Gov. Kim Reynolds on Friday signed a bill clearing the way for up to $1.36 billion in state incentives for a proposed $15 billion steel plant in Lee County, hours after the Legislature approved it in a special session.
The House passed the bill 75-17 and the Senate passed it 28-19. Senate Democrats offered two labor-protection amendments, both of which failed.
The bill takes effect upon enactment and rewrites the state’s Major Economic Growth Attraction (MEGA) program. Instead of up to two projects at a 5% credit paid over five years, it allows one project in a county of 50,000 people or fewer to receive up to 10%, paid over 10 years. The credit is refundable and, for the first time, transferable with approval from the Iowa Economic Development Authority (IEDA). Transfers are barred for agreements entered after Dec. 31, 2027, and IEDA must check that no buyer is tied to a foreign adversary.
“The reality is that it is performance-based. We do not issue any award until these plants are built,” said Debi Durham, director of the Iowa Finance Authority and the Economic Development Authority. She added that the state can claw back the credits if the company fails to perform.
The package is aimed at Mesabi Metallics, the Essar Group-owned company behind the planned plant. IEDA Director Debi Durham presented lawmakers with numbers showing the incentives total up to $1.36 billion over a decade, according to the Des Moines Register. That includes $1.145 billion in investment tax credits, $154.35 million in sales tax refunds, and a $60.5 million withholding credit. A local property tax exemption was listed as “TBD.”
While the bill and its project were widely supported by Republicans in both chambers, the sharpest criticism came from inside the party. Sen. Dan Dawson (R-Council Bluffs), who chairs Senate Ways and Means, called the package the largest corporate giveaway in Iowa history.
“Do I believe the Iowa taxpayer received the best deal in this proposition? Absolutely not,” he said. “I choose conservatism, not corporatism.”
Dawson objected to a deal negotiated outside IEDA’s normal process and warned it would set a new baseline for future projects. “The ceiling now becomes the floor,” he said.
Durham defended the deal in committee. Under the bill, credits are issued only after the project, or a designated portion of it, is in service and at least half of the associated jobs are on payroll. She said an RSM analysis shows a positive return to the state.
Durham told senators transferability was “not something that we originally offered.” She said Iowa first offered the maximum 5% and Mesabi pushed back, citing competition from other states like Kentucky and Arkansas.
The company says it will create 1,750 permanent jobs at an average wage of $48 an hour. By Iowa Starting Line’s math, the $1.36 billion package works out to roughly $777,000 per permanent job. Durham pushed back on that kind of calculation, saying the incentives aren’t set by dividing investment by jobs.
Questions that remain
The bill’s approval does not mean the project is a done deal. It makes additional tax incentives available to court the steel plant project. Mesabi must still file a full application with IEDA, whose board must vote before the state enters a contract.
Durham told senators that natural gas providers aren’t final and that lawmakers’ questions to IEDA were still unanswered. She said the state signed a memorandum of understanding with a 60-day exclusive negotiation clock.
Mesabi CEO Joe Broking told lawmakers the company’s owners have put more than $2 billion of equity into its Minnesota mine. Asked how the $15 billion Iowa plant would be financed, he said he couldn’t lay out the capital structure. The company has a $770 million Export-Import Bank commitment for the first phase. AP reported the Lee County board chair said Mesabi hasn’t committed to a specific site.
The Register has also reported on Essar’s history of bankruptcies, missed deadlines, and unpaid contractors, and on a Guardian report about loan transfers involving a sanctioned Russian bank. A Mesabi spokesperson told the Register the company has no relationship with sanctioned entities.
