Gov. Kim Reynolds signs tax incentive bill, paving way for $15 billion steel plant
DES MOINES, IA —
Iowa Gov. Kim Reynolds signed legislation that would allow the state to offer a larger package of tax incentives for a $15 billion steel mill project in southeast Iowa.
The Senate passed the bill by a 28-19 vote Friday night, just hours after it cleared the Iowa House. The measure would expand Iowa’s MEGA economic development program to allow the state to offer additional incentives for a project of this size. The steel mill’s incentive program could be worth about $1.36 billion, although the state would still have to approve the project’s full application and negotiate a final deal with Mesabi Metallics.
Reynolds signed the bill just before 9 p.m. Friday.
WATCH: Governor Kim Reynolds Signs Mesabi Metallics Tax Incentive Bill
Reynolds summoned lawmakers to the Statehouse for a special legislative session Friday to consider “reasonable and limited updates” to the state’s economic development program, which she said are necessary to advance the project proposed by Mesabi Metallics, a Minnesota company owned by Indian conglomerate Essar Group.
The terms of an agreement between the State and Mesabi Metallics were specified in a memorandum of understanding; neither provided a copy when asked for one.
The legislation would expand Iowa’s Major Economic Growth Attraction program, which provides tax incentives to businesses making more than $1 billion in eligible investments in the state.
The most significant change would allow the Iowa Economic Development Authority to offer an eligible project in a rural county an investment tax credit of up to 10 percent of its eligible investment. Current law allows credits of up to 5%.
Although the precise location was not disclosed, elected officials said the project would take place in Lee County, which has a population of about 32,000. The bill defines a rural county as one with a population of 50,000 or fewer. The new credit would be repaid over 10 years.
The legislation does not automatically give the steel project a credit equal to 10 percent of its total $15 billion price tag. The credit would be based on the project’s eligible investment, which may include land, site preparation, infrastructure, construction and certain commercial assets. The Iowa Economic Development Authority would determine the amount of credit to be authorized, up to the 10 percent limit.
The business will also have to meet certain conditions before receiving the credit. The project, or a designated part of it, should be operational, and at least half of the jobs associated with that part of the project should be added to the company’s payroll. These jobs would have to pay at least 140% of the state’s qualifying wage threshold.
The credit would be refundable and, with state approval, could be transferred to another person or business. The ability to transfer the credit would only apply to deals concluded by the end of 2027.
WATCH: What we know about the company behind the proposed $15 billion Iowa steel plant
The bill also includes provisions allowing the state to claw back incentives if a company violates its agreement or program requirements, including fraud, misrepresentation, or claiming credits for ineligible expenses. For projects benefiting from the new 10-year credit, the state could also recoup part of the tax savings if the company sells or renders the eligible property unusable within 10 years.
Businesses participating in the MEGA program may also benefit from other incentives, including sales and use tax refunds, withholding tax credits, and locally granted property tax exemptions.
If approved by lawmakers and signed by the governor, the changes would take effect immediately.
Senate Minority Leader Questions Special Session
Minority Leader Sen. Janice Weiner spoke on the Senate floor early Friday and questioned the special session and its timing.
Weiner released this statement:
“We all want to see good-paying jobs and investment come to our state. But, in less than a week, we have gone from rumors and speculation to a special session. We all saw the presentation in the Oval Office that claimed it was a fait accompli, but this resolution clearly proves those claims to be false.
“Why are we leaving ordinary Iowans out of this conversation? Why are we tripping over ourselves to approve a corporate tax break for a foreign company?” » said Senator Weiner. “It does nothing to help Iowans who are currently suffering. It doesn’t lower prescription drug prices, it doesn’t reopen local clinics, it doesn’t clean up our water, it doesn’t address our cancer epidemic, and it doesn’t help address record diesel prices.
“State Republicans have run back-to-back billion-dollar budget deficits and now this corporate welfare plan is moving forward before it has been properly vetted or Iowans have had a chance to weigh in.”
The pivot to Iowa appears to have moved quickly
Iowa State Rep. Matthew Rinker said he participated in discussions about a potential project in his district several months ago, according to the Associated Press.
Yet as recently as July, job postings on Mesabi’s website for the steel mill were based in Paducah, Kentucky, according to a version recorded in the web archive. Jobs are now listed for Iowa, although a government relations manager’s job responsibilities still include interfacing with Kentucky’s economic development team.
While the company was in discussions with Kentucky officials, the scale of the project “more than doubled during the negotiation period,” spokesman Brandon Mattingly said in an email.
Iowa “entered the mix late,” said Rinker, a Republican. “I think once they got here, they realized this is where they needed to be. »
But first, changes in state law are needed so Iowa can compete with other states for the project, Reynolds said in his proclamation. She asks lawmakers to change the economic development program so that tax credits on eligible projects can reach up to 10 percent of investments, an increase from the current 5 percent, and be paid out over 10 years instead of five.
For a $15 billion project, this could mean up to $1.5 billion in bribes payable over 10 years once the plant is operating and depending on jobs.
Major investment opportunity could carry risks for local communities
Lee County does not have any zoning ordinances or permits that would be required for the project itself. The company would need a permit to transport goods on secondary roads in the county.
The scale of an investment like this is asymmetrical to the legal and administrative capacity of a small rural community, said Anthony Pipa, a senior fellow at the Brookings Institution who studies development and policy in rural areas.
While a project of this scale has many potential benefits, this asymmetry also leaves these communities vulnerable and without significant leverage, he said. Pipa also cited examples of proposed massive investments that did not come to fruition.
In neighboring Wisconsin, for example, Trump announced the creation of a Foxconn Technology Group display manufacturing plant and his promise to create 13,000 jobs, saying it would be the “eighth wonder of the world.” The state Legislature, at the request of then-Republican Gov. Scott Walker, approved up to $3 billion in tax breaks for the Taiwanese manufacturing company if it met employment and investment benchmarks, although these were significantly reduced by Walker’s successor, Democratic Gov. Tony Evers.
Foxconn has since significantly reduced the scope of the project and now says it will employ around 2,600 people by the end of 2029.
Wisconsin Democrat Gordon Hintz, a leading opponent of the Foxconn project when he was a state lawmaker, said he sees parallels with what was promised in Iowa.
“The idea of having domestic manufacturing in a post-industrial Upper Midwest economy is very attractive,” said Hintz, who is now county executive. “The devil is in the details.”
The Lee County Economic Development Council, which Rinker said played a crucial role in bringing the Mesabi project to Iowa, said the plant brings “an extraordinary opportunity” while recognizing lingering issues that need to be addressed “regarding workforce, infrastructure, housing and community services.”
“We take both seriously,” Emily Benjamin, CEO and chair of the board, said in a statement. “Our job is to ensure that growth like this benefits the people who live and work here. »
Information from the Associated Press was used in this article.
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