$1.1 billion steel mill lands in Arkansas (Updated)

story by Roby Brock, a TCW content partner and owner of Talk Business
roby@talkbusiness.net

Arkansas landed its first official "superproject" as Big River Steel announced plans to construct a $1.1 billion-plus steel mill in Mississippi County near Osceola.

The mill will employ 525 workers initially with average annual wages of $75,000 – more than double the state's per capita income.

The mill will locate on a 1,000 acre site in northeast Arkansas near Osceola giving it access to the Mississippi River, a key factor in the site location. The Mississippi County site beat out several other locations in Arkansas and dozens of other potential sites in 10 other states.

The mill is expected to provide 2,000 construction jobs and could lead to the location of supplier businesses and steel customers locating in the region. Arkansas economic officials also secured a commitment from Big River Steel to steer at least $200 million of the plant's billion dollar price tag on in-state Arkansas contractors. Construction is scheduled to begin by the end of the year.

Big River Steel was formed by long-time steel executive and entrepreneur John Correnti and a team of industrial and financial investors. Correnti once headed Nucor Steel and its two steel mills also located in Mississippi County. He has nearly 40 years of experience in the steel industry.

Big River Steel Mill is an advanced manufacturer, state-of-the-art production plant and will produce steel for the automotive, oil and bass and electrical energy industries.

AMENDMENT 82
The billion dollar deal is contingent on legislative approval of a $125 million bond issue allowed under Amendment 82. It is the first time the superproject amendment has been utilized since its passage in 2004.

If approved by the General Assembly, the $125 million bond issue will be used as follows:
• $50 million loan to Big River Steel
• $50 million for site preparation
• $20 million for subsurface stabilization near the Mississippi River
• $5 million in bond issuance costs

Members of Gov. Beebe's administration are now charged with submitting a financial plan and cost-analysis to Senate President Michael Lamoureux, R-Russellville, and House Speaker Davy Carter, R-Cabot. Those two legislative leaders will have 20 days to independently review the proposal and vote whether to obligate the state to the general bond issue.

While the state will be on the hook for the full $125 million bond issue, Big River Steel will pay for $50 million of the bonds as a loan. That arrangement will minimize the total price tag the state may have to dedicate to cover the costs of the bonds.

ADDITIONAL INCENTIVES
Also state and local economic development leaders are providing the following additional incentives:
• Tax Back - sales tax refunds on materials, machinery and equipment
• Advantage Arkansas - 4% income tax credit based on new payroll for new jobs in 5 years
• Training funds - $10 million for workforce training with half coming from the Governor's Quick Action Closing Fund and $5 million from the Dept. of Workforce Services
• Recycling Equipment Tax Credit - Income tax credit equal to 30% of eligible recycling equipment costs
• Sales Tax Exemption on Utilities - Full exemption of sales tax on sale of natural gas and electricity
• City of Osceola - $2 million
• Mississippi County - $12 million

AEDC STATEMENT
Following is the statement released Tuesday morning by the Arkansas Economic Development Commission.
LITTLE ROCK, Arkansas (January 29, 2013) – Big River Steel, LLC today announced plans to build a more than $1 billion steel mill in Mississippi County, Arkansas that will directly employ more than 500 people with annual average compensation of $75,000 a year.

The plans are contingent on approval by the legislature authorizing the state to issue $125 million in general obligation bonds under the authority of Amendment 82 and all necessary regulatory approvals. As required by the Amendment, Governor Mike Beebe will be referring the project to the legislature for its consideration.

This is the first time Amendment 82 has been triggered since its adoption during the November 2004 general election. It allows the state legislature to approve up to 5 percent of the state’s general revenue budget to be used for bonding of super economic development projects.

John Correnti is Big River Steel’s chief executive officer and heads a group of investors backing the project.

“Having lived in Arkansas for over 20 years and having been involved in building and operating two other world class steel mills in the state, I know first-hand that the quality of the work force in Arkansas is outstanding and well suited for the high-paying jobs we intend to create,” said Correnti.  “Arkansas’s geographic location in the heart of the markets we intend to serve, the state’s well-developed transportation infrastructure as well as the availability of reliable electrical power and the ‘can do attitude’ of the government officials in Little Rock, Mississippi County and Osceola make Arkansas a great place for Big River Steel to make its investment.”

“A project of this scope will be a catalyst for job creation, investment and economic development beyond this one facility,” Governor Beebe said. “Building Big River Steel will mean up to 2,000 construction jobs, and it will help us recruit more supplier businesses and steel consumers to Northeast Arkansas.”

Big River will produce steel for the automotive, oil and gas and electrical energy industries.  Construction of the mill will take approximately 20 months from ground breaking which is expected later this year.

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“The Big River Steel project will change the demographics of Mississippi County and Osceola in particular, now, and for generations to come,” said Osceola Mayor Dickie Kennemore.  “It will continue to improve our economy and will positively impact all our citizens and every aspect of their lives, and every entity in our community.”

The $125 million generated by the sale of the bonds will be used as follows:
·         $50 million loan to Big River Steel
·         $50 million for site preparation
·         $20 million for costs associated with piling – subsurface stabilization
·         $5 million bond issuance cost

Once Beebe refers the project to the Speaker of the House and President Pro Tempore of the Senate, the legislature will have 20 working days to conduct its own independent economic impact study. The legislation will then work its way through the committee process after which a vote of both houses of the legislature will be taken.

A project of this magnitude involved many entities, public and private, to negotiate terms that make this announcement possible. Among the agencies and companies that worked to bring Big River Steel, LLC to Arkansas include: Governor’s Office, Arkansas Economic Development Commission, Arkansas Department of Finance and Administration, Arkansas Development Finance Authority, Arkansas Department of Environmental Quality, Attorney General’s Office, Arkansas Department of Workforce Services, Arkansas Capital Corporation and its affiliates, Mississippi County Economic Development, the City of Osceola, Entergy Arkansas, Inc., and BNSF Railway.

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Comments

Good News

this appears to be very good news for eastern arkansas. mississippi county has had a good manufacturing presence for years and it's location next to the mississippi river is no doubt a big plus. eastern arkansas needs some positive events and this should be one.

Great News

This is great news for Arkansas! I hope this announcement will provide continued encouragement for those in economic development across the state to keep tracking down leads and talking up Arkansas!

E Arkansas Not Tracking, Looking to Local Talent

Since Big River Steel’s CEO has lived in Arkansas for over 20 years and been involved in two other world class steel mills in the state, I don’t think tracking or economic development commissions were as responsible as allowing local talent to perform. This is good news for Eastern Arkansas.

Of course

Way to go Jack once again you prove that you can hate on anything with government involvement. Do you honestly think that they would have located here without the economic incentives provided by those commissions and the state?

the course is

think jack was saying that the CEO's home base is arkansas and that was most likely their main reason for locating in arkansas, but its still great to see the private sector and government working together to bring more business and jobs to the great state of arkansas! many states and communities across the country have been very aggressive in offering perks to new business starts ups so hopefully fort smith will study the format used in other areas and get on the list of being a very business friendly community. jack is entitled to his opinion and I did not think his comment was critical of government involvement!

Wishing and Hoping won't be enough.

I am sorry but I am tired of excuses. The proof is in the "putting". Fort Smith leadership needs to put-up or shut-up and move over to let true leadership take the reigns of prosperity for out city. There are points of light shimmering even in these darkest of economic times. I would settle for a flicker in Fort Smith instead of the smoldering ashen heap of a burnt-out local economy. Lead,follow or get out of the way!

New business start-ups

We are probably better off focusing entirely on laying the groundwork for new business startups than chasing after superprojects. Pinning your hopes on a superproject is about like trying to get rich by playing the mega lottery. And even when you think you've won a smaller prize playing the scratch-off tickets, you don't always get your reward: see Mitsubishi. Will this steel mill ever get off the ground? Their track record is spotty: http://msbusiness.com/businessblog/2013/01/31/mbj-investigation-businessman-promising-1-1-billion-steel-plant-in-arkansas-has-failed-to-deliver-on-big-projects-announced-in-mississippi/ Setting the table for business startups is a much longer and harder task, but also more sustainable and rewarding in the long-term. The city should focus resources on long-term planning and infrastructure, not just roads but also technology basic to future oriented businesses such as high speed internet. The chamber of commerce should keep doing what it does most adequately: help existing businesses retain and/or expand. The state should focus on post-secondary education and infrastructure funding. It also doesn't hurt to look in the mirror, so to speak. The citizens of the region should focus on making the area cleaner in appearance by holding our fellow residents and business owners to higher expectations and we could be more open and accepting of both creative and entrepreneurial outsiders.
We are probably better off focusing entirely on laying the groundwork for new business startups than chasing after superprojects. Pinning your hopes on a superproject is about like trying to get rich by playing the mega lottery. And even when you think you've won a smaller prize playing the scratch-off tickets, you don't always get your reward: see Mitsubishi. Will this steel mill ever get off the ground? Their track record is spotty: http://msbusiness.com/businessblog/2013/01/31/mbj-investigation-businessman-promising-1-1-billion-steel-plant-in-arkansas-has-failed-to-deliver-on-big-projects-announced-in-mississippi/ Setting the table for business startups is a ...>> Read the entire comment.

Number Six, Government Involvement?

Number Six, government involvement? I applaud all the government help in the Big River Steel project and it made the difference. Does this mean government, or a local municipality shouldn’t encourage small startups or support existing mundane companies the freedom to grow and expand? Does this mean a municipality should be active in choosing winners and losers? Should a municipality only engage or throw all its efforts into landing mega deals? Didn’t Sam Walton start with one 5 & 10? Didn’t Don Tyson start with his dad’s chicken farm? These companies started local and started small, they weren’t tracked down by economic development commissions. They were given the freedom to grow within their communities. I believe a local government should encourage and support the private sector before itself. You are quite amusing, hiding behind your anonymity while passing your judgment along to others?
Number Six, government involvement? I applaud all the government help in the Big River Steel project and it made the difference. Does this mean government, or a local municipality shouldn’t encourage small startups or support existing mundane companies the freedom to grow and expand? Does this mean a municipality should be active in choosing winners and losers? Should a municipality only engage or throw all its efforts into landing mega deals? Didn’t Sam Walton start with one 5 & 10? Didn’t Don Tyson start with his dad’s chicken farm? These companies started local and started small, they weren’t tracked down by economic development commissions. ...>> Read the entire comment.