Writings and observations

Two economies

mendiola MARK
MENDIOLA

 
Reports

To paraphrase the start of Charles Dickens’ classic novel “A Tale of Two Cities,” Pocatello’s economy has witnessed the best of times and worst of times in recent decades, experiencing bipolar mood swings that have wildly swung like a pendulum.

Shutdowns of the Bucyrus-Erie complex, Garrett Freightlines’ trucking empire, FMC’s elemental phosphorus plant, various Gateway West Industrial Center manufacturing concerns, Ballard Medical, etc., have been major Gate City setbacks over the years. Closure of the Heinz frozen food plant earlier this year in Pocatello was another major economic and psychological blow.

At its peak, the Heinz plant in Pocatello employed more than 800 who worked its food processing lines, eclipsing the J.R. Simplot Co., ON Semiconductor and Union Pacific Railroad as the Gate City’s largest private employer.

Heinz’ announcement several months ago that it would close its 500,000-square-foot factory near the Quinn Road overpass and terminate its remaining 410 employees stunned the community, sending shock waves throughout Bannock County. The unexpected shutdown was devastating for many and a gut punch to Pocatello’s economy.

That bad news came on heels of the ignominious shutdown of the $700 million Hoku polysilicon plant in Pocatello. Once operating, Hoku was to initially employ 200 and eventually boost its payroll to 400. Those ambitious plans quickly evaporated into the stratosphere, leaving many contractors in a financial lurch, when Hoku filed for bankruptcy.

At the end of October, however, Idaho Gov. Butch Otter and Pocatello Mayor Brian Blad announced that Amy’s Kitchen had acquired the Heinz plant and expects to begin operations as soon as December, initially hiring 200 but anticipating its payroll could swell to 1,000 in 15 years — an announcement that frankly exceeded my expectations.

Amy’s Kitchen Co-Founder Rachel Berliner and CFO Mark Rudolph joined Otter and Blad, plus city, state and county officials, at the revamped Pocatello Regional Airport to make the announcement to a large, enthusiastic, receptive crowd.

Berliner praised Idaho’s swift response in making the mutually beneficial arrangement possible. Rudolph said Amy’s Kitchen could expend $75 million in capital investments here over the plant’s duration. He said the company’s growth would have exceeded 30 percent this year had the Gate City operation been up and running.

To their credit, Otter, Blad, Idaho Commerce Director Jeff Sayer, Bannock Development Corp. Executive Director John Regetz and a host of other Idahoans rapidly mobilized to finalize the Amy’s Kitchen deal, giving laid off Heinz workers a boost of direly needed hope and encouragement, revitalizing an important production site.

Amy’s Kitchen is the nation’s leading maker of organic, vegetarian and non-GMO convenience foods, riding a burgeoning wave of popularity among Millennials and other health conscious Americans that promises to ensure the private, family-owned company’s longevity. The California-based company has enjoyed double digit growth since its inception 26 years ago.

Amy’s Kitchen employees in Pocatello are expected to average $33,000 a year in wages that are anticipated to total $342 million over 15 years, in addition to health benefits and scholarship opportunities. New state tax revenue from the operation is projected to hit $35.7 million. Commerce’s Sayer said Idaho’s reimbursement will be worth $6.7 million.

Some critics have questioned the wisdom and effectiveness of granting Amy’s Kitchen a 26 percent credit on its corporate income, sales and payroll taxes through 2029 under Idaho’s new Tax Reimbursement Incentive, which took effect on July 1, and Bannock County commissioners giving it a matching 75 percent tax abatement on the existing plant and future investments.

Proponents counter that the hundreds of food processing jobs created, the multiplier effect of wages paid, the positive impact on eastern Idaho’s agriculture sector, spinoff business generated and vote of confidence from Amy’s Kitchen more than offset any negatives from the tax incentives, which competing states effectively have used to attract industry at Idaho’s expense.

Amy's Kitchen announcement

Amy’s Kitchen Co-Founder Rachel Berliner addresses a large crowd at the Pocatello Regional Airport to announce her company’s acquisition of the Heinz plant. (photo/Mark Mendiola)

Sayer points out that the Gem State’s Tax Reimbursement Incentive helped persuade Amy’s Kitchen executives to select Idaho over New Mexico. That incentive also was a pivotal reason SkyWest decided to establish a new maintenance operation at Boise’s airport and create 50 to 100 jobs averaging more than $50,000 in annual pay.

On the flip side of the uplifting Amy’s Kitchen announcement comes an ominous development — the looming closure of Pocatello’s regional mail distribution center, which would have a deep, widespread impact not only on greater Pocatello, but all of eastern Idaho.

Pocatello Mayor Blad and Chubbuck Mayor Kevin England recently joined dozens of postal employees in a protest outside the distribution center, where nearly 534,000 or close to half a million pieces of mail are processed and sorted each day.

If the Pocatello postal distribution center closes on April 18, 2015, as scheduled, along with 81 other centers throughout the nation, mail that normally takes two or three days at a max to deliver conceivably could take up to a week, having an untold negative impact on commerce and convenience.

Forty-five of the 80 Pocatello employees who work there stand to lose their jobs, which average $50,000 in annual pay, as postal distribution centers in Provo, Rock Springs and Elko also are merged into a single Salt Lake City conglomeration.

Blad, who has been aggressively trying to reverse the sorting center’s closure, tells me the annual U.S. Postal Service payroll in Pocatello stands at $2.5 million, creating a major economic impact. Small businesses and rural communities benefit from the convenience of next day deliveries provided by the distribution center, as well, he notes.

Pocatellan John Paige, president of the Idaho State Association of Letter Carriers, also informs me that Idaho Rep. Mike Simpson supports a moratorium on closing the postal distribution centers, but Sens. Mike Crapo and Jim Risch have not signed onto preventing the adverse shutdowns.

As Pocatello approaches 2015, its Jekyll and Hyde economy seems to be following a recurring plot true to form as another chapter is turned. The good news of Amy’s Kitchen breathing life into the Heinz plant is tempered by potential closure of the U.S. postal distribution center only a stone’s throw away on Flandro Drive in the plant’s shadow.

Pocatello’s economic track record has been one of fits and starts since the 1980s. Like a split personality, the economy invariably seems to take steps backward for every advancement made. Amy’s Kitchen’s arrival coinciding with the potential closure of Pocatello’s regional postal distribution center is another example of that bizarre dichotomy.

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