Iowa Fertilizer: More than jobs growing in Lee County

WEVER, Ia. – The fertilizer plant under construction here in southeast Iowa is almost impossible to miss for drivers along U.S. Highway 61.

Cranes moving pipes vault into the air, while unfinished storage tanks rise high enough to be seen over the fences that surround the site. Trucks move in and out like clockwork, hauling rock and sand into the site about once every minute.

With its $1.8 billion price tag, promise of 165 permanent jobs and $100 million in state tax breaks, the project has been touted by some as a major coup for Iowa and by others as the state's worst investment.

Either way, this massive fertilizer plant is bringing changes to this small Iowa town and Lee County, causing concern among some residents and spurring hope in others. The changes are obvious — more traffic, more business for bars and convenience stores, fuller apartments and hotels — but the long-term impact for the region is less clear.

'A quiet, little town'

The fertilizer plant has enough construction workers on site to be its own small city.

About 1,500 workers are at the plant and another 1,000 to 1,500 are expected to start work by midsummer. They will stay on site until the plant's expected completion in late 2015. With all of those workers, the plant's population far exceeds that of Wever, located just a mile away.

Its construction has caused "quality of life" issues, Lee County Sheriff Jim Scholl said.

"We're taking a rich farmland area with lots of flat land, and suddenly we have a huge industrial complex being built," he said. "You have a small community that recognizes every vehicle that passes by, and suddenly they have hundreds of cars going by."

The cars are occupied by those working on the plant, some from Iowa and others from around the U.S. — Missouri, Illinois and Colorado, to name a few. Neither Orascom Construction Industries nor Weitz Construction responded to requests for comment by press time on how many of those workers come from Iowa.

They flock into the small town in the morning and rush out at the end of the day.

"From 4 to 6 (p.m.), it's just one car after another," said Tim Thompson, a Wever resident. "It went from a quiet, little town to several hundred cars a day."

Looking for opportunity

Despite the growing pains, officials hope the plant will spur other projects and help lower the county's historically high unemployment rate.

"We're looking to bring in opportunity throughout the county, not just in this area, but having this plant located here makes it attractive for other companies to potentially locate here," said Larry Kruse, a board of directors member for the Lee County Economic Development Group.

In January 2011, Lee County had an unemployment rate of 11 percent, according to the Bureau of Labor Statistics. That rate dropped about 34 percent to 8.2 percent in January of this year, following the trend of Iowa's overall unemployment also declining during that time period.

Now, Lee County has an unemployment rate of 7.2 percent — no longer the highest in Iowa, but still far above the state rate of 4.5 percent.

State officials have also said the plant — one of the largest economic development projects in state history — would help add jobs across Iowa, citing an analysis released last year. The analysis, which estimates the jobs that will be created from the plant during a 10-year period, was performed by the Iowa Department of Revenue using the software of Regional Economic Models Inc., an independent economic impact modeling firm based in Massachusetts.

The analysis reported the project would create 2,578 jobs in 2013, mostly due to construction. Total jobs created rise to 2,962 in 2014, but then begin to decline until reaching 1,894 across multiple industries in 2023, according to the report.

Others are not as convinced of those benefits.

David Swenson, an economist at Iowa State University, doubts the fertilizer plant will have much long-term impact for Lee County or the state, especially considering Iowa is dealing with a shortage of qualified workers and a surge of retiring employees.

Swenson also takes issue with the millions in tax credits promised to secure the plant.

"I think this was by far the dumbest economic decision made in Iowa," Swenson said. "We overpaid, we over-subsidized on all levels."

For a year and a half, the state negotiated with Orascom Construction Industries for the Egypt-based company's plant, at times competing against a site in Illinois. The state worked out a deal where Orascom would bring 165 jobs to Lee County, and the state made promises to pay about $100 million in tax credits, among other incentives.

Those other incentives include $1.6 million in loans, $7.4 million in sales tax refunds, $60,000 in supplemental research tax credits, a $2 million state transportation grant, about $1.8 million for job training assistance, an estimated $300 million in savings from a federal tax-exempt bond program and an expected $133 million in forgone property taxes from the county.

Altogether, that brings the state, local and federal cost to upwards of $545 million for the project.

The state already has awarded about $82.5 million in tax breaks, made up of tax credits and the sales tax refund. Orascom can come back to the table later this year for the remaining tax credits, but Iowa Economic Development Authority Director Debi Durham said that is not a done deal.

"If they come back for their final (amount), they have to prove they need it," Durham said. "It's not a given."

Those tax incentives, Swenson said, lower the impact the plant could have had for the county.

"The big issue is the sum of public costs associated with those jobs," Swenson said. "Those jobs will never pay back the Lee County taxpayer."

Swenson and other economists note that many of the construction workers are coming from out of state, and they doubt the plant will create and support many ancillary businesses.

Durham, however, said the REMI analysis and direct jobs created from the fertilizer plant show otherwise.

"I own this deal, and I stand behind those numbers because the data, the independent studies, show that this was a good deal," she said.

'Who else can we get?'

Even if the plant itself does not provide long-term benefits, it is a step along the way for Lee County's resurgence, said Kruse, of the Lee County Economic Development Group.

"The 165 jobs is truly not a huge number, but they should be good, long-term, permanent jobs," Kruse said. "The company expects to be here for 50 years, so people can expect to have a career here."

In addition, Kruse said the ongoing construction will be at least a temporary boost for the southeast Iowa economy, as will spending by any short-term workers who have to come to the area for the plant's maintenance.

Kruse cites the plant's potential as an "economic engine" to attract other companies to the areas, such as suppliers or distributors. He said additional trucking companies, for example, may come to the region since the fertilizer plant will require transportation for its products.

Mike Norris, executive director of the Southeast Iowa Regional Planning Commission, said the greatest thing the plant has done is give people in the region a new perspective.

"After a lot of years with some of our larger employers leaving, to get a new one like this, it's got people thinking about new possibilities," Norris said. "What else can we do? Who else can we get?"

Ties to Egypt and the Netherlands

Some confusion has arisen over where the company behind the Lee County fertilizer plant is based.

The Iowa Fertilizer Co., formed for this project, is the company directly associated with the plant.

Iowa Fertilizer is a subsidiary of Orascom Construction Industries, based in Cairo, Egypt. Orascom Construction Industries is a subsidiary of OCI N.V., a company based in the Netherlands.

Orascom also owns Des Moines-based the Weitz Co., which Orascom purchased soon after it finalized plans for the Lee County plant.

About Lee County

POPULATION: About 35,700, as of July 1, 2013.

COUNTY SEATS: Fort Madison and Keokuk.

MAJOR EMPLOYERS: Siemens Wind Energy, Pinnacle Foods Group and Roquette America, a France-based starch producer.

MARCH 2014 UNEMPLOYMENT RATE: 7.2 percent (state rate: 4.5 percent).

MEDIAN HOUSEHOLD INCOME IN 2012: $43,110 (state: $50,957).

AVERAGE WEEKLY WAGE, SECOND QUARTER 2013: $712 (state: $757).

Source: U.S. Census Bureau; U.S. Bureau of Labor Statistics; Lee County Economic Development Group

Manufacturing king in Lee County

Relying heavily on manufacturing, Lee County, like other industrial regions along the Mississippi River, has been hit hard by increases in efficiency, layoffs and the recent recession.

"A lot of the manufacturing that grew up along the river ... became obsolete and then shut down," said Larry Kruse, a member of the board of directors for the Lee County Economic Development Group. "Now, it's a matter of how do you bring in new industry."

In March 2008, Lee County's manufacturing sector employed 4,295 people — the largest employment number of all industry sectors in the county, according to the U.S. Bureau of Labor Statistics. Two years later, that number was down to 3,823.

The county has gained back most of those manufacturing jobs, hitting 4,263 employed in the sector as of September 2013, the most recent data available.

About the reporter

MATTHEW PATANE covers business, jobs and economic development. He can be reached at 515-284-8211, mpatane@dmreg.com or on Twitter via @mattpatane.