Community Vitality Update

May 2005 Issue No. 18

This newsletter provides community leaders, economic developers, entrepreneurs, and other Iowans interested in community vitality with features on innovative strategies, updates on CVC projects, and info about opportunities for learning and networking.

Why a Market-Oriented Economist Might Examine Ethanol Mandates

Ethanol is one of the more entrepreneurial activities occurring in nonmetro Iowa. There is soon to be more than one plant for every five counties. Will the ethanol expansion continue? Recent articles in Des Moines and Omaha media suggest an ethanol oversupply. Since February, the retail price of gasoline rose by over $.50 per gallon while the ethanol price at the plant dropped to $1.12 per gallon. Prior to February, ethanol payback prices generally moved with retail gasoline prices. But do we really have an oversupply? Using the whole national corn crop of 10 billion bushels would produce about 27 billion gallons of ethanol. That’s only 20 percent of the 135 billion gallons of annual gasoline consumption nationally. So is the ethanol price drop really due to seasonal reformulations and oversupply, or could it be unequal market power between the oil industry oligopoly and the 85 ethanol plants mostly locally owned and dispersed across the nation? The oil industry certainly would not be running their refineries at full capacity which allows them to use the ethanol price differential as leverage to add to their profit line, would they?

In recent years, technology advances have allowed the cost of production for ethanol to drop below $1.00 per gallon. Why are there not people flocking to cheaper ethanol products? Well, there is no ethanol only price for consumers to see at the pump, only blends. Half of the new cars can now use an 85 percent ethanol blend (E-85), but there aren't that many E-85 pumps around. If there were, ISU economist Paul Gallagher suggests E-85 should be selling for 10 to 15 cents below the regular grade of gasoline and 20 to 25 cents below premium after adjusting for fuel economy differences. Statewide savings for Iowa consumers would be $157 million for every dime in fuel cost savings per gallon.

Iowans spend about $2.3 billion annually to buy about 1.57 billion gallons of gasoline. Iowa’s ethanol industry will soon be producing 1.3 billion gallons of ethanol annually. Even some market-oriented economists are willing to consider government intervention when infant industries are involved and when free market conditions do not exist. If annual gas consumption stays constant and retail prices stay at or above $1.95 per gallon, Iowans will be spending an extra $785 million annually compared to last year to the benefit of oil imports and interests that primarily reside out-of-state. In contrast, an ISU study says Iowa’s ethanol industry is creating over 4,200 jobs, generating $3.9 billion in economic activity for Iowa communities, and most of the benefits remain local. Des Moines business leaders have recently touted the success of their “buy local campaign” in boosting jobs and economic activity for the metro area. Examining this strategy for higher ethanol blends could add to Iowa’s economic bottom line in a similar fashion. Minnesota is considering it. In addition, consumers would see some savings, there would be less dependence on oil imports, and homeland security would be advanced all at the same time. That’s a "4-fer." -- by Mark Edelman, ISU Economist

Community Philanthropy Academy attracts 136 Iowa Leaders

Evaluations for the 2005 Community Philanthropy Academy indicated that a wide variety of participant needs were met in this year's event. One idea that surprised many participants was the potential benefits of youth involvement in local philanthropy initiatives. Others learned about the potential role for community foundations to serve as a “give through” rather than “give to” foundation. This means that affiliates can focus on estate planning, wealth transfer, wills and bequests, and endowment management for higher returns to the benefit of other local nonprofit entities in the community that have historically focused on annual fund drives. Evaluations asked participants to rate various local technical assistance needs. Out of 48 respondents, 30 indicated need for goal setting to balance local priorities; 30 indicated need for developing a county philanthropy resources notebook to provide a database of local foundations, nonprofit resources, and contact information; 29 indicated need for assistance in implementing their local grant-making process; 29 indicated that a statewide library of best practices, success stories, and innovative philanthropic development ideas from across the state is needed; 27 indicated need for technical assistance in identification of countywide needs and priorities; and 25 indicated need for web site templates for newsletters, annual reports, local project priorities and wish list ideas to attract interest of local and external donors and stakeholders.

Academy power point presentations and handouts are now up inthe Community Philanthropy Presentations section . One additional handout titled: “A Sample Countywide Foundation Goal Setting Workshop Agenda” that was not available at the Academy has been added as supplemental handout for Workshop 2. ISUE Community Economic Development Specialist Norm Riggs contributed to this document. Norm has conducted numerous goal setting workshops for city councils and other groups in recent years and this handout heavily draws on his experiences and process.

$1000 Grants Available for Middle-School Entrepreneur Program Sponsors

The application period for ten $1000 sponsorship incentives for the 2005-2006 middle-school Youth Marketplace Program remains open. The program was developed by the ISU Pappajohn Center and has been used in 15 middle schools with great success. It brings local entrepreneurs and business leaders into the classroom for 25 hours of curriculum. Students form teams to develop business plans, seek financing, and produce a product or service. They market their goods and services to parents, classmates, and community supporters at a community marketplace event before figuring the profit or loss. This is often the student’s first experience in entrepreneurial activity. Evaluations have been great. While school cooperation is required, the coordination of the program can be accomplished by other local sponsors. Last year’s sponsors included public and private schools, local extension, chamber and economic development groups, rural electric coops, and resource conservation and development districts. Pilot tests of the program showed that schools continue the program once it has been tried for a one year pilot project.

For more info on Youth Marketplace visit the ISU Pappajohn Center website. To get an application for the $1000 grant, see Youth Marketplace. Applications must be submitted by email.

Comments and CVC Contacts

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