Iowa OKs extra $25 million for fertilizer plant

Egyptian company receives extra $25 million in tax breaks for planned Iowa fertilizer plant

Associated Press

DES MOINES, Iowa (AP) -- The Iowa Economic Development Authority board on Friday approved an additional $25 million in tax incentives for an Egyptian company building a fertilizer plant in southeast Iowa, even though a lawmaker expressed concerns the board was exceeding a legislative limit.

The award was part of the original agreement with Orascom Construction Industries when the project was approved in February 2012. The state at that time agreed to provide more than $100 million in tax credit incentives over four years.

The $25 million approved Friday was the latest installment and brings the total tax credits award to $82.5 million. If the company continues to move forward with the project another $25 million will be considered in a year, said Economic Development Authority Director Debi Durham.

She said the company has revised upward its total investment in the project to $1.8 billion from the original $1.4 billion estimate. The company also has indicated it will hire more than the original estimated 165 workers to run the plant, which will manufacture fertilizer for Midwest farmers.

Sen. Steven Sodders, a State Center Democrat and nonvoting member of the board, expressed concern that the state was increasing tax credits before the plant was built.

"There are no jobs yet. Their contract says there will be so many jobs but we're not at that point yet and we're giving them another $25 million. There were a lot of concerns about that last year in the Legislature," he said.

Some lawmakers were critical of the state for handing out so much money in tax breaks and other incentives for 165 jobs.

Sen. Joe Bolkcom, an Iowa City Democrat, has called the project the worst economic development deal in state history.

Sodders said lawmakers are concerned the board may be exceeding a legislative limit that restricts promised state aid to economic development projects to two years. He asked the board to delay the approval for a month to be sure their approval is legal.

Lawmakers set a cap of $170 million for state tax credits last year and said the state shouldn't extend promises of aid beyond two years. Sodders said lawmakers are concerned the board could be violating the intent of the law and he plans to ask the Iowa attorney general for an opinion on whether the board's action is legal.

Economic Development Authority Board Chairman David Bernstein said the state isn't writing the $25 million check now because the award is for tax credits. The company must build the plant, operate it and generate revenue before the credits are claimed, which could be several years away, Bernstein said.

He said the economic incentives are structured so that the company gets no money if the project isn't built. The incentives were stretched over several years to give the state opportunities to evaluate the project before giving more money and in an effort to stay within the state limits, he said.

Bernstein said the state should honor its side of the deal since the company is taking a leap of faith by building the plant with the promise of the state incentives.

"I don't want to be in a position to make a deal with a company for their investment and then backing away from it unless something substantially changes," he said. "They've taken a leap of faith with us that they would get up to the full $100 million."

The board approved the tax credits.

The state has already approved more than $1.6 million in loans, some of which are not required to be repaid if the promised jobs are created in addition to a $2 million grant from the Iowa Department of Transportation and $1.8 million in job training funds.

Local governments including Lee County have promised to forgive about $130 million in property taxes for the project.

The company also is allowed to finance more than $1 billion of the cost of construction through specially authorized federal Midwest Disaster Area Bonds, saving hundreds of millions of dollars in interest costs.

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