Iowa Premium to construct new facility

Mixed reactions to state and local tax incentives

Iowa Premium in Tama has recently secured $14 million in state tax incentive funding that will go toward a $561 million new construction project to be located next to the existing plant near U.S. Highway 30. On Dec. 20 the Tama City Council approved a three-year 100 percent property tax abatement that was a contingency of the state funding program. – News Chronicle File Photo

Tama County’s largest employer is on track to become much larger in the next five years.

The Iowa Premium beef processing plant in Tama has received over $14 million in state and local tax incentives for construction of a new state-of-the-art processing facility that is expected to be open in late 2024.

“​​The Iowa Premium decision to build a new processing facility is a game changer for Tama, Tama County and Iowa,” Tama County Economic Development Director Katherine Ollendieck said. “Their investment will make a difference for generations to come.”

The company received word on Dec. 17 their application for the Iowa Economic Development Authority’s (IEDA) High Quality Jobs program had been approved for a total award amount of $14,059,200.

The High Quality Jobs program will offer $6 million in investment tax credits and just over $8 million in sales or service tax refunds paid during construction in exchange for a commitment to create a number of high quality jobs.

Iowa Premium General Manager Jon Surman attended the Tama City Council meeting Monday and spoke to the council about the impact his company has had on the community since National Beef purchased Iowa Premium in 2019. – Photo by Darvin Graham

According to IEDA application documents, Iowa Premium’s expansion in Tama is expected to create 396 full time jobs in addition to a workforce that currently numbers 769 full time employees.

A vast majority of the new jobs will offer wages at or above $20.34 per hour and health benefits with over 50 percent company-paid medical premiums for single and family coverage.

The new facility is planned to be built directly north of the current plant on the east end of Tama and will take up approximately 800,000 square feet. The total project cost, according to application documents, is budgeted at $561 million.

Construction is expected to begin in the spring of 2022 with a target completion in the third quarter of 2024.

For Iowa Premium to be eligible for the amount of state incentives they received, the IEDA High Quality Jobs program requires local governments to contribute a 100 percent property tax exemption for a period of time not to exceed 20 years.

Tama County Economic Development Director Katherine Ollendieck presents the recently approved Iowa Economic Development Authority incentive program for Iowa Premium to the Tama City Council on Dec. 20. The Iowa Premium expansion project will add 396 jobs with 97 percent of them guaranteed to offer a minimum $20.34 per hour wage and health benefits. – Photo by Darvin Graham

Over the summer National Beef approached the City of Tama requesting a 10-year abatement incentive at 100 percent.

Concerns emerged at that time from council members as the city has yet to pay off an existing 10-year tax incentive the company received when it renovated and reopened the Tama plant in 2014.

“The 10-year agreement that we’re still in the middle of right now for the last expansion was fairly harmful to the city. It’s in agreement that we would never do that again,” Ollendieck said during a Dec. 20 Tama City Council meeting.

The current agreement provides Iowa Premium with tax increment financing (TIF) rebates based on the improvement made to the formerly vacant property.

The first five years of the 2014 agreement gave Iowa Premium a 100 percent incentive and the final five years are gradually stepped down in percentage until the program concludes in 2024.

Former Tama City Council member Bill Smith offers his thoughts to the council regarding the relative size of the National Beef company and it’s request for public assistance in project funding. Smith said he was wary that the investment wouldn’t pay off in the ways the company hopes it will for the City of Tama. – Photo by Darvin Graham

So far the city has refunded $810,000 toward the initial agreement and is expected to refund an additional $126,000 before the incentive ends.

“This city has got to see revenue,” Ollendieck said. “If we want to try and tackle the other things that Iowa Premium needs us to tackle like housing and more convenience for downtown, then we’ve got to have revenue.”

The City of Tama earlier this year reestablished a commercial development incentive that offers up to three years at 100 percent tax abatement for improvements made to commercial property.

In recent negotiations with National Beef, the company agreed to lower their incentive asking offer to three years to be in line with the city’s existing commercial improvement program.

Ollendieck indicated based on her discussions, the three year offer from Iowa Premium was the best the city was going to receive given that the state incentive would have to be drastically reduced to not require a local property tax exemption.

On Monday, Tama Council members voted unanimously to approve the three-year 100 percent tax abatement incentive. Abatement will begin once construction has been completed.

Ollendieck said Monday the company is estimating the property value of the new 800,000 square-foot facility to be around $26 million, though the valuation will ultimately be set by the county assessor and may come in at a different amount.

Local impact

Council member Anne Michael said at first she was hesitant to support the expansion from a city incentive perspective but that her mind had been changed as she’s observed Iowa Premium participating in community efforts in recent years.

“It’s going to push us to get more housing and that’s going to bring more jobs in,” Tama Mayor Doug Ray said. “They give a good donation to the city fire department and ambulance.”

Iowa Premium General Manager Jon Surman was present at the meeting and described to the council how the company’s decision to multiply their investment in the Tama project only further illustrated their commitment to the business in Tama.

In March of this year the company originally announced a smaller $100 million expansion that would utilize the existing facilities. Since then, plans have changed and the project has evolved into an investment of over $560 million and the construction of a new facility to replace the old one.

“Our last project that we were looking at was a $100 million expansion,” Surman said “We had a lot of interest from people in the community wanting to come in and help build at that time.”

He said local contractors like Hardon’s Inc. in Tama and Scharnwebers in Toledo have been a constant presence at Iowa Premium working to help repair and maintain the facility.

“Since they hear that we’re building a brand new facility, there’s been good feedback,” Surman said. “They were excited about a $100 million project this spring; that said we’re here to stay. And if that’s the case then, I don’t know what $650 million says now. It’s going to be the nicest plant in the country. We have the nicest cattle in the industry right here in this area so, our company wants to be here, they want to expand here.”

Surman said the company has not made a decision about what they want to do with the current facility once the new plant is open

“We’ve put a lot of money in it,” he said “we’re going to keep putting money in it over the next three years. So it would be foolish for us just to shut it down. From what I know, we’ll do something with it.”

One challenge the community and the company will continue to face as the Iowa Premium expansion progresses is the lack of workforce housing in the Tama-Toledo community.

Earlier this year estimates showed roughly 25 percent of Iowa Premium’s workforce resided in Tama-Toledo, with hundreds more commuting in from larger population centers like Cedar Rapids, Marshalltown and Waterloo.

With Iowa Premium positioned so close to the four-lane U.S. Highway 30 exit, it’s feasible for many commuters to come and go from the plant without the need to proceed further into town for food or fuel.

Reactions to tax incentives

Although input from Ollendeick and all five members of the Tama Council was strongly in favor of the Iowa Premium expansion on Monday, other reactions at the state and local level have been mixed.

In an interview published by WNAX Radio on Dec. 21, incoming Iowa Cattleman’s Association President Bob Noble addressed the dual nature of the Iowa Premium development as it relates to the industry and the state as a whole.

“It’s one of those double-edged swords,” Noble said. “We’re sure glad to see the expansion and increased capacity in Tama, but factory margins have sure been adequate enough that they should have enough capital that they don’t need an infusion from taxpayers. It’s good and bad like a lot of things.”

Former city council member Bill Smith of Tama addressed the council during public comment to express concerns of the city and state’s involvement in providing publicly funded incentives to a large corporation owned by a global conglomerate.

“They’re the second largest packer in the world with 90,000 employees,” Smith said. “They kill 31,200 head a day. That’s $12.7 billion in gross revenue. Last year they had a record profit. I don’t know why a company making record profits to this level needs to have Tama give them a handout.”

He went on to reflect upon his experience as a Tama resident observing the evolution of the meatpacking business and its effect on the local economy.

“The pack has been our ‘salvation’ in Tama since 1971 and 10 different times I’ve heard this story. Everybody comes in and says, ‘Hey, we’ve got a deal for you. This is going to be the making of Tama, Iowa.’ It never has. “

The Iowa Premium beef processing plant is owned by National Beef, a North American subsidiary of ​​Marfrig Global Foods SA.

Marfrig Global Foods is a publicly traded, Brazil-based meat processing company that is known as the second-largest beef processor in the world.

Within the state of Iowa, the company’s competitors number among the other top meat processing operations, including JBS, Tyson and Cargill.