Consultants discuss Ark. steel mill project

LITTLE ROCK, Ark. (AP) -- A pair of outside consultants on Monday offered mixed reviews of Arkansas Gov. Mike Beebe's proposal to provide a company with $125 million in state financing to build a steel mill in the northeast part of the state.

Consultants from IHS Global Insights told a special meeting of lawmakers that it's a "close call" whether the state would see a positive return on the millions of dollars it's proposing to spend to lure the project to Arkansas.

"It's not a slam dunk," said John Anton, the director of steel services for IHS. "But it's not an absolute train wreck either."

The analysts said that while they were optimistic about the trajectory of the steel industry generally, there was considerable risk about whether the market would provide sufficient demand for the Arkansas steel facility, called Big River Steel.

Gov. Mike Beebe has asked state lawmakers to approve a $125 million financing plan for the project, which is expected to employ 525 people. The Legislature hired the consultants to independently review Beebe's proposal to offer a package of economic incentives, including loans, grants and tax breaks, to land the steel mill in Arkansas.

Lawmakers on Monday asked pointed questions about the assumptions the consultants used to render their conclusions. Some legislators also said they were concerned with a possible conflict of interest after Anton, the IHS consultant, testified that Nucor Steel — a company lobbying against the project — is one of his other clients.

Sen. Joyce Elliot, D-Little Rock, called the disclosure "very concerning."

Anton said that he did not believe a conflict existed and had not discussed his analysis of the Big River Steel project with Nucor.

Consultants from another firm, Regional Economics Models Inc., gave a more favorable view of the project, telling lawmakers that the mill's impact on the state's economy was generally positive when compared with the costs. Still, they said, it depends on what basis the Legislature wants to use to evaluate the project.

The facility would most likely provide a positive economic benefit — such as jobs — even if the costs of the incentives and opportunity costs of tax credits negatively impact the state budget in some years, said Scott Nystrom, an associate economist at REMI.

Several lawmakers raised concerns about the size of the corporate income tax credit that Big River Steel would receive for recycling scrap metal and turning it into usable steel products. The credit, which would cover 30 percent of the cost of the facility's equipment and its installation, would cost the state about $216 million over 14 years, state officials estimate.

Grant Tennille, Arkansas' top economic development official, defended the tax incentive, arguing it wasn't a direct cost to the state but rather "an opportunity defrayed" since that state wouldn't realize that revenue without having Big River Steel.

He also said that the credit would only be redeemable if the company had a corporate income tax liability, which would mean that it was doing well and providing a benefit to the state economy.

Lawmakers on Monday heard more than five hours of testimony from the consultants, state finance and economic development officials, the steel mill's investors, and Nucor Steel officials.

Nucor representatives urged lawmakers not to subsidize some of the costs of building Big River Steel, arguing that the addition of another steel facility in northeast Arkansas would have "a direct and negative impact" on their business. They said the increased competition could force them to scale back its Arkansas workforce.

John Correnti, a former Nucor executive, who is leading the Big River Steel project, told lawmakers that his new venture would produce specialized steel products that don't compete directly with Nucor.