Roby Brock will moderate the Google+Hangout on how Arkansas's faring in the Internet economy. The video conference starts streaming at 3:30 p.m. It's part of the Internet Association’s Internet on Main Street tour.
In addition to Boozman and Pryor, participants include...
· Michael Beckerman, President and CEO, The Internet Association
· Susie Marks, Sr. Vice President, Arkansas State Chamber of Commerce
· Mike Abbiatti, Executive Director, Arkansas Research and Education Optical Network
· Lee Renniger, Owner, Rock Appliances and Services
· Jeffrey Hall, Associate Director of National Affairs, Arkansas Farm Bureau
· Matt Price, Founder, Bourbon and Boots
· Ellie Keffler, Vice President of the Associated Student Government, University of Arkansas
Entergy's decision in 2011 to join the Midcontinent Independent System Operator for handling interstate power transmission likely was a factor in a Little Rock development announcement today.
MISO is going to open a regional operations center in Little Rock. It will employ 35 to 50 people making $85,000 a year on average. Entergy hopes to save money by joining MISO. It has been in an unusual contract with the Southwest Power Pool, a major regional transmission operation, that is headquartered in Little Rock. MISO hopes to complete a new agreement with Entergy within three months. The state Public Service Commission has given conditional approval.
News release from the state's economic develoment agency follows:
The Blytheville Courier News reports that Nucor-Yamato Steel is planning a $115 million expansion to produce a new type of steel product. It would create 10 to 15 jobs.
It wants the city to issue $115 million in Act 9 bonds for the project. Typically under Act 9 bonds, a government owns a property until the bonds are paid off. The bonds enjoy tax-free status and thus carry lower interest rates on the borrowing. Also, the property doesn't go on local tax rolls, though businesses sometimes make payments in lieu of taxes.
No mention in the story relative to Nucor's recent opposition to the big state subsidy package for a startup competitor, Big River Steel, in Mississippi County.
The House today overwhelmingly approved, 78-17, legislation to issue state bonds for the startup Big River Steel mill proposed for Mississippi County. The state is prepared to put $125 million in incentives into the project in the hopes of creating more than 500 jobs. Nucor, already making steel in Mississippi, has fought the proposal, saying the market demand isn't sufficient to justify state subsidy of a competitor. The legislation had been approved in the Senate previously.
Rep. Stephen Meeks spoke against the bill. He said the super project money was meant to attract proven businesses, not those such as Big River Steel with no customer base and depending in part on public money from the teacher retirement system. He said it could turn out to be a "money pit" for the state.
The Arkansas Democratic Party took pains to note the "job-killing" Republicans who did not support the bill:
17 Republicans voted against the Big River Steel job creation bill or HB1870, including Alexander, Bell, Collins, Dale, Davis, Dotson, C. Douglas, Hobbs, House, Kerr, Lea, D. Meeks, S. Meeks, Miller, Payton, Westerman, and Womack. Three Republicans choose not to vote including representatives Hammer, Lowery, and Carter.
UPDATE: A GRIM DAY FOR THE WORKING:
ALSO AT THE LEGISLATURE TODAY:
*SCREWING THE WORKING MAN AND WOMAN: Without debate, the Senate passed legislation requiring random drug testing of people receiving unemployment benefits. No mention in the bill of drug testing all the unemployed members of the legisalture periodically. But that was only salt in the wounds of a vote to cut unemployment benefits. Check this out. Maybe the House can stop greedy Sen. Bart Hester's oh-so-Christian work.
* GUN BREAK FOR SENIORS: The House a bill to reduce the permit fee for concealed weapons for people 65 and older from $100 to $50. Rep. Andrea Lea had wanted to cut the fee for all, but the State Police said that would deal a budget blow to the agency, which runs the background checks and keeps the database.
* SCHOOL CONSOLIDATION: The House fell three votes short on a second try at expunging the vote that beat a moratorium on school consolidations based on a district falling below the 350-student minimum enrollment.
* TRUCK TAX: The House completed action on a 15 percent increase in the registration fee for big truck rigs, an industry-supported bill to both create a truck safety program in the Highway Department but also to make up for the break truckers got the last session when a planned diesel tax increase didn't go forward, though a sales tax increase on all other taxpayers for road work did.
* OPPOSITION TO BUFFALO RIVER HOG FARM: The National Parks Conservation Association has called on the Agriculture Department's Farm Services Agency to pull a permit for hog farm along a tributary of Buffalo National River. The Association contends (see jump) that the permit was granted without proper consultation of the National Park Service.
An e-mail from Pat Riley Jr. announces to club members the sale of the Little Rock Athletic Club and three other fitness clubs, effective today, to a group of executives from Stephens Inc., led by Brad Eichler. The sale includes the Little Rock Racquet Club, Downtown Athletic Club and North Little Rock Athletic Club.
Riley operated the clubs under his Riley Health and Fitness Centers Inc.
A call to LRAC confirms the new ownership. The business began 28 years ago, starting with purchase of an existing tennis center. Other clubs were added to the group subsequently. Terms of the sale were not disclosed.
This letter from Frank Lawrence accompanied the e-mail. He'll be the new CEO of the operation.
The e-mail follows:
Since it's mid-afternoon in New Zealand and evening in Arkansas, I'll pass along quickly this e-mail note from Entergy on a rate case filed today at the Arkansas Public Service Commission.
Spokeswoman Julie Munsell says:
Attached is our rate case filed this afternoon. There are about 15 different testimonies so it is quite complex, but the bottom line is customer rates will decrease by about $.95 for a typical residential customer using 1,000 Killowatt hours. If approved the new base rates would go into effect Jan. 2014. To give you some background, getting out of the System Agreement and moving to MISO prompted the need to restructure several tariffs. When the utility goes into restructure tariffs, they must also at that time update costs. There is a chart on page 26 of Hugh McDonald’s testimony that best explains how the math works out but basically the net impact of what we are asking is 5 million dollars. That includes a transfer of existing riders that we are already collecting from customers in addition to the costs associated with the system agreement that go away in Dec. 2013.
I should also point out that these calculations do not include the projected MISO savings of $228 million dollars once Entergy Arkansas joins MISO.
The best starting point in this volume of material is Hugh McDonald’s testimony.
Read and report.
OFF TOPIC: Am I reading everything right? Arkansas Republicans are jumping on board a massive expansion of government health care coverage under a plan that will cost even more than the modest Medicaid expansion proposal originally put forward by Gov. Mike Beebe? And they are styling it a REDUCTION in government?!? Whatever. The poor people are grateful for the alms, whatever dishonesty and hypocrisy may be served up with it. The money that flows through our health exchanges will flow outside the state budget, I guess, and thus not require a 75 percent vote? Anybody know? Love that estimate of $6,000 to cover poor under Medicaid, but $9,000 under the Republican-favored privatized plan. Wonder who pockets that $3,000? Not those welfare deadbeats, for sure. Maybe we should drug test the recipients of the windfall.
Do I also read this no-cost enormously valuable economic stimulus for Arkansas is being pitched by House Speaker Davy Carter as a justification for cutting the income tax on the wealthy? Who was it who claimed Carter was a moderate? Not me, I'll remind you.
Carter has the votes, of course, even if he doesn't have the facts to cut the tax rate on sale of appreciated assets. I have asked DFA for something they can provide if only they would. That is a breakdown, by current reported capital gains income (capital gains income already enjoys a reduced tax rate in Arkansas 33 percent lower than the top 7 percent tax rate assessed on sweat income) by income category in the most recent full tax year. Every study of this on the national level shows that the capital gains tax reduction is of overwhelming benefit to a tiny percentage of the taxpaying population — the very wealthy. The pittances paid on, say, mutual fund shares held by working stiffs amount to a drop in the bucket against, say, a corporate executive cashing some huge stock options.
But, hey, Carter is a magician. He says he can provide a $150 million tax cut without trimming a dime from the state budget.
As is customary, the White House has released the names of people who'll be joining First Lady Michele Obama in the audience for the State of the Union address. It's long custom to include people relevant to the speech. Tonight's guest list includes:
Amanda E. McMillan (Jackson, MS)
Pay Discrimination Victim
For a number of years Amanda McMillan worked as a secretary for the owner of a Forrest City Grocery Company. She was doing many of the same duties as male salespeople, but at lower pay. Despite repeatedly asking to be officially promoted to the better and higher-paying job in sales, she was told by the company that the job of a salesman was too dangerous for a woman, and that she would not be a good mother if she were on the road meeting customers. With the help of the Equal Employment Opportunity Commission (EEOC), she sued the company for sex discrimination. The lawsuit charged that Forrest City Grocery denied sales positions to an employee because she was a woman and paid McMillan less than men doing the same work. When asked why she has pursued the case, McMillan said, “I’m doing this because it was wrong and I could never look my girls in the face and then tell them they live in America and could be anything they wanted to be.”As a result of the suit, Forrest City Grocery agreed to pay $125,000 in monetary damages and agreed to disseminate employment policies to employees and provide ongoing training for management on sex discrimination. Amanda, a mother of three, currently lives in Jackson, MS.
Forrest City Grocery is a tobacco and grocery wholesaler with business in six states based in Forrest City that was acquired by a holding company in April 2011. Here's the release issued later that year when the discrimination case was settled.
His company helped shape the Little Rock skyline.
He developed what is now the Peabody Hotel and connected Statehouse Convention Center and later built the 25-story Rogers Building, now the Stephens Building. He developed retail centers throughout the country and became chairman of Metropolitan National Bank in 1983.
Rogers, a Newport native, lived in Batesville. He joined the Arkansas Business Hall of Fame in 2006. Roller-Crouch Funeral Home in Batesville will be handling the funeral arrangements.
Sour grapes or important cautionary words?
Judge for yourself. The Mississippi Business Journal reports on the Big River Steel proposal for Arkansas, which Mississippi had also sought. It raises questions about developer John Correnti's track record and, maybe more important, about the steel market generally. It includes strong defense from the Arkansas economic development corner.
It is, to me at least, undeniably healthy to have a full debate on state investment of $125 million-plus in a private enterprise that will compete with existing, less-subsidized businesses.
You might recall that a former Acxiom exec, Richard Howe, who heads Inuvo, injected himself in the Little Rock Technology Park debate recently with a letter saying his company might move to the River Market neighborhood of Little Rock if the tech park is built there.
News release follows:
Here's a full summary of Hopkins' pitch for the project.
But this comment jumped out:
I was told to expect other steel producers to begin to spend big dollars to attempt to kill an Amendment 82 approval by the General Assembly.
He raises a question that has lingered from the beginning. What do existing steelmakers in Mississippi County, who received no direct state subsidies or investments, think of the state providing a significant financial help to a potential competitor? Big River CEO John Correnti has said the overlap in competitive products will be small. About 20 percent of production, he said.
I checked yesterday and found that the state has contributed the usual investment tax credits for new jobs at the existing steel mills and a relatively paltry sum — $500,000 versus the $10 million promised Big River — to train workers, but there's no record of direct subsidies. Back when those mills started, the state didn't have a constitutional amendment that allowed pledging general revenues to debt for private enterprise.
It's going to be interesting to see how the new Republican majority eventually responds to government business investment, particularly if an in-state competitor steps forward with objections. I notice that the Koch-sponsored Americans for Prosperity, normally a clarion for the free enterprise system and reductions in government spending, has been silent to date on this project.
UPDATE: Got a succinct response from AFP to my question about for/against this state assistance.
UPDATE II: People in Mississippi indicate electric rates prompted Big River CEO John Correnti to "stomp his feet" and take a project proposed first there to Arkansas. This article is interesting because several in Arkansas had said the project would go to Mississippi without subsidies here and, on another metals project, Mississippi didn't appear so easy with money:
Officials with Mississippi Development Authority would not comment on where the company was looking to build its facility. The MDA also said that while no incentive money had been given to Silicor, the MDA's incentives remained on the table if the company found a suitable site in the state and got its financing together.
But Correnti and other investors could have difficulties obtaining financing. Lt. Gov. Tate Reeves wants to limit the amount of incentives the MDA can issue.
"The Mississippi Senate passed a bill last year that would have limited the amount of funds the Mississippi Development Authority could loan to businesses without legislative approval or oversight from the current level of $468 million to $50 million," Reeves said. "Unfortunately, the House Ways and Means Committee did not consider the measure. "I will push for this bill again because I believe there should be legislative oversight into large economic development projects.
"I am comfortable giving MDA the authority to spend up to $50 million without the Legislature's input to help close deals and bring jobs to Mississippi. I do not believe MDA needs $468 million at their disposal through the Industry Incentive Revolving Loan Fund to give to whatever projects they feel the need to fund. I voted against the Revolving Loan Fund when I was a member of the Bond Commission because I had those same concerns."
Gov. Phil Bryant has also suggested the state stop giving incentives for start up companies, especially green energy companies.
UPDATE III: I still can't reach anybody from Nucor or Nucor-Yamato firsthand, but other people who buy steel from them in the area for further processing tell me that the industry is running at about 75 percent capacity now. The prediction from processors is that Nucor won't warmly welcome a competitor with $125 million in state support. Hopkins confirms that he expects some Nucor opposition, but he says competition will be minimal and that the new mill will be aiming to serve a sector of the market for higher grade products than what local mills produce.
The agenda for Monday's meeting of the board of the Arkansas Teacher Retirement System reveals one of the investors in the $1.1 billion Big River steel mill proposed yesterday for Mississippi County.
ATRS would invest $60 million upfront for a 20 percent equity stake in the venture. (That's a lot of money, but only about a half percent of some $12 billion in assets/)
More to come on this. George Hopkins, director of the System, tells me in a brief phone call that the system expects a 40 percent return on its investment after a 3.5-year startup period. About 30 percent will be in cash flow, the rest in the markup of the asset because sale of the equity in a profitable mill could be expected to bring far more than the system's initial investment. Even if the return was half that amount, it would be good for the state, Hopkins said. Hopkins added that, under terms of its agreement with Big River, the retirement system could have a similar stake in future expansion or new locations.
He said the teachers had been working with developers of the mill plan, led by John Correnti, for six months and only recently had talked with state officials about their own decision to back $125 million in state bonds to provide $75 million in direct help and a $50 million loan to the project. Further details on the investment are to be presented at a Senate committee of the whole meeting Monday afternoon. The Teacher Retirement System board moved up its meeting to consider the investment before that session. Legislative approval is required for a state bond issue under the super project amendment in the Arkansas Constitution.
Who are other contributors to the $250 million in private capital that must be in hand (along with the remaining lending commitments) before the state bonds are sold and any proceeds paid into the enterprise?
Grant Tennille, director of the Arkansas Economic Development Department, said he couldn't comment at this point on that.
A spokesman for Correnti said that information should be available eventually, but confidentiality agreements precluded his saying anything today. He indicated they'd be familiar corporate names who shared enthusiasm about the project.
Will Correnti's project in Arkansas come to fruition where it flopped recently in Mississippi? Arkansas officials are optimistic. This Mississippi news article isn't so glowing.
FYI: The state commitment goes beyond the $125 million backed by general revenues and the $60 million in public money channeled through the teacher retirement system. Also, it promises: A refund on sales tax for materials and machinery; a 4 percent income tax credit on new payroll for five years; $10 million for job training; an extended income tax credit (14 years instead of three) for recycling equipment, and a sales tax exemption on utilities.
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.
The buzz was right. The super project is a new steel mill in Mississippi County. The state will pay $125 million of the construction cost ($50 million in a loan and the rest in a direct grant that means a greater cost because the bonds will have interest charges.) News release:
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.
All employment inquiries should be made to the Blytheville Office of the Arkansas Department of Workforce Services, P.O. Box 1409, Blytheville, Arkansas 72316. Phone 870-762-2035.
UPDATE: A quick couple of points from David Ramsey, who covered the news conference.
* Correnti, who once worked for Nucor, the steelmaker already in operation in Mississippi County, said the new mill wouldn't be competition for that operation. He said:
Nucor Yamato there's no overlap at all, that's all structural steel. Nucor Hickman makes flat roll. We'll overlap about 20 percent. We can make more sophisticated steels, we can go wider, we can go thicker, and they don't have the equipment to do that.
David also provides the following additional details on the cost of financing the state's contribution through bonds and some comments from Beebe and John Correnti, leader of the new venture:
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