Iowa lawmakers pass bill increasing tax incentive cap for a $15B steel plant
DES MOINES, Iowa (AP) — Iowa lawmakers passed a bill Friday to increase the ceiling on state tax incentives in an effort to secure a $15 billion steel plant project announced at the White House earlier in the week.
The bill clears the way for Mesabi Metallics, the Minnesota company owned by the India-based conglomerate Essar Group, to receive more than $1.3 billion in public dollars and tax savings as the project gets completed, a proposal even some Republicans criticized as a corporate giveaway.
President Donald Trump announced the plant Monday alongside Iowa elected officials, heralding the project as a major economic and national security investment. Commerce Secretary Howard Lutnick said the “deal is done,” but state and local officials in the days after suggested otherwise.
Five weeks before the midterm elections, Republicans seized on the promise of good-paying jobs and a central role for the heartland in the push for American steel manufacturing. It was celebrated as an opportunity for southeast Iowa, an area along the Mississippi River that once thrived as a hub for industry but has since suffered from shuttered facilities and dwindled populations.
Still, the deal and the state dollars it would require were met with some skepticism in rural Iowa and Des Moines alike.
Republicans State Sen. Dan Dawson, a Republican, opposed the bill and chastised the effort on the floor, apologizing “on behalf of the state of Iowa to the White House,” saying they must have been misled about the state of negotiations.
He said the project, as promised, would be a win — but they were voting on an incentives package, not a project.
“Do I believe the Iowa taxpayer received the best deal in this proposition? Absolutely not,” said Dawson, who is the chair of the Senate ways and means committee.
The bill now goes to Republican Gov. Kim Reynolds' desk for her signature.
Reynolds on Tuesday called the Republican-controlled Legislature back for the special session, asking them to increase the cap on incentives for eligible projects to up to 10% of investments paid out over 10 years, contingent on performance and jobs. It also allows the credits to be transferrable, if the state approves.
Debi Durham, director of Iowa’s Economic Development Authority, told lawmakers they wouldn’t have been called back if Mesabi Metallics had been willing to build the plant in Iowa under the law’s current 5% over five years.
Trump announced another major investment for a battleground state this week — a $54 billion investment by South Korea in a natural gas project in Alaska — that's still in early stages. South Korean officials said they needed to assess the project’s commercial viability before committing to the investment.
Trump told reporters Friday that he would hike tariffs on South Korea if they don’t finalize the investment.
The terms of an agreement between the state and Mesabi Metallics have been outlined in a memorandum of understanding; neither provided a copy when asked for one.
Iowa officials said the changes to state law were needed because Iowa is in competition with other states, naming Arkansas and Kentucky specifically.
As recently as July, job listings on Mesabi’s website for the steel plant were based in Kentucky, according to a version saved in the web archive. Jobs are now listed for Iowa, though the responsibilities for a government relations manager still included interfacing with Kentucky’s economic development team as of Friday morning.
Iowa “did get kind of into the mix late,” said Iowa state Rep. Matthew Rinker, a Republican who represents part of Lee County, where the plant is expected to be built. “I think once they got here, they realized this is where they needed to be.”
Iowa's proximity to the company's Minnesota mine and its access to rail and the river were important factors, Mesabi Metallics' president and CEO Joe Broking told lawmakers Friday.
Many Iowans from Lee County spoke to lawmakers Friday about the enormous potential for the area's families, main streets and schools.
“There's going to be some challenges ... those are growing pains,” said Patrick Jones, owner of a contracting company in the county, but “if you don't grow, you die."
Still, the scale of an investment such as this one is asymmetrical with the legal and administrative capacity of a rural community, said Anthony Pipa, a senior fellow at the Brookings Institution who studies development and policy in rural areas. While there’s a lot of potential upside, that can also leave those communities vulnerable and without leverage, he said.
Lee County does not have any general zoning or permitting ordinances that would apply to the project. The company would need a permit for hauling on the county’s secondary roads.
Pipa also pointed to examples of massive proposed investments that didn’t come to fruition, such as a Foxconn Technology Group display screen manufacturing facility and its promise of 13,000 jobs announced for Wisconsin during the first Trump administration.
Foxconn has since dramatically reduced the project's scope and now says it will employ about 2,600 people by the end of 2029.
Some lawmakers on Friday expressed concern that Iowa officials were too quickly paving the way for the company to receive millions in the future without enacting additional protections for Iowa workers, communities and infrastructure, especially when the state currently faces a budget deficit.
The company is now expected to file a full application to the Iowa Economic Development Authority, which will be decided on by the agency's board before the state would enter into a contract.
The chair of Lee County’s board of supervisors also said this week that the company has not yet committed to the project site.
Mesabi Metallics “looks forward to breaking ground in the near future,” Jesse Harris, a spokesperson for the company, said in a statement Tuesday.
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Associated Press writer Scott Bauer contributed from Madison, Wisconsin.
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