DES MOINES, Iowa (AP) — A state senator says it wasn’t necessary to give $240 million in state and local tax breaks to a planned southeast Iowa fertilizer plant because the project already qualified for as much as $300 million in federal taxpayer subsidies.
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Sen. Joe Bolkcom, D-Iowa City, said at a Capitol news conference Monday that he believes the $1.4 billion Orascom Construction Industries project was “the worst economic development deal in state history.”
The federal subsidies are coming to Orascom in the form of Midwestern Disaster Area bonds, special tax-exempt bonds created by Congress in 2008 to help Midwest states recover from floods and tornadoes. Interest on the bonds is not taxed by the federal government, so banks can allow companies to borrow money at lower rates. Companies typically save up to 2 percent on the interest.
Out of its project’s $1.4 billion cost, Egypt-based Orascom is expected to borrow as much as $1.2 billion through the MDA bonds program.
Iowa has about $1.8 billion of bonding capacity remaining under the program, which was patterned after Liberty Bonds, an $8 billion tax-exempt bond program created to help developers rebuild after the Sept. 11, 2001, terrorist attacks in New York. Similar programs were approved after Hurricanes Katrina and Rita extensively damaged the Gulf Coast and Hurricane Ike caused damage in Texas.
To be eligible for the Midwest disaster bonds in Iowa, a project must be located in one of 78 counties declared a disaster area by the president in 2008. Lee County, where the fertilizer plant will be located, is among those counties.
Bolkcom said that because Lee County qualified for the bonds, it already had a great advantage over an Illinois county that also competed for the Orascom project and Iowa didn’t need to come up with another $240 million in grants, loans and other incentives.
“The challenge to economic development people and the governor is: What’s the balance between bringing the deal to Iowa and just giving away the farm?” said Bolkcom, chairman of the Senate Ways and Means Committee. “In this example it appears we’ve given away the farm for a deal that was very, very likely to end up where it is being built in Lee County.”
Including the bonds and the other incentives, the company is getting nearly $550 million in taxpayer subsidies to create 165 permanent jobs in Lee County, which has one of the state’s highest unemployment rates at about 8 percent. The state average is just above 5 percent.
Most of the jobs would pay more than $20 an hour. Construction of the plant also would create 1,500 to 2,000 construction-related jobs.
Gov. Terry Branstad’s spokesman, Tim Albrecht, told The Gazette (http://bit.ly/PULOme ) that the governor “won’t apologize for fighting for every single job that he can bring to the state.”
“We simply weren’t going to turn our backs on the people of southeast Iowa who have a higher unemployment rate than the rest of the state, and we were going to fight for those jobs,” Albrecht said. “Gov. Branstad came to the table and fought for those jobs and was successful.”
Money allocated under the state’s disaster bond authority must be used before the program expires Jan. 1.
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Information from: The Gazette, http://www.gazetteonline.com/
