Lawmakers crafting subsidy package to lure mystery plant to Iron Range

Minnesota lawmakers and economic development officials are working on a multi-million-dollar incentive package to lure a major manufacturing operation to the Iron Range.

The company's identity remains under wraps. State officials will say only that it's a very large publicly traded company that's seen exponential growth in recent years and is searching out expansion prospects. The hoped-for plant, they add, would produce home siding and bring some 250 good-paying jobs to an economically struggling part of Minnesota.

Developers have been scouting space in an industrial park in Hoyt Lakes. The town makes sense because it has rail lines already going into the preferred site, said state Rep. Jason Metsa, DFL-Virginia.

Locations in Grand Rapids or an old Potlach plant near Cook are possible, too, he added. "We feel like the workforce up there with employment the way it's been is geared perfectly for this type of work."

Lawmakers say they need to move quickly on a subsidy package or risk losing the plant.

The DFL Senate's budget plan authorizes annual payments of up to $3 million a year based on the square footage of siding produced starting in 2017. The payments would phase out in 2035. It's a structure similar to what Minnesota ethanol producers received in the industry's early days.

Lawmakers are also considering a sales tax exemption for materials used in building the plant. And there's a bill to revise, replenish and rename what has been called the 21st Century Minerals Fund so processing plants like the one envisioned could qualify for awards.

"I know that Michigan is vying for the company as well as Canada," said state Sen. David Tomassoni, DFL-Chisholm. "By making the money available now ... for the infrastructure that it would be used for, it's sending a potential signal for economic development."

It's not clear exactly how much the subsidies would total. State officials signed a non-disclosure agreement with the company keeping negotiating details private, said Steve Peterson, director of development for the Iron Range Resources and Rehabilitation Board, the agency assembling a financial pitch along with the Department of Employment and Economic Development.

It's not the first time Gov. Mark Dayton's administration and lawmakers worked to line up subsidies under a cloak of secrecy. In 2013, they resorted to using the code name "Project Fern" when discussing tax breaks and grants for a pharmaceutical company that turned out to be Baxter Healthcare.

The subsidy legislation for the mystery plant is written so at least 80 percent of the raw materials used there would have to come from Minnesota.

"It's intended to be able to incentivize a company to make sure they get their lumber from the area and they use it in their siding business," Tomassoni said.

Despite the enthusiasm for the project among Iron Range leaders, the Minnesota Timber Producers Association doesn't support the subsidy legislation unless officials can prove there is enough wood on the auction market to supply current and future demand for the entire milling industry.

The fear is other producers could get priced out, said the timber group's president Wayne Brandt.

"Loggers are not culturally anti-cutting more wood. They tend to be strongly for that," he said. "But they also lived through and saw their friends and neighbors go through some pretty devastating circumstances."

Iron Range leaders, though, believe a new wood products venture would be a morale booster in a region that's hit another stretch of tough times.

It would be especially welcome in Hoyt Lakes, a town dependent on a boom-and-bust taconite industry, said Mayor Mark Skelton.

"It would be huge," Skelton said. "Anything that would employ people like that would be huge for us. Maybe we can get a smile on folks' faces again."

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