KFP: City weighs sharing financial risk for Smithfield jobs

by David Anderson

Kinston city officials have been asked to assume part of the cost of expanding Smithfield Packing Co.’s local workforce by reimbursing the company for any of the 330 positions it does not fill at its expanded Kinston plant.

The liability for unfilled jobs comes as part of the city’s efforts to obtain grants to fund an expansion of sewer capacity at the U.S. 70 West Industrial Park — the sewer capacity expansion would support Smithfield and future tenants.

Those grants come with requirements for job creation, and Smithfield would have to pay back grant funds for any jobs not created. Smithfield has asked the city to reimburse the company for any back payments it must make.

“Smithfield realizes the grant doesn’t solely benefit them,” City Manager Tony Sears said Wednesday. “There’s also a city of Kinston benefit and they’re asking the city of Kinston to share in the risk.”

Smithfield has operated its K2 plant in the industrial park since 2006. The company announced last November it would expand that facility and create an additional 330 jobs, as well as investing $85.5 million in its Kinston facilities.

The industrial park is currently near its capacity for sewer, with about 50,000 gallons per day available through the nearby Oliver Glass Lift Station.

Kinston officials estimate it would cost $4.3 million to create an additional 1.5 million gallons per day of capacity — the city has found potential grants from the N.C. Rural Center, the N.C. Department of Commerce Industrial Development Fund and the Golden LEAF Foundation worth a combined $2.75 million.

“It’s a great project for the city — in addition to providing sewer to Smithfield — and its something we’ve been talking about for a while,” Public Services Director Rhonda Barwick said Tuesday.

Barwick said the city and county would be responsible for funding the remaining $1.5 million, but Lenoir County Economic Development Director Mark Pope is working to find additional grants — the city had enlisted his support to find grants late last year.

Sears, along with Barwick and Pope, presented Smithfield’s request to the members of the city council during a work session Monday.

Pope expected Smithfield would honor its commitment to hire the full contingent of 330 new employees — the company is currently working with the JobLink center at Lenoir Community College to interview prospective workers.

“Their goal is to have that 330 on board by the first quarter of next year,” he told the council.

Council members were asked to vote on the agreement between the city and Smithfield Monday — the city would have to fund the full $4.3 million by itself if it could not get the grants, and all documentation must be submitted to the granting agencies by Aug. 30.

The city would have to pay up to $13,000 per job if all $4.3 million were covered by grants.

Mayor B.J. Murphy and several council members were reluctant to commit to the agreement Monday, especially without seeing a formal document.

“When government rushes decision making, it tends to lead to poor decision making,” Murphy said.

The council agreed to recess Monday’s meeting to 5:30 p.m. on Aug. 27, when they will hold a vote.

Sears said the city entered into a similar agreement with West Pharmaceuticals in 2008 when it was expanding its Kinston facility.

“This isn’t necessarily ground-breaking for the city,” he said Wednesday. “This the type of risk sharing the city has done with other big-name employers.”

David Harris, president of RSM Harris Associates in Goldsboro, is working with Pope to write grant applications.

He said it is typical for grant agreements with companies to stipulate a return of grant funds if job commitments are not fully met, but granting agencies often work with those companies.

“We’ve had extensions granted when market conditions change, that were totally unpredictable at the time of the award,” Harris said.

 

David Anderson can be reached at 252-559-1077 or David.Anderson@Kinston.com. Follow him on Twitter at DavidFreePress.