story by Roby Brock, a TCW content partner and owner of Talk Business
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.
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.
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
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.
“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.