CHICAGO — Iowa has formally landed Egyptian-based Orascom Construction Industries' proposed $1.4 billion nitrogen fertilizer plant which has filed an initial application to tap up to $1.2 billion of Midwestern Disaster Area Bond financing.
Gov. Terry Branstad, other state officials, and Orascom chief executive officer Nassef Sawiris made the announcement late Wednesday of the state's selection. Branstad in February announced that the company had planned to build the plant in the state under its subsidiary the Iowa Fertilizer Co. A final deal was hampered, however, by some site problems and a $1 billion pitch of incentives from neighboring Illinois.
The Iowa Economic Development Authority Board's approval of more than $100 million in tax credits and other financial incentives, up from an original $34 million in credits and loans announced earlier this year, helped seal the deal. "This … will indeed invigorate the Iowa economy," Branstad said at a news conference.
The Iowa Fertilizer Co. submitted a request earlier this year for up to $1.2 billion of MDABs for the plant through the Iowa Finance Authority which is administering the state's federal allocation. The company must return to the authority to file a formal application. The authority anticipates the company will seek some amount of MDABs but is not sure how much the final application will request especially given the company's short time line to get a deal completed ahead of the federal program's expiration at the end of the year, said Lori Beary, IFA's community development director.
The $14.6 billion federal disaster program created in 2008 permits the use of tax-exempt bonds for qualified privately owned projects aimed at generating jobs and economic activity in certain Midwestern counties that saw severe weather-related damage in 2008. IFA has about $1.4 billion in authorization remaining. If the total $1.2 billion financing comes to fruition, officials said it would be one of the largest private-activity issues on behalf of a for-profit company.
The governor warned that the state won the plant by the "skin of its teeth" and he used the occasion to both take shots at Illinois and call for corporate income tax and property tax reforms to keep the state competitive in vying for businesses. He called Illinois the "poster child" for unfunded pension liabilities, debt, and corruption but it still nearly landed the plant.
"If that doesn't wake us up, I don't know what will," Branstad said of the need for reforms.
Sawiris said the company was concerned over Illinois' budget, debt, and pension woes and possible future corporate tax increases - all factors that contributed to its decision to stick with Iowa. Illinois is grappling with $83 billion of unfunded pension liabilities and last year raised its income tax rates.
Under Iowa's package, the company will receive a total of $50 million in tax credits and $11 million in loans and other assistance. If lawmakers fail to pass a reform package, the company could receive another $50 million in credit in the coming years.
State officials defended their decision to provide the largest incentive package ever offered to a company as worth it given the project is the largest capital investment in state history. Lee County, which will house the plant, has also agreed to forgo $133 million in property taxes.
The project is expected to create 165 permanent jobs and several thousand construction jobs and save farmers as much as $740 million annually because of reduced transportation and import costs. The nation imports about half of its nitrogen fertilizer.