LITTLE ROCK — The board of the Arkansas Teacher Retirement System voted Monday to invest $60 million in the proposed $1.1 billion Big River Steel mill in Osceola, while Gov. Mike Beebe and state officials briefed the Senate on financial details of the project.
The deal is contingent upon the Legislature approving a $125 million bond issue for the project.
"We recognize that this is an enormous investment that we are asking the people of Arkansas to make. We have done every thing we know how to do to try and ensure the safety of the taxpayers’ dollars," Grant Tennille, director of the Arkansas Economic Development Commission, told senators.
"Like with anything, this is not without risk, but we’ve done our due diligence to ensure that we’ve mitigated the risk as much as possible," Tennille said.
Tennille and other AEDC officials, along with officials with the state Department of Finance and Administration, Arkansas Development Finance Authority, ATRS and Delta Trust spent nearly three hours on the Senate floor discussing the project and answering questions from lawmakers. Beebe, who appeared at the briefing for only five minutes, urged lawmakers to study the proposal carefully.
"If the Legislature doesn’t like this, if the Legislature doesn’t think this is good for Arkansas, it’s not going to happen," Beebe said.
Last week, Beebe announced plans to build the steel mill in Mississippi County. The project is projected to employee more than 500 people with annual average pay of $75,000.
The Legislature will be asked to authorize the issuance of $125 million in general obligation bonds to support the project under Amendment 82, the first such use of the so-called superprojects amendment passed in 2004.
Officials told the Senate on Monday that under the $125 million bond proposal, $50 million would be loaned to Big River Steel, to be repaid to the state over time.
Another $50 million would be used for site preparation for the plant and $20 million would be used for subsurface stabilization at the site. The remaining $5 million would cover the cost of issuing the bonds.
Earlier Monday, the ATRS board voted to invest $60 million into the steel mill project for a 20 percent interest in Big River Steel.
ATRS Executive Director George Hopkins said later that the board has confidence in the steel mill project.
"This is an … investment where we see great opportunities for quality returns in 20 to 30 percent conservative, and it could be a lot better then that, and this is after stress testing this investment to make sure that even at lower capacities of operation of the mill and tighter spreads between scrap and finished steel, this mill will pay all its obligations and do well based upon long historic averages," Hopkins said in an interview with the Arkansas News Bureau.
Estimated value of ATRS is about $12.25 billion, with about 55 percent of that invested in the stock market.
Hopkins compared the board’s decision with its investment of about $65 million since 2010 in South Arkansas timber land.
Senate Pro Tem Michael Lamoureux, R-Russellville, told reporters after the Senate meeting that the ATRS investment was a positive sign.
"For me personally it provides a high degree of confidence," Lamoureux said. "I know the level of detail (ATRS) puts into evaluating a project."
During the briefing, Sen. Bruce Holland, R-Greenwood, expressed concerns about the state investing $125 million in a project being backed by an unknown company that doesn’t have a national reputation.
"You are absolutely right," Tennille told Holland. "This is a start up, but this is a start up that is being helmed by people who have done it 14 other times," Tennille said. "So, we factored that into our risk analysis, but again we feel fairly comfortable … this will work."
Tennille told reporters later that the project has a number of safeguards in place to protect taxpayers.
He said the state will not sell any bonds until Big River Steel has all its funding in place.
"That’s one safeguard. They’ve got to have their money in before the people of Arkansas take on the risk," he said. "The second thing is, they’ve got to spend $250 million in project costs before they can start to spend any of our $120 million, so we’ll start to see that mill coming out of the ground before we start to spend."
The House is to be briefed on the project Wednesday.