Baking & Snack - October 2015 - 20

FINANCING,LEASING

After finding a general location, bakers and snack
producers should then look into government incentives
that reduce initial operating costs as well as long-term
overhead. The amount and type of incentives often are
major factors in the final decision on where to locate.
That's an observation not lost on the DCOA.
"Businesses should ask, 'How aggressive is the local
community in dealing with incentives?' " Mr. Sharp suggested. "What breaks can we get if you put a new business within a 50-mile radius? It becomes towns competing against one another to win the business, and a lot of
time that's done with incentives."
In the short run, Mr. Spano said, the goal might be to
obtain free real estate or reduced costs for land or build-

"The fact that we get
this kind of support from
them allows us to think
about making many more
investments in this city."
Patricia Canal, AbiMar Foods

Communities compete for your business
In Texas, most public governmental
incentives for attracting new or expanding companies come from more than 700
municipal economic development corporations. State law allows voters to pass a
local sales tax in increments up to a half
cent. That often adds up to millions of dollars annually.
In Abilene, TX, the Development Corp. of
Abilene works with the Abilene Industrial
Foundation (AIF), an agency of the Abilene
Chamber of Commerce, in site selection
assistance, marketing and existing business retention/expansion. The AIF meets
with local businesses regularly to see how
the community can be of help, noted Kent
Sharp, CEO of the DCOA.
Once the DCOA agrees to provide financial assistance to a business, a five-member
board must approve the agreement, which
is then sent to the city council for approval.
"It generally takes a week or two for the city
council to vote," Mr. Sharp said. "There's
not a lot of red tape or bureaucracy."

20 Baking & Snack October 2015 / www.bakingandsnack.com

ings in a community or industrial area - or to negotiate favorable leasing rates or a reduced purchase price.
"Most bakeries have a lot of startup costs, so the key is to
lighten the burden until the plant starts making money,"
he explained. "Any way to lower or eliminate those costs
in the beginning is a benefit to the company."
Reducing infrastructure costs should also be a priority. "If a road needs to be improved or needs to be widened, get it done immediately," Mr. Spano advised. "Have
the community or state help you out with the project.
That will obviously save a lot of headaches in the future."
To alleviate ongoing costs, Mr. Spano noted exploring
tax abatements that can provide long-term assistance.
In the community, that may mean lower property taxes
over the next 10 to 20 years with a depreciation schedule. The state may provide corporate tax assistance.
Many communities also may lower utility bills, such
as water or sewer usage, up to 20% or more for several
years. Others may lower or eliminate the cost of disposing effluents, such as suspended solids and other biological oxygen demand (BODs) materials, over a period
of time.

A business-friendly community
The skills of the labor force should also be evaluated. Mr.
Spano typically examines the "labor shed" within a 30mile range of a potential new bakery location. Talking
with existing businesses - especially food companies
in the region - often will determine whether the current available workforce can absorb hiring an extra 100
skilled employees.
Additionally, local food processors can shed light on
how proactively the community collaborates with local
technical schools to train and recruit workers. "Many
states have discretionary incentives or cash grants that
are administered locally or at the state level to, in essence, provide assistance programs to train workers and
encourage a business to locate in that state or community," Mr. Spano said.
In Abilene, the DCOA worked with Fehr Foods to provide assistance in expanding the cookie facility and adding capital equipment, according to Kim Turrant, DCOA's
chief administration officer. In fact, Steve Fehr, the company's owner, introduced officials at Grupo Nutresa to the
DCOA when he sold the cookie operation.
To assist with the new cracker operation, the DCOA
agreed to pay 15% of Grupo Nutresa's investment. So far,
Mr. Sharp said, the municipal economic development
corporation has paid out $2.5 million with the agreement to pay up to $2 million more based on the number
of jobs created and other performance criteria. To secure
its investment for taxpayers, the DCOA has a lien on the
cracker facility's building that AbiMar owns.

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Baking & Snack - October 2015

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