City Beat: Kraft Heinz plant considered for $48M in improvements

The Kraft Heinz Food Co. (Nasdaq: KHC) is again looking to expand product lines and upgrade manufacturing equipment at its Springfield plant.

During its April 6 meeting, Springfield City Council approved 8-1 a resolution of intent to issue Chapter 100 industrial revenue bonds of up to $48 million for improvements to the company’s local plant at 1951 E. Meadowmere St. Council members participated in the meeting through a Zoom videoconferencing session to comply with social distancing and stay-at-home orders issued by Mayor Ken McClure.

The potential project is competitive with Kraft Heinz plants in other markets, said Sarah Kerner, the city’s director of economic development.

In its Chapter 100 bond request, Kraft Heinz is asking the city to exempt 75% of property taxes for five years on the purchase of the equipment, though Kerner said the city’s adopted policy is to grant 50% abatement for 10 years.

The project would allow the company to maintain its 950 employees at the 750,000-square-foot plant, according to bill documents.

Kerner said the city usually requires companies that utilize Chapter 100 bonds to make payments in lieu of taxes to all taxing jurisdictions in an amount equal to 50% of the exempted property taxes.

The Springfield plant makes products such as Kraft Singles, Kraft Natural Cheese, and Kraft Mac & Cheese. Kerner told council members the Springfield plant is the largest manufacturer in the company’s cheese and dairy network.

“The Springfield plant is not being as efficient and not bringing in the revenue levels that it previously did because Kraft Singles are selling about 5% less each year than they did the previous year,” Kerner said. “What we want to do is make the Springfield plant as competitive as possible so continued investment from that company continues coming to Springfield and we maintain those 900 jobs.”

Kraft Heinz representatives did not return requests for comment by press time. A company news release in February noted the company recorded $6.5 billion in 2019 net sales, which was down 5% from the year prior.

If the project goes through, it would be Kraft Heinz’s third Chapter 100 bond-financed project in Springfield since 2012. That year, council approved $26 million toward expansion of the plant’s cheese and pasta production, according to bill documents, and in 2016, bond-funded equipment purchases totaled up to $36 million.

Councilman Mike Schilling cast the lone opposing vote.

“This is a multibillion-dollar corporation,” he said before voting. “Why do we have to give them tax breaks? I’m getting weary of this ... getting on our backs to help them pay their way when they’re richer beyond compare.

“Isn’t business supposed to be investing their products back into their facilities – rather than leaning on getting out of taxation?”

Council also heard a first-reading proposal to create a preliminary funding agreement between the city and Kraft Heinz for the potential project. Bill documents indicate the work would cost the city $50,000. The proposal will be up for vote at the April 20 council meeting.

Rezoning request
Council also heard the first reading for a rezoning request of 43 acres at 2401 E. Sunshine St., where SRC Electrical, a division of SRC Holdings Corp., operates.

The applicant, Southwest Missouri Investments Inc., is requesting a zoning change to industrial commercial from heavy manufacturing. State records indicate SRC Holdings founder Jack Stack is an organizer of the group that owns the acreage.

Planning documents note the change would enable commercial and retail development along Sunshine Street. SRC Holdings representatives did not return requests for comment by press time, and representatives did not attend the virtual council meeting. Council will vote on the request on April 20.

Other action items
Council unanimously approved the city’s loan committee to lower interest rates for the city’s business development loans as the prime rate decreases. The city’s loan rate is determined by calculating 50% of the prime rate, plus 1%, according to past Springfield Business Journal reporting. Now, the city can alter its current rate of 3.75% to remain competitive with the federal rate, which was 4.25% last month but has since dropped to 3.25% due to the coronavirus pandemic.

Council also approved a request from the Department of Public Works to enter into a surface transportation program agreement with the Missouri Highways and Transportation Commission and amend the department budget for nearly $3.7 million worth of projects. Bill documents show the city would provide 20% of the funding through the quarter-cent capital improvement sales tax, and both projects would take place along Sunshine Street, National Avenue and Battlefield Road. The largest project calls for $2.4 million of federal funding to be used in street overlay improvements. Public Works also requested to use $1.3 million in federal funds to make improvements in accordance with the Americans with Disabilities Act.