Archive for Thursday, October 4, 2007

Huhtamaki considering De Soto expansion

October 4, 2007

After nine months under wraps as "Project Snow," a possible expansion of Huhtamaki Americas plant in De Soto came to light during an interim legislative hearing in Topeka last week.

The long-rumored possible project would add a new product line to the De Soto plant.

"It's the largest economic development in the state right now," De Soto Mayor Dave Anderson said.

Huhtamaki officials revealed little of the company's expansion plans at the hearing and remain silent on details. Huhtamaki spokeswoman Brenda Scott said two company officials, including vice president of finance John O'Dea, testified at the hearing on the tax issue being discussed. Scott said the company had no further comment on the expansion.

It was stated at the hearing the $100 million project would add 100 new jobs if it was located at the De Soto plant. Currently 440 work at the plant and offices just north of Kansas Highway 10.

City officials confirmed they have been meeting with company representatives on the proposal since a snowy day in January, which gave the project its Project Snow code name.

Huhtamaki has moved the approval date of the project back several times as the company officials did their due diligence, Anderson said. De Soto and another site have survived as a possible home to the expansion as other Huhtamaki facilities in the United States have been eliminated.

Anderson said the project was now on hold as the company took stock of current economic conditions.

As an incentive to land the expansion, the city is proposing a 10-year, 100 percent abatement on the $100 million expansion, Guilfoyle said.

The payoff for the city would come from utility sells. It is estimated Huhtamaki would pay the city more than $30 million for water and sewer usage during the abatement's 10-year history (see related story).

Last week's interim hearing was to discuss how the state's 10-year-old tax credit economic development tool be modified to help Huhtamaki and other companies, said state Sen. Julia Lynn, R-Olathe.

The incentive, which was instrumental in getting Sealright to locate in Kansas, Lynn said. Sealright built the plant in De Soto which was subsequently purchased by Huhtamaki.

The concept behind the incentive is to give companies tax credits to be used against corporate income tax liabilities when they meet certain benchmarks, such as hiring a certain number of employees with defined levels of training and wages, Lynn said. The problem revealed in the Sept. 26 hearing was that Huhtamaki and other companies never qualified for the tax credits in the incentive packages offered them.

"Initial tax credits granted have never been used," she said. "They've been sitting out there unused against any tax liability. At what point do tax credits become meaningless?"

The Legislature would address the issue when it returns to Topeka in January, Lynn predicted.

"I can tell you there will be action," she said. "Senate Majority Leader Derek Schmidt put together a committee on this. I will be on that committee. There will be legislation this session."

Anderson and Lynn said they had spent a lot of time on the issue. They said they received the support of legislative leaders and the governor's office. Gov. Kathleen Sebelius has written a letter to Huhtamaki supporting De Soto's bid and visited the plant, Anderson said.

Moreover, Kansas Commerce Secretary Joan Wagnon said there were other possible incentive programs available to the company and offered to help Huhtamaki identify them, Anderson said.

All in all, Anderson said he was optimistic the work would eventually pay off for De Soto and Huhtamaki.

"We've got quite a few people interested in it happening, so this year I'm optimistic," he said.

The Finnish company Huhtamaki Van Leer purchased the struggling De Soto Sealright plant in 1998 and production of ice cream packing was resumed in De Soto in 1999. The purchase brought stability to the De Soto operation, which under the previous management had failed to meet the terms of its tax abatement agreement with the city.

In February 2000, the Finnish-based corporation announced that De Soto would serve as its North American headquarters.

Another product line to serve a "major quick service restaurant" customer requiring a near $2 million capital investment was announced in 2003.

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