Avesta steel to return part of state grant

July 31, 1998|By Jay Hancock | Jay Hancock,SUN STAFF

Avesta Sheffield East Inc., the Essex stainless steel mill that shut down after it received a $1.1 million economic development grant from the state, has agreed to pay back $600,000 of the money, Maryland's economic development department said yesterday.

The settlement came after a yearlong dispute in which Maryland officials accused Avesta of breaking a promise to add jobs. Avesta blamed a weak steel market, saying the employment target was a nonbinding goal.

Maryland's Department of Business and Economic Development took the unusual step late last year of seeking to recover the money through a lawsuit filed in Baltimore County Circuit Court.

"If a company does not live up to its contractual obligation, we will do whatever we need to do to hold the company accountable," James Fielder, acting secretary of the department, said in a written statement yesterday. "This repayment brings the case to a close."

Because Avesta spent $90 million to buy and refurbish the plant, and kept it operating for three years, Maryland won't require repayment of $500,000, the department said.

Local Avesta officials could not be reached for comment.

Three years ago, Avesta, based in Sweden, bought the former Eastern Stainless Corp. mill in Essex for $55.6 million. Avesta received $1.8 million in grants and loans from Maryland, and hoped to more than double employment, from 140 to 350.

Instead, the stainless-steel market deteriorated. Employment at the plant shrank, first to a little more than 100 and now to a crew of about 15.

Avesta has repaid loans financed by the economic development department and by Baltimore County. But it claimed that the contract didn't require repayment of the $1.1 million grant.

Maryland has tightened the performance language in its

economic-development deals since Avesta's package in 1995. The contracts now state clearly that grants must be repaid or be converted to loans if employment goals aren't met.

With millions of dollars in new equipment sitting ready at the Avesta plant, Fielder and Avesta officials have said they are optimistic that it eventually will resume production.

Pub Date: 7/31/98

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