COLUMBIA — Kraft Heinz is asking local authorities for tax breaks on more than $100 million in technology upgrades that could eliminate at least one in five jobs at Columbia's Oscar Mayer hot dog plant. But, company officials say, the proposal would ensure the remaining jobs stay in town, and the city's tax base would benefit in the long run.
Kraft Heinz's proposal is similar to the one granted to ABC Laboratories in 2006, said David Griggs of Regional Economic Development Inc.
Between 2017 and 2027, the Oscar Mayer factory would only pay 25 percent of the personal property tax and real estate tax on its agreed-upon new equipment and work space; Boone County would help secure bonds to pay for the upgrades; and over the next 10 years, Kraft Heinz would make the annual payments on the bonds. Until the company pays off the bonds, the new assets would belong to the county.
The company's tax rate on existing facilities wouldn't change.
The Oscar Mayer plant, officially called Columbia Foods, employs about 500 people across 400 full-time-equivalent positions, a Kraft Heinz spokesman said Wednesday. The company wants to install more automated machines, which would enable the plant to downsize to about 400 employees across 350 full-time-equivalent positions, Griggs said.
"This is a good deal," he said. "We can preserve these jobs and keep a really good employer in our community."
The bonds, called chapter 100 bonds, are for industrial development and don't need to pass a public vote because they don't accrue public debt.
Instead, representatives for each taxing entity affected by the deal — Columbia Public Schools, the Boone County Library District, Boone County Family Resources, Boone County Road and Bridge, the city of Columbia and the state — will vote on it Friday.
The Columbia School Board and the library district's board voted Wednesday to endorse the deal. Boone County Collector Brian McCollum will support it on behalf of Boone County Family Resources, Griggs said, and the state has indicated it's on board, too.
If the representatives agree to endorse the deal, two public hearings will be held. After that, the Boone County Commission will vote to finalize the proposal.
Kraft and Heinz agreed to a merger earlier this year, making it the third-largest food and beverage company in North America with an annual revenue of about $28 billion. An executive with 3G, a Brazilian investment firm that helped finance the merger, has indicated the company will adopt zero-based budgeting practices, according to Reuters. Unlike conventional budgeting, where management only has to justify increasing its budget, zero-based budgeting requires administrators to re-justify every expense each year.
Monday was the first day the Kraft Heinz stock traded on the NASDAQ.
Supervising editor is Adam Aton.