Iowa lawmakers to vote on raising tax incentive cap for a $15B steel plant

DES MOINES, Iowa (AP) — Iowa lawmakers will return to the Statehouse Friday to consider expanding the ceiling on state tax incentives in an effort to secure a $15 billion steel plant project for the state.

President Donald Trump announced the plant Monday alongside Iowa elected officials, heralding the project as a major economic and national security investment.

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's 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 tax abatements it could carry have also been met with some skepticism in rural Iowa and Des Moines alike.

And while Commerce Secretary Howard Lutnick said the “deal is done,” state action and local officials in the days since suggest otherwise.

Republican Gov. Kim Reynolds on Tuesday called lawmakers back for the special session, saying “reasonable and limited updates” to the state's economic development program were needed to advance the project proposed by Mesabi Metallics, a Minnesota company owned by the India-based conglomerate Essar Group.

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.

While the specific location remains undisclosed, elected officials have indicated the project is set for Lee County. Still, the chair of the county board of supervisors 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. He said the company is “optimistic” that changes to the law will be enacted based on conversations with legislators and elected officials.

The White House said Thursday that the Iowa project is only possible because of the president's policies.

“President Trump has a proven record of securing historic investments, creating high-paying jobs, and bringing manufacturing back to the United States," spokesperson Taylor Rogers said in a statement.

Iowa state Rep. Matthew Rinker said he joined conversations on a potential project in his district several months ago.

Still, as recently as July, job listings on Mesabi’s website for the steel plant were based in Paducah, Kentucky, according to a version saved in the web archive. Jobs are now listed for Iowa, though the job responsibilities for a government relations manager still include interfacing with Kentucky's economic development team.

While the company had been in discussion with Kentucky officials, the scale of the project “more than doubled over the negotiation period,” spokesperson Brandon Mattingly said in an email.

Iowa "did get kind of into the mix late,” said Rinker, a Republican. “I think once they got here, they realized this is where they needed to be.”

First, though, changes in state law are necessary for Iowa to compete against other states for the project, Reynolds said in her proclamation. She is asking lawmakers to modify the economic development program so that tax credits on eligible projects can be worth up to 10% of investments, an increase from the current 5%, and paid out over 10 years instead of five.

For a $15 billion project, that could mean up to $1.5 billion in kickbacks payable over 10 years once the plant is running and contingent on jobs.

Lee County does not have any zoning or permitting ordinances that would be required for the project itself. The company would need a permit for hauling on the county’s secondary roads.

The scale of an investment such as this one is asymmetrical with the legal and administrative capacity of a small, 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 to a project of this scale, that asymmetry also leaves those communities vulnerable and without significant leverage, he said. Pipa also pointed to examples of massive proposed investments that didn’t come to fruition.

In neighboring Wisconsin, for example, Trump announced a Foxconn Technology Group display screen manufacturing facility and its promise of 13,000 jobs, saying it would be the “eighth wonder of the world.” The state Legislature, at the urging of then-Republican Gov. Scott Walker, approved up to $3 billion in state tax breaks for the Taiwanese manufacturing company if it hit employment and investment benchmarks, though those were significantly scaled back by Walker’s successor, Democratic Gov. Tony Evers.

Foxconn has since dramatically reduced the scope of the project and now says it will employ about 2,600 people by the end of 2029.

Wisconsin Democrat Gordon Hintz, a leading opponent of the Foxconn project when he was a state lawmaker, said he sees parallels with what’s promised in Iowa.

“The idea of having domestic production in an Upper Midwest, post-industrial economy has a lot of appeal,” said Hintz, who is now a county executive. “The devil’s in the details.”

The Lee County Economic Development Board, which Rinker said was pivotal in bringing the Mesabi project to Iowa, said the plant brings “extraordinary opportunity,” while acknowledging the ongoing questions that need to be addressed “about workforce, infrastructure, housing, and community services.”

“We take both seriously,” board CEO and President Emily Benjamin said in a statement. “Our job is to help make sure growth like this benefits the people who live and work here.”