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Iowa's New Incentives Spur UNFI, Rockwell Collins Expansions
of Interactive Publishing
IOWA CITY, Iowa By its name alone, it was pretty obvious what Iowa's New Capital Investment Program (NCIP) was designed to do. And now the new incentive initiative has begun doing it, paying off by generating new capital investment from in-state firms:
Some 255 new jobs are headed to the Hawkeye State, courtesy of expansions by the first two firms to tap the subsidies. Iowa lawmakers approved the NCIP earlier this year, and Gov. Tom Vilsack (D) signed it into law on May 12.
One company that's utilizing the program is Blooming Prairie Cooperative, part of United Natural Foods Inc. (UNFI at www.unfi.com), which is adding 130 positions. The additions will come in an expansion that will more than double the size of the company's Iowa City facility, which distributes natural food products.
Rockwell Collins (www.rockwellcollins.com) is adding another 125 new jobs, though their precise position hasn't yet been firmed up. But the new jobs, company officials explained, will definitely be located at one or more of the company's five Iowa-based operations, which are in Bellevue, Cedar Rapids, Coralville, Decorah and Manchester.
Blooming Prairie and Rockwell Collins share similarities that extend beyond their NCIP subsidies. Both started small in Iowa long ago, then grew into far larger enterprises.
NCIP Subsidizes Smaller ExpansionsThe NCIP was created to fill what Iowa leaders saw as a gap in supporting the state's expansion-minded firms. Specifically, the initiative establishes incentives for Iowa-based firms' expansions that are smaller than the projects that the state's existing subsidies had rewarded.
Some state lawmakers, in fact, dubbed NCIP a "junior version" of Iowa's New Jobs and Income Program (NJIP). NJIP was already providing a package of tax credits and exemptions to expanding in-state companies. Projects, however, were required to make a capital investment of at least US$10.87 million and create 50 or more jobs that meet the state's "high-quality" wage and benefit targets. Up until recently, companies mounting smaller expansions could only receive aid if they received a waiver from the Iowa Department of Economic Development (www.iowasmartidea.com).
NCIP's enabling legislation drops the capital investment requirement to $1 million; and its only employment specification is that projects create "high-quality jobs due to the capital investment." (Total incentives are tallied after the state determines how many high-quality jobs were created by a project.) The subsidies for smaller expansions "allow Iowa businesses to be more competitive in the world economy," the bill explains.
The new program certainly boosts competitiveness for Blooming Prairie and Rockwell Collins. Both companies' investments fall just below the NJIP guidelines, with Blooming Prairie's totaling $9.6 million, and Rockwell Collins' $10 million.
Both firms' job-creation numbers, however, will trigger NCIP's maximum 5-percent investment tax credit. The program allows only a 1-percent credit if expansions ultimately don't create any new jobs that meet the "high-quality" standard. But projects that create more than 15 such jobs qualify for the maximum credit.
The NCIP also qualifies local areas as ultimate decision-makers on the program's incentives. Each local community must approve a project for it to be eligible to receive NCIP aid, which also includes refunds on sales, services, and use taxes. (Local areas, however, aren't required to pony up any matching funds.)
UNFI Adding 140,000SFIowa wasn't a lock for the expansion by Blooming Prairie, founded in Iowa City in 1974 with a tiny staff of three part-timers. Indianapolis also made a strong pitch for the company, which distributes its products in 13 states.
Space needs are what's driving the Iowa City expansion. Those needs trace in part to the company's October 2002 acquisition by Dayville, Conn.-based UNFI.
That left Blooming Prairie's 120,000-sq.-ft. (10,800-sq.-m.), 235-employee distribution center in Iowa City as an odd-size duck in UNFI's distribution network. The company's 10 other distribution facilities range between 260,000 and 300,000 sq. ft. (23,400 and 27,000 sq. m.), according to UNFI Manager of Special Projects Tom Dziki.
The Iowa City expansion will add 140,000 sq. ft. (12,600 sq. m.), maximizing the existing site's acreage, Dziki explained. Among the features installed in that new space will be a 25,000-sq.-ft. (2,250-sq.-m.) freezer, 19,000 sq. ft. (1,710 sq. m.) of additional cooler space and a 6,000-sq.-ft. ( 540-sq.-m.) cold dock.
The additions will triple the facility's freezer area, while doubling room for refrigerated and dry-goods storage. That will ease the operation's space pinch since UNFI's acquisition. The facility currently leases 20,000 sq. ft. (1,800 sq. ft.) of off-site storage space and rents refrigerated space as needed, Dziki explained.
"Additional storage space allows for more product diversity and the elimination of outside storage expenses," explained UNFI CEO Steven Townsend (who was a real estate developer earlier in his career). "While we anticipate incremental short-term costs during the first half of fiscal 2004, we expect the efficiencies created by expanding our Iowa City facility to lower our expenses relative to sales over the long term."
Market demand also dictated the expansion. Frozen and perishable items are UNFI's fastest-growing product lines, with annual sales increasing 20 to 25 percent for the past five years, Townsend said.
Already under way, Blooming Prairie's expansion will be completed in April of 2004, he added.
Rockwell Collins Began in Founder's BasementRockwell Collins' history, on the other hand, underscores even more pointedly what can happen when a small homegrown business blooms.
The company's Iowa roots trace back to 1932, when Collins Radio was founded - in very modest fashion - in Cedar Rapids. The firm began operations in makeshift space set up in the basement of founder Arthur Collins' home.
By 1933, though, the company had gained high-profile recognition: It supplied the equipment to establish a communications link with Rear Admiral Richard Byrd's South Pole expedition. And by 1973, Rockwell International had acquired the company, changing its name to Rockwell Collins.
Today, the firm ranks as the state's largest home-grown manufacturer; 8,000 of its 14,000 total employees are in Iowa.
A $7-billion military contract is what's prompting Rockwell Collins' presence in the Hawkeye State to get even larger. The U.S. Army awarded that work to a Boeing-led group that includes the Iowa-based company. The contract calls for developing a tactical radio system capable of handling voice, video or data traffic while connecting battlefield chiefs, troops, ships and pilots.
Rockwell Collins officials are predicting that the Army deal could produce as much as $2 billion in company revenue during the contract's 12-year lifespan. The firm's new capital investment in Iowa, they explained, will be focused on new equipment and research work on the new military communication technology.
Full production on the system won't begin until 2007, they added, with all of the 125 new jobs likely added by 2005.
©2003 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.