After years of losing major projects to other states, Arkansas finally landed a legitimate super project with this month’s legislative approval of the $1.1 billion Big River Steel mill near Osceola.
The project is being led by steel magnate John Correnti who said the mill will employ 525 workers earning an average of $75,000 annually in salaries and bonuses. That would make Big River Steel one of the highest-paying employers in the state, along with Nucor Corp., which also has steel mills in Mississippi County.
But landing of a similar super project soon is not likely because of the state’s constitutional limit on the dollar amount of economic development incentives allowed at any one time, officials said.
Amendment 82 to the state’s constitution limits Arkansas’ incentives to 5 percent of the state’s net general revenue, which was almost $4.8 billion last year. That meant about $240 million was available in incentives.
Arkansas has committed $125 million in incentives from bonds for the Big River mill, leaving about $115 million for future projects.
“The reality is there are not a lot of projects out there floating around that are this size and that would take this much investment,” Joe Holmes, a spokesman for the Arkansas Economic Development Commission, said about the $125 million invested in Big River Steel. “This was the first one in almost 10 years since Amendment 82 was brought to the Legislature. And we don’t have any standing in the wings.”
The amendment was proposed in the 2003 regular session and approved by voters in 2004. Voters approved an amendment in 2010 that removed limitations on the amount of money - $500 million - that had to be invested in the project and the number of employees required, 500.
Arkansas’ $125 million in incentives will be raised through general obligation bonds, with $50 million being used for a 4-year loan to Big River.
The plant will make flat rolled steel, with about a third of it for electrical steel used in transformers, and light steel used in automobile manufacturing.
If developers of another major project consider locating in Arkansas, the state could seek Amendment 82 funding, Holmes said.
Should the project require more than the 5 percent limit, when combined with Big River’s incentives, “it would be impossible” for the state to provide incentives, Holmes said.
“Or it would take a big change in the law to raise that limit,” Holmes said.
MISSING THE BIG ONES
The Big River Steel mill is the largest single economic development project ever landed by the state’s economic development commission,Holmes said.
But the state has pursued larger projects that were eventually chosen for sites outside Arkansas.
In 2003 and 2007, Arkansas finished second in a duel for two Toyota Corp. auto manufacturing plants. In 2003, Toyota selected San Antonio over Marion, as the site for a $750 million Toyota Tundra plant with 4,000 workers.
San Antonio offered only $133 million in incentives to Toyota, which often accepts lower pay packages. Toyota said it chose the Texas city for marketing reasons, primarily because more trucks are sold in Texas than any other state.
In 2007, Toyota chose a site near Tupelo, Miss., over the same Marion location it rejected in 2003 for a plant that now employs about 2,000. The economy forced Toyota to delay production at the plant until 2011.
Mississippi offered Toyota $296 million in incentives for the Toyota plant in 2007. At the time, Arkansas offered about $200 million for the plant, where Corollas are assembled.
It was the last plant Toyota has built, although the company said this month it will expand its Georgetown, Ky., plant and begin building Lexus sedans in 2015. The expansion will add 750 jobs at the massive facility where Toyota already employs about 6,000.
Because of the limits on incentives, attracting an auto assembly plant now in Arkansas is almost impossible, officials say.
“We can be competitive on [Big River Steel], but on a new car factory, we can’t,”said Clif Chitwood, economic development director in Mississippi County.
Other states can, though.
Arkansas remains on an island with auto plants in almost every direction.
After Mississippi landed its first auto plant, built by Nissan Corp. in 2000, Arkansas was left as the only state among at least 10 surrounding and nearby states, including Alabama, Georgia, Kentucky, Louisiana, Missouri, Oklahoma, South Carolina, Tennessee and Texas, without an auto manufacturing plant.
Since then, Oklahoma lost its only auto plant when General Motors closed its facility in Oklahoma City.
Arkansas missed out on another major project in 2007. Osceola finished third for a $2.9 billion, 2,700-employee Thyssen Krupp AG steel plant that went to Mobile, Ala. The economy has caused Thyssen Krupp to seek buyers this year for the plant.
FIRST CORRENTI PLANT
Arkansas had its first shot at a John Correnti steel mill in 2004. Led by Correnti, Steel-Corr Inc. was an $800 million, 450-employee project that would be built near Osceola. Correnti wanted the plant in Arkansas and declared it was“Arkansas’ to lose.”
Arkansas lost it.
The official reason was that Correnti couldn’t get an inexpensive electricity contract in Arkansas. In 2005, he chose Columbus, Miss., where the Tennessee Valley Authority supplied the cheap electricity he needed and Mississippi supplied about $120 million in incentives.
But Chitwood, as well as other Arkansas economic development officials who sought anonymity, say Arkansas changed its original offers to Correnti.
The state made commitments to Correnti in the early stages of negotiations that later were withdrawn, Chitwood said.
The state changed its offer after Nucor Corp. lobbied against the plant being built in Arkansas, Chitwood said. Nucor also lobbied against Correnti’s plant this year.
“Regardless, Mr. Correnti did not receive the support he was expecting from the [state],” Chitwood said. “But [Mississippi Gov.] Haley Barbour was more than happy to supply that support and now that plant employs between 700 and 900 people in Columbus, Miss. It was a terrible loss for Arkansas, as so many have been over the past decade.”
Former Gov. Mike Huckabee disagreed with claims that Nucor caused the state to change offers to Correnti.
“I don’t recall that,” Huckabee said in an interview before a recent speech in Conway. “It was our attitude that we go after every business possible.”
Arkansas did not have a lot of resources to attract the first Correnti plant in 2004, Huckabee said. This was before Amendment 82 was approved by voters and before the governor’s quick action closing fund was available, Chitwood said. The quick action closing fund provides up to $50 million to attract businesses to Arkansas.
Huckabee noted that Arkansas was successful in landing a Hino Motors plant, with about 600 jobs, in Marion and a Nestle plant, with about 800 jobs, in Jonesboro.
“It is an incredibly competitive market out there,” Huckabee said. “Some things you can’t control. But you do have to be careful that you don’t give someone who is here a different set of opportunities than the ones for someone you haven’t landed yet. You have to be nice to the family you have in order to attract the family you want.”
Business, Pages 65 on 04/28/2013