A state payroll tax credit incentive created to make Iowa border cities more competitive with neighboring states has resulted in $138 million in new private investment in Iowa over the past six years, according to a report released Tuesday by the Iowa Department of Revenue.

Launched as a pilot program in 2006, the Iowa Targeted Job Withholding Tax Credit program allows the diversion of withholding taxes to be matched by the cities to fund urban renewal projects to be used as development incentives to attract or retain businesses.

In the past six years, the state has made 39 awards totaling $37.6 million in tax credits in five cities: Sioux City, Council Bluffs, Burlington, Fort Madison and Keokuk. Eligible businesses have claimed $7.5 million of the tax credits between fiscal years 2007 and 2012. Participating cities match each dollar of tax credits claimed and must use them on urban renewal projects related to the businesses receiving the credits.

The study estimated that between fiscal years 2007 and 2012, the program resulted in 574 new jobs and 1,855 retained jobs in the state. By the end of the 10-year program, $8 in private funds will have been invested for every dollar of tax credit claims made by awarded businesses, according to the study. 

The program is “a critical tool to attract and retain good-paying jobs and increase capital investment in Iowa,” Sioux City officials said in a letter included in the study. City officials credited the program for creating at least 1,500 new jobs in Sioux City with wages averaging more than $30 an hour, and with leveraging more than $98 million in new private investment. 

Two major projects now under construction in Sioux City – a multimillion-dollar expansion by manufacturer Sabre Industries Inc. and a major clinic expansion by St. Luke’s Hospital —  were attracted using the program, say economic development officials.