Rentech’s spending would trickle down
Published 12:00 am Sunday, March 14, 2010
NATCHEZ — The co-authors of a study to assess the economic impact of Rentech conclude the green fuel company’s reach will affect everyone from home builders to hairdressers.
Dr. Vivek Bhargava, associate dean of the graduate business program at Alcorn State University, and Dr. Kimball Marshall, professor of marketing at ASU, released their findings in an executive summary last year. The economic impact estimates in the report are based on capital investment and operating expenditure estimates provided by Rentech for three project phases — the development phase, the construction phase and the operations phase.
Due to proprietary guidelines outlined by the coal-to-liquid fuel manufacturing company Rentech, Marshall said he and Bhargava are limited in their discussion of the study.
Email newsletter signup
Bhargava and Marshall entered Rentech’s expenditure and employment estimates into an economic impact modeling simulation system called IMPLAN, which allows users to create a detailed social accounting picture of a regional economy using national and local statistical data.
Used by more than 1,000 public and private institutions, IMPLAN was developed in 1993 involving the U.S. Forest Service’s Management Planning Unit, Marshall said.
Bhargava and Marshall said what sets IMPLAN apart from other programs is its ability to determine how an industry will impact change in a specific region via direct and indirect effects, and according to the report, the change will be vast in the Miss-Lou.
“The economic impact goes beyond Rentech,” Marshall said. “(Rentech hires) plus additional hires will result in increased business activity due to more people in town and more people being paid.”
Bhargava and Marshall attribute the increased business activity to IMPLAN’s multiplier effect, which illustrates the impact of change. For example, during Rentech’s three-year construction phase, the company estimates creating 2,284 jobs in and around the Miss-Lou and generating $93,732,808 in annual salaries.
In Adams County, construction phase expenditures are expected to generate 987 full-time jobs. Additional economic benefits include $516,950,109 in increased business activity for the three-year period.
Bhargava explained Rentech employee salaries will generate more tax dollars to feed city and county budgets and area businesses, thus boosting economic activity.
Naturally, Rentech employees will spend money on housing, food, entertainment and other amenities. That spending leads to those businesses hiring more employees, who also spend their money on various services, and so on — a ripple effect.
“All that money is re-spent and re-spent and re-spent,” Bhargava said.
The multiplier effect not only extends throughout the Miss-Lou, but the state of Mississippi. Assuming Rentech uses Illinois coal as “feedstock” during its operation phase, the company will spend nearly $700 million annually over a 10-year period — from mid-2014 to mid-2024. In Adams County, Rentech will spend nearly $685 million annually over the 10-year period.
Again, assuming Rentech uses Illinois coal, the company is estimated to generate more than $3 billion in Mississippi over the 10-year-period. When operation begins, Rentech expects to generate 2,115 jobs statewide.
In Adams County, Rentech expenditures are expected to generate more than 1,300 full-time jobs outside the company over the 10-year period. The company expects to employ 400 people at its facility. Within a 75-mile radius of Adams County, increased business activity is expected to generate more than $4 billion over the 10-year period.
The report concludes Rentech’s existence will not only create spin-off businesses and a highly skilled workforce, but will increase the demand for port facilities, rail services and highway commercial transportation over time.
Marshall said he and Bhargava took an accurate and conservative approach to the study, adding the IMPLAN model is one of the most reliable in the economic field.
“This is the most accurate approach that I know of, and it is the most reliable standard approach for estimating economic impacts for substantial projects,” Marshall said. “(Rentech) is a really massive project for an area like Adams County, and it will create a lot of opportunities for people in Natchez.”
Rentech officials traveled to Natchez in January, and announced plans to begin construction on their Adams County facility next year at the former site of International Paper. The company is still working to sign on investors and complete necessary permitting.
Rentech officials could not be reached for comment last week.