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Kraft Heinz Co. could spend up to $36 million at its Springfield plant under the bond proposal.
Kraft Heinz Co. could spend up to $36 million at its Springfield plant under the bond proposal.

Kraft proposes $36M bond plan

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Kraft Heinz Co. (Nasdaq: KHC) is moving forward with plans to bring eight new manufacturing lines and over 100 jobs to its Springfield plant.

At last night’s Springfield City Council meeting, Assistant City Attorney and interim Economic Development Director Sarah Kerner introduced the manufacturer’s Chapter 100 industrial revenue bond plan, which would fund the purchase of the new equipment by up to $36 million.

Kerner said the actual estimated cost of the new manufacturing equipment designed to allow the company to increase production of Kraft Macaroni & Cheese and Kraft Singles is $33.2 million.

The bond issuance would effectively cut Kraft’s property taxes on the new equipment in half for a period of 10 years. The taxable value of the new lines over the next decade is just over $1.5 million, according to information provided by Kerner, putting the property-tax savings for Kraft at over $750,000.

“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,” Kerner said at the meeting.

Should council approve the bond plan, Kerner said the city would issue bonds and the company would purchase them. The bonds would be used to purchase the equipment, and then the city would lease the equipment back to Kraft for 10 years. The lease payments would be applied to the principal and interest on the bonds. Because the city would own the equipment during that time, there would be no new property taxes on the manufacturing lines, but Kraft would have to cover payments in lieu of taxes to the tune of over $750,000. After 10 years, the equipment would be transferred to the company.

“There is no financial risk to the city,” Kerner said.

Kraft Heinz spokesman Mike Mullen confirmed in January the new jobs would pay an average of $48,000 a year. On Jan. 25, council approved a measure to accept $40,000 from the manufacturer to pay legal fees associated with creating the bond plan.

Under the terms of the bond deal, Kraft would have to meet key 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 and must ramp up to at least 950 employees by Oct. 17, 2017, from under 900 currently.

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.

They spill off to small manufacturers looking to grow. And keeping a large company like Kraft in town helps all of the other manufacturers by keeping these special tradespeople and specialized companies that supply them locally and help grow our entire manufacturing culture.”   

James Gomochak of Incentis Group, a national tax-credit consultancy working with Kraft on the plans in Springfield, said approving the bond proposal lays the groundwork for possible future investments, as well.

Council is slated to vote on the measure at its March 21 meeting. 

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