Local Matters

Recent comments

Community Sponsors

January 24, 2019 - 5:51pm

Buyers lining up for Alpina plant at bargain price compared to $70 million invested

posted by Howard B. Owens in Alpina Products, batavia, business, news, notify.

Some potential buyer of the now-shuttered Alpina property in the Genesee Valley Ag Park is going to pick up an ultramodern dairy plant for a relative song, according to the man tasked with finding a buyer.

And it will sell soon, said Aaron Morgenstern, managing director of Harry Davis & Company, the firm handling the real estate listing.

"It's an opportunity that doesn't come along often," Morgenstern said. "I would expect we'll soon find a buyer. I'm 100-percent confident that it will be sold soon and I'll be surprised if it's July 4 and we're still talking about who will buy the plant."

Harry Davis & Company specializes in valuing dairy companies and handling dairy plant and operations sales. The company helped in the sale of the former Muller Quaker Dairy plant in Batavia when HP Hood acquired it from Dairy Farmers of America.

Alpina acquired the land and built the plant for $20 million in 2012. Over the next six years, Alpina invested another $50 million in buying more land in the ag park, adding equipment, including equipment for liquid yogurt production, and adding onto the facility in anticipation of increased production.

The fully automated plant will help the company that acquires it control labor costs; at full capacity, Morgenstern would expect the plant to employ about 100 people.

"Our goal is to find a new operator who will bring jobs back to the area and grow the facility to its full capacity," Morgenstern said.

Morgenstern said he couldn't disclose the asking price for the plant but said it's substantially less than the $70 million that Alpina invested.

"The value proposition is that this an opportunity for somebody not currently in New York State to get into one of the premier milk sheds in the United States," Morgenstern said. "Or it's an opportunity for somebody in New York to continue to capture this milk shed with a brand-new ultramodern facility."

Morgenstern said he's received about three dozen inquiries about the property from serious potential buyers since the plant went on the market last week.

In 2012, Alpina, based in Colombia, received $767,096 in tax incentives to build its first U.S. plant in Batavia. A large portion of those tax incentives was in the form of a PILOT -- Payment In Lieu Of Taxes -- in which Alpina paid a fee in exchange for reduced taxes on the increase in assessed value of the property. The amount of taxes due to the increase in assessed value graduates upward over the years, from zero percent the first year, to about 50 percent today.

The assessed value of the property $168,000 (commercial properties are assessed differently than residential properties to account for the depreciation of commercial buildings). CORRECTION: When looking at assessments, we only looked at one parcel. There is another parcel that Alpina owns with an assessed value of $4.2 million.

Jim Krencik, spokesman for the Genesee County Economic Development Center, said the GCEDC board has the option, under the PILOT agreement, to adjust the agreement, or even cancel the PILOT, to increase the tax bill to 100 percent of assessed value.

A potential pitfall of canceling the PILOT is that a new owner would not be eligible for a continued tax abatement. The board keeps the PILOT in place but adjusts the taxable amount, another company could get a new PILOT agreement. A canceled PILOT agreement potentially makes the property less marketable.

The Batavian contacted four of the five current GCEDC board members and all said they wanted to reserve comment on the status of the PILOT until they had more information.

The board doesn't meet again until February and the time period for making a decision about the future of the PILOT is February and March.

"As we move forward with the site, I’m keeping in mind that any decision regarding the PILOT is within a larger effort to continue to bring more capital investment and job growth at the Alpina site, the Ag Park and Genesee County," Krencik said.

If the amount of taxes due under the PILOT were adjusted, it wouldn't take effect until the tax years for municipalities and school districts, and if Morgenstern's prediction of a quick sale is correct, the issue would become moot.

When Muller Quaker sold its $200 million plant to DFA, DFA didn't immediately decide what to do with the plant and it sat vacant for more than a year. In that case, the GCEDC board adjusted the PILOT and DFA paid more than $655,000 in additional taxes to local governments in 2017. When HP Hood acquired the plant, the PILOT benefits were extended to Hood.

Lorna Klotzbach
Lorna Klotzbach's picture
Offline
Last seen: 2 weeks 4 days ago
Joined: Jul 20 2010 - 10:27am

This is a very frustrating development for our communities...Please, Howard, correct me if I am mistaken--a PILOT does not give a new business a complete pass on paying taxes; it simply diverts the funds from the County and Towns, into the coffers of the GCEDC. So, the GCEDC waived the sales tax on the construction costs of these plants...then, awarded the companies PILOTs...which put much less money into the Genesee County treasury, so it had less to distribute to the Towns...Now that the businesses are gone, the GCEDC does not give back any of the monies it kept for itself, nor does it reimburse the Towns for the sales tax revenues they lost...After these businesses failed, Steve Hyde and the other GCEDC employees do not have to return the bonuses they received, even though they received the bonuses for starting these businesses...and, in spite of the fact that the GCEDC is funded by starting new businesses, over and over and over again...there are no personal consequences if those businesses fail...There aren't even any consequences to the GCEDC itself. Just how does this work out to the advantage of the average taxpayer in Genesee County?

Howard B. Owens
Howard B. Owens's picture
Offline
Last seen: 11 min 8 sec ago
Joined: Apr 23 2008 - 3:05pm

GCEDC's income is derived from a fee paid by the applicant/business, like 1 or 2 percent of the total tax abatement.

PILOT payments are routed to the taxing jurisdictions.

There's a lot of things I'd change about the system if I could but as a matter of clarity:

"waived the sales tax on the construction costs of these plants ..."

But the plants are still there. Hood has moved into one, in this case, and if Mr. Morgenstern is to be believed, the Alpina plant will also still be used. So, setting side the issue of whether tax dollars should be used at all, the taxpayer investment is still in place and still set to produce a return. And considering the boost to the local economy from construction and six years of employment there, local taxpayers are almost certainly past the break-even point on the investment.

"then, awarded the companies PILOTs...which put much less money into the Genesee County treasury"

But it's monopoly money. If Alpina had built elsewhere then the land would be fallow, with no increase in assessed value. There would be another community with the construction and the jobs and the PILOT payments and the increased value generating more taxes over time. It's not like money was shifted from here to there -- the money doesn't exist unless there is construction of a new plant. Tax abatements exist only on paper. If the plant had never been built there wouldn't magically be $700,000 in local general funds.

"nor does it reimburse the Towns for the sales tax revenues they lost"

Again, no construction, no sales tax. No construction, no jobs at all. No increase in assessed value (remember, the property is already generating tax revenue equal to 50 percent of the assessed value; it hasn't been a total economic loss.

"GCEDC employees do not have to return the bonuses they received"

They haven't received bonuses in years.

"there are no personal consequences if those businesses fail."

And most businesses fail. That's just a fact of life.

But in this case, we have in our community two state-of-the-art production facilities. In Alpina's case, it's a $70 million facility that Alpina will sell for a fraction of that investment, that cost taxpayers less than $1 million. The big loser here is Alpina (and before them, Pepsi and Muller, who lost an estimated $380 million combined on their ill-fated project) and its investors, not the local community.

Sure, from a free market perspective, it would be better not to have these kinds of market-distorting programs. I would like to see more effort placed on creating homegrown startups. But I share what I share because I think it's fair to try and bring clarity to the actual economic facts.

Daniel Norstrand
Daniel Norstrand's picture
Offline
Last seen: 2 hours 29 min ago
Joined: Jul 18 2016 - 10:27am

GCEDC: A planning committee of the local politburo.

Post new comment

Log in or register to post comments

Calendar

S M T W T F S
 
 
 
 
 
1
 
2
 
3
 
4
 
5
 
6
 
7
 
8
 
9
 
10
 
11
 
12
 
13
 
14
 
15
 
16
 
17
 
18
 
19
 
20
 
21
 
22
 
23
 
24
 
25
 
26
 
27
 
28
 
 
 

Upcoming

Copyright © 2008-2019 The Batavian. All Rights Reserved. Privacy Policy | Terms of Service
 

blue button