U.S. Steel wins tax breaks from one of America’s poorest cities

Indiana’s investment of $10 million in tax credits, along with $2 million in worker training grants, comes with the condition that U.S. Steel retains at least 3,875 jobs at Gary Works

Steel city: A woman walks her dogs along the lake front at Marquette Park in Gary, Indiana, U.S.

United States Steel Corporation founded Gary, Indiana in 1906 — naming it after co-founder Elbert Henry Gary — and the city’s fortunes have been closely tied to the company ever since.

When the firm started losing business to cheap Asian imports in the 1970s, waves of layoffs followed as Gary became a haven of blight, crime and lost population.

Last year, the city harboured hopes for a revival after President Donald Trump imposed tariffs on steel imports and the company planned a $750 million investment to modernise Gary Works, its largest North American plant.

But it’s now clear those hopes will not translate into new steel jobs, even after the city and state offered the firm a $47 million tax break package.

Losses, not gains

The whole point of the investment is to make the plant more efficient, so the incentives will help finance a project that city and company officials concede could ultimately result in job losses, not gains.

Gary’s dimmed hopes for a tariff-driven renaissance underscore how the policy has so far provided a windfall for U.S. steel firms, but only a marginal benefit to workers and struggling steel towns.

Gary Works once employed more than 25,000 people, but now supports only about 4,000 in a city that has seen its population plummet from 1,75,000 in 1970 to 77,000 today.

Steel industry employment nationwide increased by 1,000 jobs to 83,400 between March, when tariffs were imposed, and November, according to the latest available data from the U.S. Bureau of Labour Statistics.

In a statement to Reuters , Mr. Trump’s Commerce Department called the 1.2% increase a “welcome change from decades of decline and layoffs” and said “many more” jobs would be created as planned industry investments and expansions are completed, without specifying how many. “Improving efficiency is important and was one of the goals of the tariffs,” a department spokesman said of the Gary investment. “We are glad to see the American industry is making investments that will protect their long-term viability and ensure a strong domestic supply.” The state of Indiana’s investment of $10 million in tax credits, along with $2 million in worker training grants, comes with the condition that U.S. Steel retains at least 3,875 jobs at Gary Works. But a state spokesperson declined comment on whether the company could still collect part of the incentives if the number of jobs falls below that threshold.

The city would get no guarantees of job retention for its bigger and longer-term commitment of property tax breaks, a benefit estimated at $35 million over 25 years. The details of both deals are still being finalized, officials said. U.S. Steel Vice President Douglas Matthews acknowledged the modernisation would cut costs and reliance on manual labour. Productivity improvements would likely results in a “decreasing headcount over time,” he said.

But without the investment, “then the business is at risk, and then you put all the jobs at risk,” Mr. Matthews said in an interview.

U.S. Steel declined to comment about why it needed tax breaks to make its investment viable and declined to provide details about its negotiations with the city.

U.S. Steel’s 2018 profits shot up to $1.12 billion, from $387 million the previous year. The tariff-driven windfall has allowed the company to spend $300 million buying back its own stock.