Gov. Reynolds signs $15 billion steel deal, but not without opposition
By Ray Dombrowski · Reporting from Youngstown ·
Governor Kim Reynolds is selling the people of Lee County a ghost. She signed a bill to give Mesabi Metallics $1.36 billion in tax incentives. She traded public money for a failed promise. The math is a disaster. The state is offering approximately $777,000 in credits per permanent position over ten years. It is a payout to a foreign conglomerate.
Governor Kim Reynolds is selling the people of Lee County a ghost. She signed a bill to give Mesabi Metallics $1.36 billion in tax incentives. She traded public money for a failed promise. The math is a disaster. The state is offering approximately $777,000 in credits per permanent position over ten years. It is a payout to a foreign conglomerate.
A one-day session for a ten-year gamble
The timing of this deal smells like a campaign office, not a commerce department. CBS News reports that Iowa lawmakers held a special session to approve the package. This happened less than two weeks before early voting begins. The plant is slated for Lee County in a district where Republican Mariannette Miller-Meeks won by only 798 votes.
The project promises 1,750 permanent jobs and roughly 6,000 construction jobs. But these numbers are just ink on a page. KCRG reports that some lawmakers saw the legislation Friday morning and approved it hours later. Democratic State Representative Dave Jacoby voted yes with the hope the plan is real. He noted that today is not a ribbon cutting. He is right. A ribbon cutting is not employment.
The state is using the Major Economic Growth Attraction program. KWWL reports that new rules allow a single business in a rural county to get incentives up to 10%. This is the largest private investment in Iowa's history, according to Senate Majority Leader Mike Klimesh. But the largest investment often carries the largest risk of a total loss.
The Nashwauk blueprint for failure
The parallel is Essar Steel Minnesota. Essar Steel was a common name of the steel manufacturing companies of the Essar Group of Companies. Its main subsidiary was Essar Steel India Limited, based in Mumbai. It operated an integrated steel plant in Hazira, Gujarat, and pellet plants in Visakhapatnam and Paradeep. There was an integrated steel plant under construction in Paradeep.
The mechanism is the same. A company promises a high headcount to secure state incentives and then abandons the site. Essar Steel Minnesota filed for bankruptcy in 2016. This is the pattern the Reynolds administration is ignoring. They are betting $1.36 billion that this time the company will actually build the plant.
The risk is not just a failed project. It is a financial shell game. State Senator Dan Dawson warned that transferable tax credits let a company sell them or use them as collateral. This is the same trajectory as Foxconn in Wisconsin. That project promised a $10 billion plant. It was scaled back to 1,454 jobs. Iowa is walking into the same trap.
The volatility behind the payroll
The administration claims this will strengthen the workforce. But the company's actual operations are volatile. Mesabi Trust records show ongoing arbitration against Cleveland-Cliffs over underpaid royalties and idled operations. Bonus royalties for the quarter fell to $0.
The company claims the plant will produce 10 million tons of steel by 2030. Mesabi Metallics states the plant will not be running before then. That is a long time to wait for a payroll that may never materialize. When you give away the farm before the first shovel hits the dirt, you lose your leverage.
The strongest case for this deal is that it is a "once in a lifetime" exception. Supporters argue that the $15 billion investment is too big to pass up. They say the risk is worth the potential for thousands of high-paying roles. But a bet is only a good bet if the player has a history of paying out. Essar's history is a ledger of missed deadlines and bankruptcy filings.
The $1.36 billion in credits will be monetized before any steel is poured in Lee County. The Essar Group is using the MEGA program to turn Iowa taxpayers into a line of credit. This project will follow the Essar Steel Minnesota path. The headcount will shrink, the investment will stall, and the state will lose its money.