In bidding war, steel mill the winner
BYLINE: James Gill
These must be happy days at ThyssenKrupp in Duesseldorf. Executives will be toasting each other with Sekt on the Koenigsallee and swapping stories about how they bamboozled the Americans.
The guys who played Louisiana as a patsy will claim much of the credit for driving up the price Alabama is paying ThyssenKrupp to build its steel mill north of Mobile in Mount Vernon.
Alabama wooed ThyssenKrupp with tax breaks that may in the fullness of time cover the entire cost of construction.
This was not Southern hospitality at its most spontaneous. Alabama would hardly have been so generous but for the threat that the Krauts might up and take their mill to St. James Parish.
Louisiana was so eager to lure ThyssenKrupp that it was prepared to put up close to $2 billion, slightly more than half of it for site preparation and infrastructure, the rest in cash incentives.
For a $3.7 billion mill that was a pretty bold offer. Although ThyssenKrupp claimed the mill would create at least 2,700 jobs, it would guarantee only 2,000. Louisiana could therefore have found itself paying $1 million per job. Sometimes economic development can partake of the quality of bribery.
There was a time when Louisiana appeared to be a live contender for the mill, but prospects faded in the last several months. The geniuses of Baton Rouge had not even secured an option to buy part of the site where the mill would have been built, an omission that can only have unnerved prudent German businessmen.
ThyssenKrupp must have regarded the potential site as a mess anyway. It needed to be elevated by as much as 10 feet, and lacked drainage and levee protection. There was no generating substation, and the state would have had to obtain easements for power lines. A new $210 million port terminal on the Mississippi was required too. ThyssenKrupp may well have doubted Louisiana 's ability to have the site ready in time. Who wouldn't?
No reassurance was forthcoming from Economic Development Secretary Michael Olivier, who instead complained that ThyssenKrupp was being too picky and wrote a letter requesting a slew of adjustments to the specifications for the site and the port terminal. Company officials took the view that they knew best what was required for a steel-mill site.
A sure sign that Louisiana's bid was doomed came in late March, when ThyssenKrupp demanded $2 billion in addition to the tax breaks. That was finally too rich for state officials, and they refused to up the ante.
The Alabama site, meanwhile, was sitting there ready for development. A port terminal was needed there too, but plans were in hand to build one, at a cost of $115 million, on Pinto Island. Alabama also had the advantage of lower labor and utility costs.
Still, the Germans maintained the suspense by suggesting it was pretty much a toss-up between Alabama and Louisiana, and said they would announce their decision May 11.
Alabama was taking no chances, so, having already approved $400 million in cash incentives, Gov. Bob Riley May 10 signed a bill granting further concessions. ThyssenKrupp received a 10-year exemption on utility taxes, a 20-year exemption on non-education property taxes and a 30-year income tax credit.
Perhaps it was a good deal for Alabama , which, after all, would have received no taxes at all had ThyssenKrupp gone elsewhere.
Gov. Kathleen Blanco proclaimed that, Louisiana having made the final cut, "we feel like a winner." Other suitors were lining up to build on the St. James Parish site, she said, so maybe it will be smiles all round in the end.
Right now, though, the big winner should be saying, "Danke schoen."
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James Gill is a staff writer. He can be reached at (504) 826-3318 or at jgill@timespicayune.com