December 28, 2014

Branstad defends Orascom deal, despite lawsuit

Governor Branstad says there’s always a chance of failure in firms that get state grants for promising to create more jobs.

“But we do take it seriously and we will try to recover the money,” Branstad says.

A review by The Cedar Rapids Gazette finds more than 50 companies that have received grants from the State of Iowa in the past decade failed to fulfill job-creation promises. A total of $7.5 million in taxpayer-funded grants should be repaid to the state under the terms of the contracts.

“That’s a pretty small amount considering the fact that we’ve had $5.2 billion in capital investments in just the last two years,” Branstad says, “so we think considering the amount that has been invested, the commitments that have been made — that’s a relatively small amount.”

The newspaper calculated that 11 percent of the economic development grants which have been handed out over the past decade went to companies that failed to meet job-creation goals. The governor says some of the firms have gone out of business and there’s no way to recoup that money for taxpayers.

“Let me also say sometimes you have a situation where because of economic cirucmstances — and we’ve had an economic downturn nationally over the last several years — sometimes it takes longer to create the jobs that they promised, so these are tied to the number of jobs created and maybe instead of two years it take three or four years,” Branstad says. “Well, sometimes we have to be reasonable and give them a little extension in terms of meeting those goals.”

Branstad also is defending the state’s $110 million incentive package for Orascom, an Egyptian company that plans to build a fertilizer plant in southeast Iowa. Democrats in the legislature say Branstad and his aides were “asleep at the switch” by failing to find out about a lawsuit against a subsidiary of Orascom that alleges the company cheated taxpayers out of millions.

“That lawsuit’s been on hold for six years and the federal government is continuing to do multi-hundreds of millions of dollars worth of business with them,” Branstad says. “The Iowa Fertilizer Plant…when we met with the people from southeast Iowa, they gleefully told me instead of 2500 jobs in construction, they’re now looking at 3500 jobs over the next three years.”

The lawsuit alleges Orascom formed a secret partnership with an American company to win $332 million in federal contracts, as only U.S. companies were eligible for the work.

The fertilizer plant Orascom is building in southeast Iowa will employ 165 workers once it opens. The company says the facility will cost $1.4 billion to build. Federal, state and local government incentives for the project top half a billion dollars.