Tax breaks lure McLane to Republic

In what some might describe as an economic development coup d'etat, the city of Republic has successfully wooed a Texas-based supply chain services company that promises to be the largest employer in the community's history.

McLane Co. Inc., of Temple, Texas, announced at a Feb. 24 news conference that it would build a 400,000-square-foot grocery distribution center on Republic's west side that would employ about 400 people when it opens late next year.

The company, a wholly owned subsidiary of Warren Buffett's Nebraska-based Berkshire Hathaway Inc., will build the gigantic facility on 132 acres near the intersection of Greene County Farm Road 156 and State Highway MM. McLane has agreed to buy the property from Drury University for an undisclosed amount in a transaction expected to close this month.

McLane's corporate director of logistics, Cortney Hunt, said Republic met all of the company's needs: reasonably priced real estate, proximity to major highways, necessary infrastructure and an adequate labor pool.

Millions of dollars in state tax breaks on the table also helped. Depending on which incentive program the company chooses to pursue, McLane stands to receive between $2.5 million and $4.15 million in tax credits, said Missouri Department of Economic Development spokesman John Fougere.

One of those incentive programs is Missouri Quality Jobs, which Gov. Jay Nixon has urged state lawmakers to expand by approving a bill that has encountered resistance in the Senate. A House version of the bill passed last month removes several spending caps attached to the Quality Jobs program, including an overall annual limit of $60 million in tax breaks.

"We can send a signal that Missouri is open for business," Nixon said at last week's news conference in Republic. "We are not waiting for things to happen. We are going to make things happen here in the Show-Me State."

'Project Secret'

For 14 months, Republic Economic Development Director Gail Noggle worked on "Project Secret," the code name city officials gave to the McLane deal.

Noggle worked diligently to bring McLane to Republic after receiving the lead in late 2007 from a liaison at the state Department of Economic Development. At the time, the company was seeking just 60 acres for its new distribution center.

McLane's Hunt said the company - working with Dallas-based construction management firm CMT - was exploring possible sites in the "four corners" of Missouri. In the end, Republic beat out nearly 60 other locations - some in Springfield and Joplin - for the project, although Noggle said there were some "tense times" throughout the negotiation process.

"This was a three-way negotiation that had to take place simultaneously," she said. "It was pretty tricky."

The third party was Drury University, which is selling the land to McLane as well as 40 acres to the city of Republic for future development of a park. The university acquired the property in 2001 through a bequest and had no plans for development, said Ken Johnson, vice president for administration and finance at Drury. Ironically, Johnson said, a study commissioned by the university found that the highest and best use of the property was a distribution center.

"Those types of opportunities don't come along very often," he said.

Hunt said McLane rarely builds more than a couple distribution centers each year. The newest facility opened last year in Jessup, Penn., he said.

Hunt said the distribution center in Republic - expected to open in third-quarter 2010 - would serve grocery stores, restaurants, pharmacies and convenience stores in Missouri and surrounding states. Wal-Mart and 7-Eleven are among McLane's clients, he said.

While McLane won't start hiring for several months, Hunt said employees at the distribution center, which will operate three shifts around-the-clock, would include office staff, forklift operators and truck drivers.

The average salary for McLane employees will be $34,000, City Administrator Jim Krischke said.

In addition to employing 400 people, Krischke said the project will have a much-needed ripple effect on the regional economy.

Construction of the distribution center is expected to generate 261 jobs and its operation could create more than 500 indirect jobs at companies that supply McLane with goods and services, Krischke said.

Steve Morehead with CMT said the total cost of the project has not yet been determined, but he did note that a Texas architecture firm would handle the design work.

Inside the incentives

McLane may only participate in one of two major incentive programs because state law precludes employers from double-dipping.

By building in Republic's Enhanced Enterprise Zone, the company is eligible for $2.5 million in tax credits over five years, Fougere at DED said. But through the Missouri Quality Jobs program, he said, McLane could receive up to $4.1 million in tax breaks over five years, provided the company creates the 400 forecasted jobs, offers health benefits and pays employees the annual average wage for Greene County. That figure currently stands at $32,569, according to DED.

Echoing Nixon's stance on the Quality Jobs program, Fougere noted that companies must create jobs before they receive tax breaks.

"It has built-in accountability measures," he said. "The taxpayer or state of Missouri is not losing out if a business does reach its threshold and has not created the number of jobs it said it would."

McLane, for example, falls into the Quality Jobs program's "high-impact" category, meaning the company has three years from the time it files a "notice of intent" to create the jobs, Fougere said.

McLane also is eligible for a new jobs training program valued at $700,000 and the employment recruitment and referral incentive, which provides state assistance with recruiting and hiring needs at no cost to the company, Fougere said. The latter is expected to save McLane about $200,000 over 12 months, he added.

The city of Republic - working in conjunction with Greene County - also incurred an out-of-pocket expense to entice McLane.

Krischke said the city has budgeted $300,000 for water, sewer and road improvements tied to the project. The city expects to recoup that investment in three to four years, he said.