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EVRAZ expansion would trigger economic growth in Pueblo

Posted: 8:11 PM, Jan 25, 2019
Updated: 2019-05-06 14:04:58-04

PUEBLO – Steps are being taken toward a major expansion at EVRAZ Rocky Mountain Steel Mill. The company is reportedly planning to build a $500 million solar-powered long rail mill that would create hundreds of new jobs and add hundreds of millions of dollars to the Pueblo economy.

Details about a tax incentive package to encourage EVRAZ to build here were made public in October when the Pueblo Economic Development Corporation announced that the company selected Pueblo as the site for the expansion if it chooses to move ahead.

“We’ve been in a competitive process with other states for quite some time as EVRAZ was looking for the location to do this rail mill,” explained PEDCO President and CEO Jeff Shaw.

“Typically we don’t announce incentives until the company has decided to move forward. This one’s a little different mainly because of the sheer size of it and there’s a lot of moving pieces to it.”

Many of those moving pieces require public votes. So, keeping the deal private was nearly impossible. In October, the Colorado Public Utilities Commission approved a deal between EVRAZ and Xcel Energy to build a 240 MW solar plant on the property in order to power the new factory.

EVRAZ is Xcel’s largest electricity customer. The new solar farm will surpass the 156 MW Comanche Solar project, which is currently the largest solar production facility east of the Rocky Mountains.

At the same time that the PUC was taking testimony in hearings to approve the solar production project, Pueblo City Council was holding hearings on whether to annex nearly 50 acres of EVRAZ property from two separate parcels.

In November, the council approved the annexations and accepted the results of a blight study which was required to designate the area as an urban renewal zone. EVRAZ has been cleaning up that area ever since, knocking down old coke batteries and smokestacks that sat dormant for decades.

These legal moves by the council were all necessary for Pueblo to offer EVRAZ a record-setting $100 million in tax incentives. The largest share of that public money, $75 million, comes in the form tax increment financing on the property where the new mill will be built. The Pueblo Urban Renewal Authority would administer the TIF payments.

An additional $15 million comes from the half-cent jobs fund, and $800,000 would be spent with Pueblo Community College to create specific job training programs.

In exchange, EVRAZ committed to keeping a workforce of at least 1,000 full-time employees at the mill earning an average pre-benefit wage of $60,000 to $65,000 per year. EVRAZ currently employs around 800 workers in Pueblo, which suggests the expansion should create at least 200 new jobs.

Shaw estimates the economic impact in labor alone at EVRAZ will grow from $78 million a year to $118 million. He further calculates a total annual economic output at EVRAZ growing from $337 million a year to more than $500 million.

“Something of this magnitude, we haven’t seen for 50 to 60 years,” he said.

The EVRAZ deal is notable considering the history of the parties involved. PEDCO was created to diversify the Pueblo’s economic base away from heavy dependence on the steel industry following the crash of the late 1970s. The irony of EVRAZ now receiving the largest incentive in PEDCO history is not lost on Shaw or the board members.

“It’s very ironic and it’s generated some very interesting conversations and a lot of pleasant smiles in the room,” he said.

He pointed out that the half-cent fund gives the community bargaining power it would otherwise lack in negotiating with such large organizations.

“Historically, we haven’t been in a position to incentivize any kind of expansion or operation,” Shaw said. “When this opportunity came to us, and we knew how important the steel industry was to us, I’m not sure there was a more perfect project to invest in.”

He thanked the voters for their steadfast commitment to renewing the half-cent sales tax and credited that money as being critical to making the deal.

The paper trail produced by this expansion hints that Pueblo came dangerously close to losing the steel mill altogether. The utility commissioners note in their  October order for the solar farm that testimony was given by EVRAZ employees that it, “must upgrade it’s production facilities if the Pueblo facility is to remain viable.” Those findings also draw attention to testimony suggesting that the absence of an agreement, “could risk closure of the EVRAZ mill in Pueblo.”

An EVRAZ expansion will likely generate growth beyond just steel production. Shaw pointed out that PEDCO is currently developing a rail-friendly industrial park immediately south of EVRAZ near the Vestas Towers plant.

“That’s going to include companies that either manufacture products involved in the rail industry, or companies that need rail for distribution or raw materials,” he said.

Under the terms of the incentive package, EVRAZ has until December 1 to move forward with the expansion.