Iowa state senator questions level of incentives for fertilizer plant

A state senator from Iowa City on Monday called on Gov. Terry Branstad to explain why more than $240 million in state and local tax dollars were committed to attract a fertilizer plant to southeast Iowa when the international company involved already stood to gain as much as $300 million in federal taxpayer subsidies -- but only if it invested in Iowa.

The project in question was a $1.4 billion fertilizer plant to be built on a 500-acre site in Lee County that chose Iowa, in part due to $110 million in state tax credits and $130 million in local tax breaks that were offered to Egyptian-based Orascom Construction.

Sen. Joe Bolkcom, D-Iowa City, told a Statehouse news conference Monday that he learned from discussions with Iowa Department of Economic Development officials that Orascom was approved for $1.2 billion in Midwestern Disaster Area (MDA) bonds by the Iowa Finance Authority in April. The federal bonds were created to help businesses recover from the historic 2008 floods that devastated parts of the Iowa and the Midwest and every site under consideration in Iowa for the proposed fertilizer plants qualified for the bonds, while competing Illinois sites did not qualify.

The bonds allow private companies to borrow at tax-exempt rates, Bolkcom said, meaning they save up to 2 percent on their borrowing costs. Assuming the bonds produce a net savings of $300 million to Orascom, he said, the corporation would receive a total of nearly $550 million in taxpayer subsidies from federal, state and local governments.

“This is the worst economic development deal in state history,” said Bolkcom, chairman of the Senate Ways and Means Committee, who calculated that the 165 permanent jobs that will be created in Lee County would cost about $3.3 million per job in taxpayer subsidies.

“Illinois could never compete with the federal subsidies worth as much as $300 million that Orascom Construction Industries would gain for siting the plant in Lee County, a federally declared flood disaster area,” the Iowa City Democrat contended.

“I believe this plant was coming to Iowa and we got taken to the cleaners,” he told reporters.

Branstad spokesman Tim Albrecht refuted Bolkcom's claims, saying the state needed to provide up to $110 million in tax credits to sway the company to bring 165 permanent jobs and hundreds of construction jobs and other benefits to Iowa rather than seeing the project end up in Illinois.

“Gov. Branstad won't apologize for fighting for every single job that he can bring to the state,” he said.

“These incentives did need to be there in order for Iowa to compete for this lucrative project,” Albrecht added. “We simply weren't going to turn our backs of the people of southeast Iowa who have a higher unemployment rate than the rest of the state, and we were going to fight for those jobs. Gov. Branstad came to the table and fought for those jobs and was successful.”

Bolkcom said the Branstad administration “went way too far” in offering state and local incentives on top of the federal benefits that, in the end, totaled nearly $550 million in taxpayer support for the project. He said he would support legislative efforts to pare back incentives offered to lure business development and would advocate for requiring legislative sign-off on future multimillion-dollar commitments made by executive-branch officials.