Incentives quoted in decoy steel mill

The $3 billion steel mill that US Steel announced on Tuesday it would build in Osceola — the largest economic development project in Arkansas history — was created in part with millions of dollars from incentives that state officials have said they will make available to the steelmaker.

But Governor Asa Hutchinson said the high-quality steel that workers at the mini-plant will start producing as early as 2024 will serve as an economic incentive in its own right — a lure to attract potentially even bigger projects not just in northeast Arkansas. but the whole state.

“Any time you look at what they’re going to produce, the state-of-the-art highly manufactured steel that’s used in the automotive industry and so that puts us in a better position to say to the automotive industry: ‘ Locate yourself in Arkansas,” the governor said during a briefing with reporters Wednesday morning at the governor’s mansion.

“Put your next manufacturing plant here. Look at this steel that we’re producing, how close would you be to this steel production in our state? So that’s a great achievement.”

Arkansas Commerce Secretary Mike Preston said the industries attracted to the state because of this project will range from suppliers to end users.

“It’s the most premium steel,” he said. “It will go into automobiles. It will go into the batteries that we see in electric vehicles.

“We now have this to our advantage. It’s in our backyard. It’s in Arkansas. We have the manpower. They know how to do it. We have additional land. For me, sky is the limit.”

The plant seemed a perfect fit for northeast Arkansas, which had been producing steel since the 1980s when Bill Clinton was governor and Preston called it the “mecca of steel.”

Hutchinson credited Clinton and another predecessor, Mike Beebe, for their efforts to attract the steel industry.

“I want to give credit to former Governor Bill Clinton who helped recruit Nucor Steel to Mississippi County and then after that of course we had Big River Steel under the Beebe administration with the first draft 82 amendment “, said Hutchinson.

US Steel came to the area nearly three years ago when it acquired a 49.9% stake in Big River Steel. He bought the rest a year later. The total price was nearly $1.5 billion.

“Please note that we competed for this,” Hutchinson said.

In its announcement, US Steel cited area amenities as factors in its decision on the Mississippi and Alabama sites. But those amenities and his history with the steel industry weren’t enough, Hutchinson said.

“First of all, what does Arkansas have to offer compared to Mississippi?” he said in response to a question. “In Mississippi, they have steel mills. You have the Delta, you have the river, you have the same freeway access.

“In Alabama, you have the Gulf Coast. There are a lot of things that each state offers and competes in. What we have are people who have experience in steel production You have utility rates which are reasonable, you’ve got access to rail which is critically important.

“But other states have also offered these things,” Hutchinson said. “So the incentives play a role.”

In fact, the governor added, US Steel would never have had the opportunity to buy Big River Steel had the state not used a legislature-backed incentive package to attract the project.

Lawmakers also backed that package, Hutchinson said.

“They realized the importance of this, and without their support of these economic incentives, we could never win this project,” he said.

The incentive program has not been finalized, according to Preston. But the legislature enacted its centerpiece last month.

The identical Arkansas House and Arkansas Senate bills that Hutchinson signed into law as Acts 3 and 4 of the Second Special Session of the 93rd General Assembly make available the recycling of tax credits on revenue that would cost the state an average of $11 million a year for 14 years or $8.8 million. one year if the State buys back the tax credits with a 20% discount.

The law creates a new type of project that allows steel fabricators to receive an income tax credit for waste reduction, reuse or recycling equipment.

State law now provides an income tax credit of 30% of the purchase price of waste reduction, reuse, or recycling equipment for a qualified steel fabricator.

To qualify for the tax credit, a project should have common property with and be located on or near an existing qualified steel fabricator; have a total investment of at least $2 billion; create 700 new direct positions with an average annual salary of $120,000; and create 200 new freelance direct positions with an average annual salary of $60,000, according to the State Department of Finance and Administration.

The project would also be required to have a positive cost-benefit analysis from the Arkansas Economic Development Commission and the Department of Finance and Administration; a profit-sharing agreement with the commission with performance and clawback clauses; begin on or after January 1, 2021; and a debt and equity financing closing date required before July 1, 2023.

Preston said a cost-benefit analysis of the US Steel project shows it to be positive, but he said it could not be made public because it contained confidential information.

“For every tax dollar we invest in a project, we recoup at least one tax dollar in state revenue,” he said. This does not include local taxes. It’s positive. But it’s proprietary.”

The legislature also enacted legislation that would allow the state chief financial officer to transfer $50 million from the long-term reserve fund to the general reserve fund for economic development incentives.

Under the new laws – Acts 7 and 8 – the CFO, after deciding that incentive funding is needed, can transfer that money to the Economic Development Incentives Rapid Action Closing Fund for expansion. offered by US Steel in Mississippi County.

If US Steel receives the money, the funds would go towards the site infrastructure of the proposed expansion.

The long-term reserve fund is expected to receive that $50 million from the state property tax relief fund by the end of this year, according to legislative leaders.

These identical bills will also transfer $31.6 million in unspent money from fiscal 2021 state agencies.

Of this amount, $17.4 million will be transferred to a restricted reserve account, bringing its balance to $28.5 million. A majority vote of the Legislative Council is required to spend money from the account.

Local officials also brought money to the table. They included $5 million and $1 million respectively from Mississippi County and Osceola to US Steel for reimbursement of the cost of land for the project.

The governor also said Mississippi County is going one step further and offering to pay 10% of the cost of a new home starting with a price of $200,000 and capping it at $500,000.

“It’s an incredible incentive for the location in Arkansas,” Hutchinson said, noting that Mississippi County lost 9,000 jobs when the old Eaker Air Force Base closed in 1992. steel industry recovered 5,000 jobs.

The county continues to lose population, although at a slower rate than before, according to Mississippi County Economic Development Officer Clif Chitwood. The homeownership incentive is a last ditch effort to increase the population.

“We’ll probably never have a better shot than this,” he said Wednesday afternoon.

The effort to land the project began with a Zoom meeting that included top US Steel executive David B. Burritt and Hutchinson in September. Four months later, it concluded with another phone call between the two men last week, Hutchinson said.

Challenges remain, but it was hard for the governor and his aides not to hide their joy at the size of the $3 billion project, which also brings an unmatched payroll – 900 jobs with an average salary of over $100. 000 dollars – as well as the 2,400 indirect jobs the project will likely create.

In the short term, up to 2,000 people will participate, if only temporarily, in the construction of the mill.

“These are extraordinary numbers in terms of the size of the project, in terms of the economic impact, in terms of the opportunity to change so many lives with greater economic opportunity,” Hutchinson said.

But there are some things about projects of this magnitude that cannot be measured, Hutchinson said.

“What you can’t measure are intangibles,” he said. “That’s success. It drives the economy in ways you can’t measure.

“The fact that Arkansas is going to play such a big role in steel produced in the United States is pretty exciting for the state. It’s one of those calling cards.”

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