Groups work out creative incentive package for steel plant

FORT MADISON – Lee County residents got their first glimpse Wednesday night into negotiations between the county and the Minnesota company that plans to build a $15 billion steel facility in Green Bay Bottoms near Wever.
Officials with Mesabi Metallics, which is a subsidiary of Essar Group of Mumbai, India, along with officials with Lee County, Lee County Economic Development Group, and Southeast Iowa Regional Planning Commission pulled the curtain back on negotiations over incentives.
The Lee County Board of Supervisors plans to vote on a resolution approving the term sheet at their board meeting Nov. 10th. That will allow the project to return to the state for an official application for the project.
Mesabi President Joe Broking spoke to about 165 people at Quality Inn & Suites and another 105 who took in the meeting online and said the company was excited about the possibility of coming to Lee County.
Broking said although the project will bring more than $95 billion in economic inputs to the county over 50 years, he didn’t want the group to leave thinking it was all about money.
“The investment here is substantial. But I don’t want you to leave here thinking it’s about the money. This is the highest quality steel being produced at the lowest possible cost,” he said.
Broking also said the company has invested massive resources in creating an integrated steel production process that reduces carbon emissions by 65% to 75%.
“And we want to do all that right here in Iowa,” he said.
State Sen. Jeff Reichman (R-Montrose) ushered the $1.36 billion incentive deal through the State Senate and said Mesabi is ready to participate in the steel market on a global scale with products produced in Lee County. He said those products would be viable even without President Donald Trump’s imposed steel tariffs because of the process Mesabi is using.
“This allows them to produce the best steel at a competitive price even with China dumping inferior steel on the market,” he said. “This will be that high-quality steel that manufacturer’s need.”
State Rep. Blaine Watkins, who was re-elected last night to his first-full term in the State House said he hadn’t seen the incentive package that Lee County Economic Development Group CEO Emily Benjamin outlined at the meeting, but said things look very good for Lee County and southeast Iowa.
“I think they’ve negotiated a pretty good deal and we need to make sure they follow through,” Watkins said.
“They used the same strategy that (IEDA) did,  where they have to meet certain thresholds before you get an incentive. There were other states that were ready to just sign a check and move on, and (Mesabi) is still here.”
Watkins said he doesn’t believe the power shift to the Democratic party on the national level will impact the project.
“We still have a majority in the state house and senate and if we have to be a roadblock, to be the people who say, ‘You’re not changing the plan and we want to make sure people of Lee County are taken care of.' That’s why we did what we did at the state level.”
Reichman was a little more pointed.

“That’s Joe right over there. He’s the president of the company and he’s still here today. He knows the outcomes of the election last night, too. Things are in motion,” he said.
Reichman hadn’t seen the full details of the local incentive terms but said he was happy that Lee County wasn’t going to foot the bill for any improvements needed for the project.
“I don’t have that sheet, so I haven’t seen the details. The big thing is there’s growth so we can get more money to schools, and the communities. But the thing I was really happy about was that the residents of Lee County will not pay and that was important to me,” Reichman said.
A spokesperson for Alliant Energy also made a few comments at the meeting and said any costs of getting electricity to the project will not be shouldered by other rate payers.
Benjamin outlined the tentative incentive agreements between the county and Mesabi. The County Board of Supervisors is set to vote on a resolution in support of the proposed agreement on Tuesday.
Under the terms of the agreement, the county would receive a $250,000 payment when the sheet is executed, and then $100,000 every quarter until construction begins. At that point, the quarterly payments go to $365,000 per quarter until construction ends. Those dollars, described as Host Community Payments, are capped at $10.5 million and are designed to offset and mitigate the project's impact on county services, including engineering, law enforcement, fire and EMS, conservation, public health, and outside consultants. Those payments are also capped at $10.5 million.
A TIF rebate and a PILOT, or Payment in Lieu of Taxes program are also part of the agreement. However, with new tax laws capping property tax growth at the county level with the exception of new growth, the county has negotiated full property taxes on the first $112 million of the new value created by the project. If the taxes on the project set at 2%-2.5% range, that would amount to $2.8 million annually.
Once improvements reach the $112 million threshold, 100% of the taxes above that value will be rebated to the company for 20 years starting the following year. So, the county would hold the first $2.8 million and then rebate the rest of the taxes for 20 years.
The County stands to collect $50 million in PILOT payments, which is what they are currently receiving from the Iowa Fertilizer Co., over the same 20 years. Much of that is weighted heavier during actual company operations and lighter during the construction phase due to the Host Community Payment piece, however, the actual dollars were not disclosed. That would amount to an additional $2.5 million on average, but again, those payments are stepped up.
With the PILOT program and the front-side property tax payments, the county would generate about $4.3 million annually on average or about $86 million over 20 years. With the host payments estimated at $6 million for a three-year construction window, the county stands to receive about $91 million in direct payments from the facility. That number is even higher when you factor in that EMS services and schools are exempt from TIF rebates, so those values would come in at full weight. It’s also worth noting that the taxes are collected and paid to corresponding agencies outlined on a property tax statement, so all the funds wouldn’t be revenue lines for the county, specifically.
The agreement also provides for the company or the state to be responsible for infrastructure growth. The company and the county would work together to determine infrastructure needs and pursue potential grants, at no cost to the county.
The county would pay nothing to remove, relocate, repair, improve, or add roads. Access to existing residents and businesses will be preserved and a road use agreement would require the company to repair all damage to county roads and bridges.
The agreement also reaffirms that the company must qualify for, and stay in compliance with, any agreements it has with the state. The Iowa Economic Development Authority will conduct financial due diligence before its agreement with the company is approved.
Next the company will need to file an application with the state for the project to begin. If that occurs and the state and Mesabi sign a contract, the financing of the project becomes the next step for Mesabi.
The plant is set to produce 10 million tonnes of steel annually. Tonnes are metric tons and are about 20% more than a U.S. ton, or 2,204 pounds. An average U.S. ton is 2,000 pounds.
The facility is projected to require 7,000 construction jobs and 1,750 full-time jobs when fully operational.
The state has offered amortized incentives over 10 years, amounting to $1.36 billion triggered by construction, worker, wage, and operational benchmarks.