Tax incentives lure fertilizer plant to Iowa

Project is the highest incentivized project in state history overall and on a per-job basis

Associated Press
Published: September 5 2012 | 10:19 am - Updated: 31 March 2014 | 11:59 pm in
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DES MOINES — Gov. Terry Branstad simultaneously celebrated and panned an agreement Wednesday that broke all kinds of state records to bring a $1.4 billion fertilizer plant to Lee County.

Egyptian-owned conglomerate Orascom Construction Industries will make the largest single capital investment in state history when it finishes construction on the Iowa Fertilizer Co. planned for a 500-acre site just east of Wever.

It took $240 million in state and local tax incentives to convince the company to come to Iowa.

The project, which comes with an estimated 165 plant jobs as well as some 2,500 construction jobs, is the highest incentivized project in state history overall and on a per-job basis, with a potential per job incentive of $1.4 million for the permanent positions.

“As excited as we are to welcome Iowa Fertilizer Co. to our state ... today’s announcement underscores a bigger issue that we must deal with as a state. Our business climate is simply not as competitive as it needs to be,” Branstad said at a Statehouse news conference Wednesday afternoon. He then called on lawmakers to make “real tax reform” a priority when the 85th General Assembly convenes in January.

The incentives to bring the plant to Iowa include:

---- $57 million in state tax credits, with a promise of $25 million in additional tax credits each year for the next two years, contingent on the state’s corporate income tax structure staying essentially the same way it is now, making a total potential tax credit benefit of $107 million.

---- $133 million in local tax abatements offered by Lee County over a 20-year period.

---- $1.6 million state grant from the Iowa Department of Transportation.

Egyptian billionaire and Orascom CEO Nassef Sawiris, who joined Branstad and Lt. Gov. Kim Reynolds at the news conference, said calculating a per-job incentive isn’t as easy as dividing incentive promises by the number of jobs at the future plant.

“The 165 jobs assume that the product will fly out of the plant, which is not very accurate,” Sawiris said. “We will need to transport the product, we need to have additional distribution points ... there is a minimum impact of 1,000 jobs that are outside the facility boundaries of the Iowa Fertilizer Co.”

But even the boundaries of the Iowa Fertilizer Co. were in question for several months. Orascom had initially selected a Lee County site in February, but pulled back when company officials became concerned about the land being in a 100-year flood plain.

The company then looked at a possible site in Scott County, as well as one in Peoria County in Illinois, before coming back to a new site in Green Bay Township in Lee County that is not in a flood plain.

Sawiris said the deal offered in Illinois was superior to the one in Iowa, but there were concerns about the state’s long-term financial stability.

“We were able to land this project by the skin of our teeth after nearly losing it to Illinois, a state that is the poster child for debt, unfunded liability and corruption,” Branstad said, making another pitch for tax reform. “If that doesn’t wake us up, I don’t know what will.”

After the news conference, Branstad Chief of Staff Jeff Boeyink said specifics of the governor’s corporate and commercial tax reform proposals are forthcoming.

Rodney Williamson, director of research and development for the Iowa Corn Growers Association, said the plant is good news for farmers in Iowa who may see reductions in fertilizer costs.

“The amount of fertilizer we use in this state, we could use 13 plants of this size,” he said. “But the competition should have an effect.”

House Speaker Kraig Paulsen, R-Hiawatha, who also attended the news conference, said he wasn’t convinced the project was going to be the highest per-job incentive in state history since it would depend on how that figure is calculated.

“Ultimately, we need to do something with tax reform and tax relief, both the property side and the income side that needs to apply to all Iowans so that these types of packages aren’t necessary, but we’re not in that position today,” he said.

The plant is expected to move more than 30,000 truckloads of fertilizer during peak season from the new facility.

“It’s a win-win,” Lee County Board of Supervisors member Larry Kruse said Wednesday. “It means a lot to Lee County and the whole region.”

Not everyone agrees.

“It’s a good deal for the shareholders and their CEO,” said Adam Mason, statewide policy director for Concerned Citizens of Iowa. “Do we need to be bringing in just a few jobs for such a huge investment? I think we’d be better served investing in small businesses.”

Also on Wednesday, Sawiris announced that Orascom would acquire a Des Moines-based contracting company, The Weitz Co., which specializes in commercial, federal and industrial construction.

The acquisition and the commitment to build the Lee County fertilizer plant are the company’s only two holdings in Iowa, although it has operations in Texas and Washington, D.C.

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