Steel mill update | Arkansas Blog

Tuesday, December 12, 2006

Steel mill update

Posted By on Tue, Dec 12, 2006 at 12:29 PM

Earlier in the day we commented on a story about efforts by Louisiana and Arkansas to lure a German steelmaker in return for $1 billion in corporate welfare and givebacks in easing of pollution control regulations.

The update is that the Louisiana legislature has turned down Gov. Kathleen Blanco's entreaty to set $300 million aside for ThyssenKrupp as part of broader legislation to lift a cap on state spending. She thinks she may still have time to get the additional money before the legislature adjourns Sunday, but she fell 11 votes short Monday and Republican and New Orleans-area opposition is strong.

If our earlier correspondent is correct -- that the subsidies demanded were too high for Alabama's taste -- failure of Blanco to get the money in Louisiana could leave Arkansas in the "lead" for the steel mill. Electric rates likely will be an issue here, however.

Understand. The state must play the incentives game because all of them do. But there's a point at which the cost might be too high. Is $333,000 per job a good deal for a plant with unknown environmental costs? It's a lot, that's for sure. If each job pays $60,000 per year and you figure that the average taxpayer pays about 10 percent of his gross income in state and local taxes, it would take better than 15 years before tax revenue, including local taxes, recouped the base outlay by the state. Sure there are multipliers as the money moves through the economy, but there are also new infrastructure costs required by such a facility and the people who work there -- streets, police, fire, sewer, water, schools, etc.  I'm not making the case either way, merely saying that every business must weigh costs of a project against potential return. The state should be no different.


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