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.”  

Governor Chet Culver announced on Tuesday that he has appointed Fred Hubbell to serve as interim director of the Iowa Department of Economic Development (IDED). Hubbell will start working there on October 5. He will continue to serve on the Power Fund board, only he will now be IDED’s representative on that body. Last month the rumor mill floated Hubbell’s name as a possible challenger to Senator Chuck Grassley, but he said he was not interested in running for Senate.

Culver picked Joe O’Hern, deputy director at the Iowa Finance Authority, to be the new interim deputy director at IDED, focusing on IDED’s flood recovery efforts. This press release from the governor’s office contains more background on Hubbell and O’Hern.

Culver spoke about the abuse of Iowa’s film tax credit program during a press conference in Cedar Rapids on Tuesday:

When information was first brought to my attention last week about Iowa’s film tax credit program, I was troubled. But as we began our investigation into this program, and more information has come to light, frankly, I am outraged – not only that a program involving millions of Iowa tax dollars was so mismanaged but that some companies were taking advantage of this situation.

This problem first came to my attention last week when I was traveling on Tuesday with former director Tramontina. At that time, I asked him to prepare for me a memo outlining problems with the program. And, after receiving that memo, I took immediate steps to protect the taxpayers of Iowa. […]

These actions are intended to protect the best interest of Iowans, and not to harm the growing film and television industry in our state. This program should continue only after we have the controls, oversight, and due diligence in place to assure that it operates properly.

But, while there were clearly not the controls and oversight in place at the Iowa Film Office, we need to make sure that the film and TV productions in our state are following the rules.

For example, projects must have commitments for at least 50% of their funding before even applying for assistance under the program.

In addition, projects are not to receive tax credits until after their work is complete and they have submitted invoices of qualified expenses.

And, we expect film and television productions to obey Iowa’s labor laws – which mean people get paid for the work they do. That does not mean they wait until after their tax credit has been approved.

Iowans will not be taken for suckers. While we need to make changes to strengthen management of this program, we are not going to be taken advantage of – and if we are, we are going to claw back and make sure any money wrongfully provided is returned.

If something good can come out of this scandal, I hope that all of Iowa’s tax credit programs will now receive greater scrutiny. Even if there are no other tax credits being abused, we may not be getting our money’s worth for all of these programs. In a weak economy that puts pressure on state revenues, wasteful tax credits need to be on the chopping block along with government spending.