Find out more →

Get unlimited access. Become a digital member!

Wednesday, January 30, 2013

Big steel mill — how good a deal?

Posted By on Wed, Jan 30, 2013 at 7:38 AM

THE BEER EFFECT: John Correnti said construction workers drink a lot of beer, a colorful way of illustrating multiplier effect of new industry.
  • THE BEER EFFECT: John Correnti said construction workers drink a lot of beer, a colorful way of illustrating multiplier effect of new industry.
What's not to like about 500 good-paying jobs at a steel mill in an economically depressed part of the state, which was announced yesterday at the Capitol?

There are potential air quality issues, true.

There's also the cost/benefit question for the state, which is prepared to put at least $75 million in general revenue into the deal. That's about $142,000 per job. At $75,000 pay per year, those workers will generate about $4,500 a year in income tax. They'll spend that money, too, of course. Every resident in Arkansas generates about $600 per year in sales tax, so figure $2,000 a year for a 3-person family supported by a steel worker. At $6,500 in direct benefits, you're looking at a long payout.

There are more multipliers, of course. Truck drivers and railroad employes, at least those who live in Arkansas, will be paid, plus construction workers in the beginning and others. Some big expenses of the operation don't immediately offer obvious multipliers. The scrap metal forged in the mill comes from out of state. Electricity used in the process, a major expense, will be getting a tax break from the legislature. The hope is that the installation will spur related businesses. But I couldn't help but notice that Mississippi County, despite three existing steel mills that have located there since the 1980s, has a higher unemployment rate than the state as a whole and has continued to lose population.

We don't yet know who John Correnti's investors are. He's the leader of the new enterprise. Russians were his moneybags in Mississippi. It's of interest only to the extent that their residency and how this corporation is structured could have tax implications, both state and federal. It would be nice to know more.

Did Nucor and related steel companies get direct state subsidies to locate in Mississippi County? I don't recall anything of this magnitude. It is, as Correnti said, "steel mill heaven." A big river, good highways, good railroads, good electricity supplier, good workers. Is a state subsidy necessary on top of this? The state believes so and they may be right given how states are ready to be held up for tribute by just about any corporate idea that comes along.

I don't know the bottom line on the state's benefit against expense. But I think legislators who'd like to see a sound analysis before committing $9 million a year in general revenue are doing due diligence. I hope it's a sound analysis, not full of the funny money multiplier so beloved of chamber of commerce soap salesmen. If it's a deal too good for the state to refuse, then make the deal. If it's not clearcut, let's debate.

Meanwhile, I thought David Ramsey, who covered the news yesterday for the Times made a good observation in another relevant current context:

This struck me, from Correnti: “last one I did about five years ago, the day we started construction, the sales tax receipts in that particular county went up 17.2 percent. It’s amazing what 2,000 construction workers do. They eat a lot, they drink a lot of beer.”

This was played as a laugh line and everyone seemed happy to cheer, but the ideas here are in stark contrast to Republican dogma.

You know what he means. Republicans generally frown on borrowing money to stimulate the economy and doubt the economic multiplier effect. They also tend to downplay the tax revenue generated by government spending, which, after all, goes to pay people's wages, which pour into the economy.

House Speaker Davy Carter recently called state tax revenue from federal spending on Medicaid expansion “funny money.” It will be interesting to see if state tax revenues are included in the legislature’s independent economic analysis of this deal.

Tags: , , ,

Speaking of...

  • American Bridge releases report on Koch brothers' environmental impacts and layoffs

    August 15, 2014
    American Bridge, the liberal PAC formed by David Brock, the former Clinton foe now dedicated to round-the-clock Hillary Clinton defender, is out today with a new report on environmental impacts and layoffs from Koch Industries. The report focuses on the business activities of the Koch brothers — more famous for hundreds of millions in political spending aimed at slashing government services, regulation and taxes — in twelve states, including Arkansas. From the report: "The Kochs' extreme, self-serving agenda is bad for working families. And that reality is starkly embodied not only by their political persuasions, but by their business endeavors." /more/
  • Nucor sues to stop Big River Steel plant in Mississippi County

    August 12, 2014
    Nucor Steel Arkansas and Nucor Yamato Steel, which operate steel mills near Blytheville, have filed suit in federal district court in Jonesboro to stop construction of the Big River Steel mill, an operation heavily subsidized by state and local tax money that's a venture by Nucor's former boss, John Correnti. /more/
  • The Gilbert Baker Is a Slimeball Edition

    August 1, 2014
    New political polls, Gilbert Baker and newly released ethics commission investigative files on campaign contributions to Mike Maggio, the hypocrisy of Big River Steel’s John Correnti, the LRPD’s move to encrypt its radio broadcasts, a Little Rock City Board proposal to rollback closing time for private clubs and the Little Rock Planning Commission once again going against professional staff recommendations — all covered on this week's edition. /more/
  • Hypocrite of the week: John Correnti, state welfare king

    July 31, 2014
    John Correnti, leader of the Big River Steel project, says government should "stay out" of private sector projects. What a hypocrite. Without government handouts, he wouldn't have a steel company. /more/
  • Job-creation, Mississippi-style

    July 23, 2014
    When candidates this year make big promises on economic development, listen closely for candidates who claim they'll match Mississippi, a solid red Republican-controlled state. Their corporate welfare tab is huge and schools are paying the price. /more/
  • Big River Steel closes on financing

    July 1, 2014
    Big River Steel LLC announced today that it had closed on the financing necessary to build a $1.3 billion steel mill in Mississippi County that supposedly will employ 500. /more/
  • Asa Hutchinson takes a brave course on tax policy

    June 19, 2014
    What's this? The Republican candidate for governor is speaking ill of treasured chamber of commerce tax and corporate welfare giveaways? /more/
  • More »

Comments (20)

Showing 1-20 of 20

Add a comment

 
Subscribe to this thread:
Showing 1-20 of 20

Add a comment

More by Max Brantley

Most Shared

  • Not giving up on Fred

    We ended up adopting Fred due to his incorrigible stubbornness. Originally bred to track game, basset hounds can be amazingly persistent. It sometimes appears that when their noses are working, their hearing shuts down.
  • Private clubs win early closing battle

    Private clubs apparently have won their battle against earlier closing hours, based on a "compromise" revealed at the City Board meeting last night.
  • Prosecutors have all the power

    But little oversight. Is a violation not a violation if a prosecutor says, 'I didn't mean to'?
  • The Kochs, Tom Cotton and their dislike of helping farmers

    The Koch political lobby is trying mightily to pretend it supports American farmers and that Tom Cotton's vote against the farm bill isn't a measure of farm support. A new report from a Democratic organization blows that dishonest messaging out of the water.
  • Lawsuit says Crittenden Regional Hospital charged employees for health insurance premiums but never paid claims

    A lawsuit filed on Friday in the Circuit Court of Crittenden County alleges that at least beginning in 2014, Crittenden Regional Hospital (CRH) withheld money from employees' paychecks for health insurance premiums, but never actually paid the claims. That would potentially leave their employees on the hook for tens of thousands of dollars in medical care they were told was covered by their health insurance. The practice may have dated back even further, said Denny Sumpter, the attorney for the plaintiffs.

Most Viewed

Most Recent Comments

Blogroll

 

© 2014 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation