DES MOINES – Senator Joe Bolkcom last week introduced legislation to stop the final transfer of $25 million in state tax credits to Orascom. The tax credits were part of more than $500 million in federal, state, and local incentives given in exchange for creating 165 permanent jobs in Iowa.
“This is our last chance to clawback some of the tax credits needlessly given away by the Branstad Administration,” said Bolkcom, chair of the Senate Ways and Means Committee. “The secret meetings with industry lobbyists backfired when Governor Branstad overlooked $300 million in federal subsidies available only at the Iowa sites. Because of that oversight, Governor Branstad signed the worst Iowa economic development deal ever. We can still get some of that money back for Iowa taxpayers.”
This July, Orascom is scheduled to ask the Iowa Economic Development Authority Board for another $25 million of investment tax credits. If approved, Orascom will have received a total of $100 million in investment tax credits. Bolkcom’s proposed legislation (SSB 3207) would limit the amount of investment tax credits that any company could receive to $75 million.
“Orascom, an Egyptian multinational corporation, snookered Iowa’s Governor for hundreds of millions of additional state and local tax credits in addition to the $300 million in federal funds that was already on the table,” said Bolkcom. “Iowans should not spend an additional $25 million to cover Governor Branstad’s mistake.”
Background
When the 2012 Orascom deal was announced, Governor Branstad said the $250 million package of state and local economic incentives was necessary to outbid a competing offer from Illinois. Independent economic development experts quickly noted that Orascom would also receive an estimated $300 million in federal flood disaster area incentives available only at the Iowa site.
In the end, Orascom will receive approximately $550 million in taxpayer subsidies from federal, state and local governments. The 165 permanent jobs projected to be created at the new fertilizer plant in Lee County will cost taxpayers roughly $3.3 million per job.
Orascom was approved for $1.2 billion in Midwestern Disaster Area (MDA) bonds by the Iowa Finance Authority on April 13, 2012, six months before Governor Branstad announced the agreement. The bonds allow private companies to borrow at tax-exempt rates, meaning they save 1 to 2 percent on their borrowing costs. MDA bonds were created to help businesses recover from the historic 2008 floods that devastated parts of Iowa and the Midwest. Every site under consideration in Iowa qualified for the bonds; the competing Illinois sites did not.
Here’s the breakdown of the $545,260,000 Orascom incentive package:
o $300 million in Midwest disaster area bonds
o $133 million in property tax exemptions approved by the Lee County Board of Supervisors
o $100 million in investment tax credits promised over 4 fiscal years
o $7,440,000 of refunded sales or used taxes paid during construction
o $60,000 of supplemental Research and Development tax credits
o $805,000 loan from IDEA
o $805,000 forgivable loan from IDEA
o $1.65 million grant from the Iowa Department of Transportation
o $1.5 million for job retraining
