Northwest Arkansas Democrat-Gazette
Beebe informs House on steel-mill specifics
Meeting eased some worries, Carter says
A nearly three-hour meeting led by the governor and the Arkansas Economic Development Commission on Wednesday helped quell House members’ concerns about the state’s role in a proposed $1.1 billion steel mill in northeast Arkansas, House Speaker Davy Carter said.
Big River Steel LLC said Jan. 29 that it wants to build a steel mill near Osceola that will employ at least 525 workers who will earn, on average, annual salary and bonuses totaling $75,000.
The House met as a whole to ask questions from people involved in nearly a year of planning for the project, including Gov. Mike Beebe, Department of Finance and Administration officials and George Hopkins, executive director of the Arkansas Teacher Retirement System — which is investing in the mill.
It has been proposed that the state issue $125 million in bonds to help pay for construction of the steel mill. Of that, $70 million would be a
grant, $50 million would be a loan repaid by the company and $5 million would cover the cost of selling the bonds.
Amendment 82, passed by voters in 2004, allows the Legislature to authorize general obligation bonds to finance infrastructure or other needs to attract large economic development projects.
This is the first time it has been used since it passed.
In addition to the bonds, the state would offer the company tax credits, sales tax exemptions on some building materials and utilities and money to train new employees at area community colleges.
Beebe told state representatives that he wants them to do a “a very healthy, very indepth, a very lengthy” review of whether the project is best for the state.
“There’s no pressure, there’s no high sales pitch on my part. You satisfy yourself that this is good or it’s not good and act accordingly,” Beebe said.
It was the governor’s second pitch to legislators this week. Beebe spoke to senators Monday.
In considering whether to allow the bonds, the Legislature is required to do its own analysis of the project. It must hire someone to either review existing studies of the project or conduct a new study. Carter, R-Cabot, said he and Senate President Pro Tempore Michael Lamoureux, R-Russellville, have discussed doing both.
Carter said they are still deciding who would be qualified to do such a study. He said the person would be paid from the Bureau of Legislative Research budget.
Once legislative leaders determine who can do the job, the Department of Economic Development will send them a detailed report of the project, including its economic clout and estimated benefits to the state, Carter said. The study or review must be done within 20 days.
“That sounds like a lot of work to get done in 20 days. I suspect it will be very expensive.
Beebe told state representatives that he wants them to do a “a very healthy, very in-depth, a very lengthy” review of whether the project is best for the state.
I suspect we’re [talking] tens of thousands,” Carter said.
Investors in the project include Koch Industries Inc., a multibillion-dollar company based in Wichita, Kan. The project is led by steel magnate John Correnti of Blytheville.
Carter said he did a quick poll of House members after the meeting, and members seemed reassured that so much work had gone into planning the project already.
“They recognized that this wasn’t just put together overnight or over the week. This has been a long-term effort,” Carter said. “I think today was certainly a very positive day and I think it was very helpful.”
Carter said legislative approval of the bonds may gain momentum from the meeting, but he wants to stay at a pace legislators are comfortable with.
“I’m very optimistic about it. The more I learn about it, the more support I can give to it,” Carter said. “It’s sort of hard to argue when you have some investors putting their own skin in the game.”
During the meeting, Rep. Bruce Westerman, R- Hot Springs, asked how it would affect the project if the Legislature doesn’t approve the bond sale.
Economic Development Commission Executive Director Grant Tennille said Mississippi offered Big River $160 million for the project, which is still on the table.
He said Oklahoma’s governor also approached the company.
“If we don’t do it, it’s just going to go somewhere else,” he said.
Rep. Andy Mayberry, RHensley, said lawmakers envisioned a project like an automobile plant when pushing Amendment 82.
“I understand that this is a needed economic development tool. The question is if this is the right project at the right time,” he said.
Tennille said the mill may not be what lawmakers expect but “you swing at the pitch that’s in front of you.”
He said the state cannot afford to wait for a bigger project.
“We can sit here all together and hold hands and close our eyes and wish that a bigger project’s going to come along,” Tennille said. “We might stand here with our eyes closed wishing a real long time before we got another opportunity.”
Tennille stressed that Big River Steel has to place $300 million in the form of cash or letters of credit into an escrow account and line up $700 million in financing before the state will sell the bonds.
None of the proceeds from the state bonds will be spent until Big River has spent $250 million of its own money on mill construction.
Tennille said a lot of questions have to be answered before the project goes forward.
“Your approval is not the starting gun, nor is it the green light, nor are you all alone in determining whether or not this project is viable and appropriate,” Tennille said. “We are asking for your approval to tell them “the state is ready when you are.” There is a mountain of things that have to happen before these bonds will ever be sold.”
He said the company is already working to secure the environmental permits. He said the mill will have to meet World Bank Environmental Standards.
“It will be the cleanest of these mills operating in the world,” he said.