Lee County has agreed to a tax incentive plan for Mesabi Metallics $15 billion Iowa steel plant. On Nov. 11, the Board of Supervisors unanimously approved the term sheet and a resolution in support of the term sheet. The vote is another milestone for the complex that leaders say will create thousands of jobs in southeast Iowa.
The framework sets three payments. During development and construction, Mesabi Metallics would pay up to $10.5 million to the host community. In addition, the company has to ensure that the assessed value of its property increases by at least $112 million before the tax rebate is received. Meanwhile, it would pay Lee County $50 million over 20 years in lieu of additional property taxes.
Other Projects
In other industrial news projects, as the $2 billion South Carolina plant nears completion, Scout Motors has sold about 212,000 vehicle reservations. The count includes the Terra pickup truck and Traveler SUV, CEO Scott Keogh told CNBC. At the same time, the over $2 billion Blythewood Production Center is in its final stages of construction. Furthermore, the company expects full production to start next year.
The mix of the reservation is skewed toward combustion backup. Furthermore, about 87 percent of buyers chose extended-range electric vehicle models. Meanwhile, about 75 percent chose the Traveler SUV over the pickup. The company, which is backed by Volkswagen, will begin full production in 2028, with deliveries commencing then.
Scope of the Mesabi Metallics Steel Plant in Lee incentive deal
The Tax Increment Finance structure was the most important part of the deal, Vice Chair Garry Seyb said. Normally, the county cannot tax any new property value for around 20 years under a TIF. But it will take Mesabi $112 million in value before the county incentives take effect. This means the county can tax that base while the TIF agreement remains in effect.
It is a small percentage of the overall investment. Nevertheless, it is designed to circumvent Iowa’s new law that limits property tax increases to 2 percent per year. We can see that growth upfront, and that 2% is then multiplied over that 20 years, 2% potentially every year,” Seyb said. Board Chair Ginger Knisley explained the up-front design in a nutshell: “It basically is an up-front payment for host community agreement.
The board also passed a resolution in support of the project. That resolution also is a prerequisite for the incentive package from the Iowa Economic Development Authority. The next step is for the board and Mesabi to develop an agreement. Knisley also wants the surrounding residents to be heard on the way. She said they are looking forward to hearing what ideas people have and what concerns they have. “It’s something we have to be aware of as we go.”
Outlook for the $15 billion Iowa steel complex
The company calls the complex the largest integrated steel plant in U.S. history, a claim it shares with President Donald Trump. Mesabi states that the project would create over 6,000 construction jobs and provide at least 1,750 jobs when completed. Furthermore, it is expected to generate $95 billion in economic output during construction and the first 10 years of operation.
The plant also provides a domestic supply chain. Thus, Minnesota’s iron ore would be used to produce high-quality steel in Iowa. The investment is nearly $3 billion in Minnesota, and the mill complements that. “This is a generational investment in Iowa and this week’s vote is a step forward,” said Mesabi CEO Joe Broking in a release.
But state support came first. Iowa lawmakers made changes to the Major Economic Growth Attraction (MEGA) Program last month at Gov. Kim Reynolds’ request. This has led to the ability to claim a tax credit for one qualifying rural project over 10 years. The credit is double the normal amount, reaching 10 percent of the investment. However, the officials will not be able to issue the credit until half of the promised jobs are available. Those wages also need to be at least 140 percent of the qualifying amount.
The county vote comes one month after President Trump announced the plant for Iowa. Despite this, the project is still years away from completion and the development agreement is now the next document to be signed.
Project Overview: Mesabi Metallics Steel Plant in Lee County
- Project Value: $15 billion
- Location: Lee County, southeast Iowa
- Developer: Mesabi Metallics
- Status: Term sheet approved unanimously
- Approval Body: Lee County Board of Supervisors
Scope
- Largest integrated steel complex claim
- Minnesota iron ore feeds Iowa mill
- $112 million taxable base guaranteed
- Development agreement to follow
Project Highlights
- 6,000-plus construction jobs projected
- 1,750 operational workers minimum
- $95 billion economic output estimate
- $50 million payments over 20 years
Key Developments
- Term sheet approved Nov. 11
- Host payments up to $10.5 million
- MEGA Program credit doubled in October
- Resolution filed for state authority
Key Challenges
- Credit needs 50 percent jobs first
- Wages must hit 140 percent threshold
- Years remain before completion
- Community concerns still emerging
Outlook
- Development agreement comes next
- TIF taxes $112 million base early
- Minnesota link completes supply chain
- Residents invited into review
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