An Egyptian-owned construction firm has economic development types along the Mississippi River salivating at the chance to land its proposed $1.3 billion fertilizer plant.
Potential sites in Iowa include one in Scott County, one in Clinton County, perhaps one in Des Moines County and an original location in southeastern Lee County.
Those counties find themselves in competition with each other to bring those foreign dollars — sometimes referred to as Direct Foreign Investment, or DRI, in development circles — into their counties.
It’s a process that can be troubling for those who oppose tax breaks or taxpayer-funded incentives going to out-of-state or out-of-country corporations. There’s also an issue for those who don’t like to see wealthier counties pitted against poorer ones or who think the local government demands so little in return that it gets the raw end of the deal.
“If there were a better way, I’d be quite happy to hear about it,” said Matthew Mitchell, assistant professor of International Business at Drake University. “In competitions for DRI, basically the firm is the one that benefits.”
Orascom Construction Industries secured one of the largest incentive packages in state history this year when it set its sights on Lee County in February. But company officials later raised concerns about the 100-year flood plain where the plant was proposed and started to scout other potential sites.
“The beauty of this is the communities aren’t getting into a bidding war with one another, that’s not occurring,” Economic Development Authority Director Debi Durham said. “Lee County officials know that it’s not Lee County, it’s the site.”
Tina Hoffman, spokeswoman for the Iowa Economic Development Authority, said the state incentives for the Lee County agreement are site-specific and are still good for that site.
That package includes a $2 million state grant, forgivable and low-interest loans and tax incentives worth $31.5 million. Orascom also was set to get $1.2 billion in tax-free Midwest Disaster Bonds for construction and remodeling, according to Iowa Economic Development Authority documents.
It included an additional $248,000 building construction tax incentive from Lee County. Local participation is required in most state incentive packages before the state will sign off on an agreement.
Hoffman said no other proposal for the fertilizer plant has come to the authority, although documents obtained from Scott County officials show that Orascom wants a similar tax incentive package from Scott County that it got from Lee.
But the $248,000 might simply be a starting point for negotiations as counties try to make themselves more attractive to the company.
Incentives can vary from county-to-county depending on what one types of programs a county has in place. For example, Hoffman said, some counties have revolving loan funds that offer low-interest loans to businesses while others don’t. Other incentives could be put on the table, too.
“You have a situation where some counties just can’t afford to compete,” said Tom Sands, R-Wapello, chairman of the state House Ways and Means Committee. “I don’t have an issue if it’s private incentive money, but when you have taxpayer money being used, I think that’s something that we should take a harder look at.”
Sands and other legislators took such a look at tax-increment financing districts this year after concerns arose that cities were using the tool to snatch existing development from one municipality to another.
One instance that sparked a lawsuit and eventual legislative action at the state level was an effort by the city of Coralville to attract retailer Von Maur into a TIF district inside its borders from neighboring Iowa City.
“Well, I would disagree (that it was poaching),” said Rep. Dave Jacoby, D-Coralville.
Still, he agreed with Sands that more could be done to monitor what type of incentive packages are being used to drive development.
“I also want to see more follow-up,” Jacoby said. “I think we need to have better oversight on the promises that (companies) are making actually come through.”
Effects on decisions
William Peterson, longtime director of the Iowa Association of Counties, said his impression is the incentives a county offers are some of the last items considered when a developer is looking to site a store, factory or office park.
“It might have some effect, but if you look at the development we’re talking about, they seem more concerned with not being in a flood plain,” he said.
But Des Moines County Supervisor Board Chairman Tom Broeker said a system in which counties compete against each other doesn’t always work well.
“I don’t like it,” he said. “There should be a way we can work regionally to benefit everyone.”
He said that despite the rumors, he’s unaware of any plans for Orascom to locate its proposed plant in the county.
“I’ve had some people — people on the street — ask me about that, but we’ve had nothing official that I know of,” he said. “I’m not saying I know everything that’s going on all the time, but you would think that something like this, they’d reach out to the chairman of the board.”
Durham said, in this case, there’s no competition between the counties.
Lee County officials, she said, “want it in Lee County, but they understand, at the end of the day, that they want it in Iowa. And Scott County’s the same way.”