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City Beat: Kraft chooses Springfield for expansion plans

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The Kraft Heinz Co. (Nasdaq: KHC) has selected the Springfield Kraft manufacturing plant on East Bennett Street for eight new production lines and over 100 new jobs with an average pay of $48,000 per year.

All the city of Springfield has to do to secure an estimated $33.2 million investment is approve a Chapter 100 industrial revenue bond plan financing up to $36 million in equipment purchases.

That proposal would sidestep roughly $750,000 in property tax payments over a 10-year period.

At the March 7 City Council meeting, Assistant City Attorney Sarah Kerner introduced the bond plan, which would facilitate additional production of Kraft Macaroni & Cheese and Kraft Singles.

The taxable value of the new lines over the next decade is just over $1.5 million, according to information provided by Kerner, but Kraft would only pay a little over $750,000 in payments in lieu of taxes under the proposal.

“The project benefits are that it will help them expand production capacity; it will help them meet additional consumer demand; it will add 109 new jobs; and help them retain their existing workforce,” said Kerner, who also is the city’s interim director of economic development.

Should council approve the financing plan and tax abatements, Kerner said the city would issue bonds and Kraft would purchase them. The bonds would be used to buy the equipment, which the city would lease back to the company for 10 years. The lease payments would be applied to the principal and interest on the bonds. Because the city would own the equipment, there would be no new property taxes on the manufacturing lines, but Kraft would have to cover payments in lieu of taxes totaling 50 percent of taxable value of the new equipment.

After 10 years, the equipment would transfer to the company.

“There is no financial risk to the city,” Kerner said, adding the city’s credit rating could not be impacted by a bond default because Kraft would own the bonds.

Kraft Heinz spokesman Mike Mullen confirmed in January the new jobs would pay an average of $48,000 a year. He declined to say what other facilities were in the running for the new manufacturing lines. On Jan. 25, council approved a measure to accept $40,000 from Kraft to pay legal fees associated with drafting the proposal.

Under the terms of the deal, Kraft would have to meet performance gates in order to receive the full estimated tax abatement. Kerner said the company would have to spend a minimum of $24.2 million on new equipment by the end of 2017 and ramp up to at least 950 employees by Oct. 17, 2017. It currently employs 892.

SMC Packaging Group CEO Kevin Ausburn was among four public speakers who voiced support for the bond plan. No speakers at the meeting were opposed.

“It is vital that as a community we support companies that choose to expand here in Springfield,” Ausburn said. “In the last few years, using the Chapter 100 program, Kraft has invested $150 million in new equipment here in Springfield. If we secure this project, we are looking at the creation of approximately 109 new jobs and an associated annual payroll of $5 million. This type of program works.”

Mother’s Brewing Co. owner Jeff Schrag said the bill was important because it helps support Springfield’s manufacturing culture.

“There are companies that are located here because they work with large manufacturers, machine shops, supply companies, but also a cadre of professionals who know things like (programmable-logic-controller) programming and specialized machine shops, as well as good packaging options for places that supply large manufacturers,” Schrag said. “All of these things spill off to the new companies, as well.”

James Gomochak of Incentis Group, a national tax-credit consultancy working with Kraft, said the Queen City is the preferred site for the product-line expansion, and approving the bond proposal lays the groundwork for possible future investments.

“As they invest more money in the facility, that just enhances its viability,” he said.

Council is scheduled to vote on the measure March 21.

Indecent exposure
Council members voted 5-1 to repeal an indecent-exposure ordinance amended last fall, reverting to the ordinance in place before a group called Free the Nipple held a rally in the Queen City in August. Three council members – Craig Fishel, Craig Hosmer and Ken McClure – were absent from the meeting.
 
The repeal was necessitated by an injunction secured on Jan. 22 in the U.S. District Court for the Western District of Missouri in a lawsuit brought by the American Civil Liberties Union.

Mayor Bob Stephens said with the injunction in place, the writing was on the wall and he felt it was clear the city would lose its defense of the amended ordinance.

“If we do not repeal this tonight, the lawsuit will go ahead, and I fully expect that we would lose that lawsuit and we would have to spend additional sums of city money unnecessarily,” Stephens said.

Springfield City Attorney Dan Wichmer has said a settlement with the ACLU in the indecent-exposure ordinance case would likely follow a repeal.

Councilman Justin Burnett said the fact that no speakers showed up to the Feb. 22 public hearing to call on the city to defend its amended ordinance demonstrates that many across Springfield were ready to move on.

Councilwoman Kristi Fulnecky cast the lone vote against the repeal, saying at the meeting the ACLU was a group worth fighting in this case because she has heard wide support for the amended ordinance. After the meeting, Fulnecky said repealing the stricter ordinance could be bad for business.  

“If topless women were roaming around our city, this could potentially hurt tourism and could have an adverse effect on businesses downtown and throughout the city,” she said.

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