By Deborah D. Thornton
MOUNT PLEASANT, IA – There has been much discussion this spring about Tax Increment Financing (TIF) and the proper use of economic development incentives.
A major international fertilizer producer and construction company is proposing to build a $1.3 billion nitrogen fertilizer plant in Lee County. Orascom Construction Industries, based in Cairo, Egypt, is setting up Iowa Fertilizer Co. on 300 acres near Wever, Iowa. The facility is anticipated to be in full production by 2015. It will produce ammonia nitrate, diesel exhaust fluid (DEF), and urea – a liquid fertilizer that can be combined with other crop additives to allow one-pass application.
Orascom is taking advantage of every economic development incentive they can wrangle out of the state of Iowa and local governments. This includes $1.6 million in forgivable and low-interest loans from the state, almost $1.2 billion in federal loans through the 2008 flood-relief money, $2 million for road and rail improvements, and various local government incentives.
From a free-market, capitalist perspective it is problematic that the company is only investing $70 to $100 million of its own money in the project. Seventy million out of $1.3 billion. This is less than 5.5 percent of the total investment. The rest is being funded by government loans and incentives.
Additionally, the total bonding ability under the Midwest Disaster Area (MDA) Relief program is $2.6 billion. Orascom is requesting and receiving almost half of this money, at $1.2 billion. What about others? Aren’t there other companies in Iowa that would like this money? Should so much go to only one entity? What happens if they, like Solyndra in California, go bankrupt?
“Attracting new companies and new jobs to Iowa should not involve the government picking winners through state taxpayer subsidies and federal loan programs, but should be based on lower taxes and a level playing field for all,” said Deborah Thornton, a Research Analyst with Public Interest Institute in Mount Pleasant, Iowa.