Wanted: Answers to Orascom deal

March 28, 2014 | 12:02 pm

By Quad-City Times

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For three days, Iowa state Sen. Joe Bolkcom has used the Senate floor to raise some fairly disturbing questions about Iowa economic development. They include many of the questions we asked on this page last summer about Iowa’s unprecedented incentives to land an Egyptian firm’s fertilizer plant.

We applaud the senator’s continued attention on a deal the governor helped hustle through, then celebrated as Iowa’s biggest economic development win ever, without ever addressing these lingering questions.

As important as these ignored questions were last summer, Bolkcom’s challenge raises one big forward-looking question his fellow lawmakers should consider now: How will Iowans know their $200 million in state and local incentives were worth it?

The deal Orascom cut with Iowa and our federal government to build a $1.4 billion fertilizer plant in Lee County has few measurable performance benefits to Iowa. The company intends 165 permanent jobs, an extraordinarily low number for such a high taxpayer investment. The governor claims the new plant will lower fertilizer costs for Iowa farmers. But the deal doesn’t require anyone to document any measurable savings.

So all we’re left with is the word of the company.

That apparently was good enough for the governor last summer. But it shouldn’t be good enough for Iowans.

Branstad was convinced Iowa needed to increase incentives because company officials told him they were considering an Illinois location. Our reporting last summer found no credible evidence Illinois was in any position to deal. Bolkcom now says Orascom could not have gotten the federal government tax credit financing of the plant in Illinois. The funds were restricted to states and counties that suffered flooding in 2008.

So the company did not appear to be entirely forthcoming in its Iowa negotiations.

Now consider new disclosures of the company’s ongoing litigation with our federal government. A 2004 Department of Justice lawsuit accuses an Orascom-connected firm of fraudulent, behind-the-scenes work to win a United States Agency for International Development contract for construction work in Egypt. USAID rules forbid overseas companies from bidding on this work. The lawsuit alleges Orascom-connected employees helped a U.S. firm get “five USAID-funded contracts unlawfully because the presence of (Orascom-connected) Misr Sons destroyed their nationality-eligibility to bid on such contracts,” according to government pleadings in the case. “After securing the contracts, Defendants caused false and untrue invoices for payment to be submitted to the USAID fraudulently certifying that the nationality requirements were satisfied.”

Bolkcom’s three-day chamber floor miniseries on Orascom certainly livened up the Legislature Feb. 18-20. Lawmakers should not dismiss his concerns as water under the bridge.

This isn’t about water.

We’d remind Iowans this water represents $200 million in state and local taxpayer support, and close to $1 billion in federal-assisted financing. Cash is being allocated right now. While lawmakers cannot backtrack on this rushed deal, they can use this expensive lesson to require specific performance objectives for every incentive deal. We’d hope the governor’s economic development team would have built that into negotiations. But it appears the governor’s staff is getting schooled on what due diligence really means.

 

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