Columbia manufacturing plant in line for break on sewer rates

Wednesday, April 13, 2011 | 3:13 p.m. CDT; updated 10:28 a.m. CDT, Thursday, April 14, 2011
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In March, City Council increased the sewer rates for Columbia’s biggest users. Now they are considering a proposal where four of the top 20 users, considered manufacturers, could pay their increased amount over three years rather than all of it in the first year. City Council votes on the proposed amendment Monday. Here are the annual changes.

COLUMBIA — The Oscar Mayer hot dog manufacturing plant and three other large Columbia sewer customers would get a break on recent sewage rate increases under proposed changes that go before the City Council on Monday.

During the March 21 council meeting, when the increases in sewer rates were approved, Mayor Bob McDavid promised to meet with Kraft Foods Inc. after its senior plant engineer told the council the new rates make the plant less competitive.

Four days later, McDavid, Interim City Manager Paula Hertwig Hopkins, Third Ward Councilman Gary Kespohl and Public Works Director John Glascock met with two Kraft representatives. McDavid said he initiated the meeting "because it has been my policy to talk to the manufacturers and see what their issues are."

"Manufacturing jobs are precious," McDavid said. "You just can't afford to lose them."

Three days after that meeting, Glascock told city staff to draft an amendment to the ordinance that would let sewer users apply for a "manufacturer" designation giving them three years to phase in the higher rates. Included in the definition is a requirement of at least 25 employees. Additionally, the amendment says the public works director would determine who meets the criteria of a "manufacturer."

McDavid said the proposed changes were a "direct outcome" of the meeting.

Kraft spokeswoman Joyce Hodel in Chicago said that Kraft was "very appreciative" that McDavid "wanted to understand our situation and help us remain competitive."

John Wulff, the plant manager who testified before the City Council in March, could not be reached for comment.

The proposed rate changes would cost Columbia Foods, the Oscar Mayer hot dog plant owned by Kraft Foods, an additional $20,633 a year for three years rather than an additional $61,900 a year under the rates approved last month. In the fourth year, Columbia Foods would begin paying the total new amount.

Columbia Foods currently pays about $492,000 a year for the city to treat its sewage, which totaled 800,000 gallons per day in February. The plant discharged 28 gallons per day of grease into the sewage system in February, along with 1,365 pounds of suspended solids per day.

Only four of Columbia's top 20 sewer users would be eligible for the manufacturer designation: Columbia Foods, plastic manufacturer PW Eagle Inc., 3M Inc. and the Quaker Oats Co.

The Oscar Mayer plant is Columbia's biggest water user and accounts for the largest single sewer discharge.

Kespohl, whose ward includes the Oscar Mayer plant, said "the disadvantageous position" the new rates put the factory in was discussed at the meeting.

"We really want to try and save those manufacturing jobs by helping those folks by phasing in the sewer increase," Kespohl said. "If their costs are higher, they don't get the contract, which means we lose jobs. We are not in favor of losing jobs."

Kespohl said he is likely to vote for the amendment.

Columbia Foods employs nearly 600 people, and Kraft's annual economic impact in the "general area" of Columbia is $65 million including payroll, utilities, taxes, goods, services and benefits, Hodel said.

Hertwig Hopkins said the manufacturer designation was chosen for phasing in rates because "manufacturers' rates went up the most" as part of the new rates.

"Manufacturers have to compete not only globally but also within their own companies," Hertwig Hopkins said. "It's important for us to have these companies remain competitive."

Columbia Sewer Superintendent Bill Weitkemper said the proposed ordinance "gives some users preferential treatment over others."

"What about hospitals and hotels?" Weitkemper said. "They've been hit with rate increases, and they employ plenty of people. Shouldn't they get their rates spaced out over three years? If somebody comes down next week, will they get the same deal?"

McDavid said while every job is important, "we have a history of knowing what it's like when manufacturing jobs leave." He said 3M recently went from 1,200 jobs in Columbia to 200 jobs and that the 1,000 jobs "went to Singapore."

"We want those jobs," McDavid said. "I certainly do not apologize for concessions made to retain jobs."

Mark Stevenson, president of the real estate firm REMI, was on the task force that designed the rate increases.

"Special discounted deals are unfair to the rest of us," Stevenson said.

Kespohl said the council would be willing to meet with other commercial users who wanted a "manufacturer" designation.

"If some other commercial user wants to come to us with a valid argument, then we'll absolutely listen to them," Kespohl said.

Weitkemper also raised the concern that the proposed amendment would violate the revenue neutrality of the billing increases. The ordinance that council approved March 21 had a clause that stipulated that the billing increases be revenue neutral.

McDavid said the amendment would "obviously" violate revenue neutrality.

"Somebody is going to have to pay more," Weitkemper said. "We need a certain dollar amount to operate the maintenance cost. If these guys get a break, we'll have to increase someone else's rates or cut services."

Senior Budget Analyst Sarah Talbert said it was too early to determine the fiscal impact of the proposed amendment. "We don't know what the fiscal impact is going to be," she said. "We don't know who is going to send in a request."

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Jimmy Bearfield April 14, 2011 | 10:32 a.m.

"I certainly do not apologize for concessions made to retain jobs."

No need to say so publicly because companies already know that. It's just a matter of which city will make the bigger concession to attract or retain a company. When a city agrees that $61,900 makes a company less competitive, that company then knows it can come back later on for even bigger concessions.

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