked the turmoil at IDED, and the department won’t issue new credits under that program for the remainder of this fiscal year. However, film credits already awarded will cost taxpayers tens of millions of dollars.

The upside is that all state tax credits are being subjected to much more scrutiny. Debates about scrapping or scaling back some of the business tax credits will be among the most contentious issues of the 2010 legislative session. Ordinarily, I would not expect legislators to defy any well-funded corporate interests, but this year the budget is so tight that I see no way they can continue with the status quo. Lee Rood reported for the Des Moines Register earlier this month:

Iowa’s incentives for filmmaking may have been the most generous in the country, but they were not the first of the state’s tax credits to skyrocket in cost.

Over the years, other carrots offered by the state to stimulate job creation, development and research have grown dramatically – while sometimes being subject to limited oversight.

A Des Moines Register review of some of the state’s biggest tax credit incentives found state leaders had reason to worry about runaway costs, lack of transparency and waste long before Iowa’s botched attempt at using tax breaks to jump-start a film industry made international news.

That review found the state auditor had identified almost identical oversight problems in another tax credit program; state law required almost no outside oversight of some of the biggest credit programs; and authorities already knew that a portion of projects that tapped the most widely used programs had problems […]

In yesterday’s Register, Rood reviewed five tax credits that “could cost the state more money over the next five years than the film-making tax incentives […] for research, job training, historic preservation, development in distressed areas and high-quality jobs.”  

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