Business

Sunday, Feb 24 2013 12:00 PM

County offers $200,000 tax rebate to attract $12 million business expansion

BY JOHN COX Californian staff writer jcox@bakersfield.com

Kern County is offering about $200,000 in tax rebates to an Illinois-based food packaging manufacturer in exchange for a $12 million equipment investment that could add 20 to 30 full-time jobs to its existing, 300-worker plant near Bakersfield.

The incentive package, approved Feb. 12 by the Board of Supervisors, is a rare move for the county, which hopes to beat out two other contenders outside California.

"I think it's a good idea and it's appropriate," board Chairman Mike Maggard said of the offer. "Our No. 1 priority after keeping people safe is to create jobs, and this will help us create jobs in our local community."

The company weighing the county's offer is Pactiv LLC, a leader in its field with about 55 manufacturing plants and more than 12,000 employees in seven countries. It is expected to decide this month where it will make the investment. A county official said that, in any case, Pactiv's 288,000-square-foot facility at 2024 Norris Road would stay put.

A Pactiv spokeswoman declined to comment.

Paperwork filed with the county earlier this month details Kern's incentive package. It provides a glimpse into what is typically a secretive tug-of-war among local governments vying to lure jobs.

Expansion details

According to the filing, Pactiv is considering installing thermoforming machines, robotic packaging equipment and machine tooling and dies at the Norris Road plant. No new construction would be involved.

To a facility that now manufactures polystyrene foam products, the investment would add the capacity to make injection molded polypropylene products serving the domestic market.

The county's main economic development officer, Teresa Hitchcock, said there is a special sensitivity involved because the investment will be accompanied by a closure that will cost jobs outside the state. She noted that cities in Utah and Texas appear to be courting Pactiv for the same expansion.

Pactiv is asking Kern for an economic incentive package because its key competitors are "seeking to steal market share," the county filing states.

"These efforts are driven primarily through aggressive pricing scenarios focused on strategic customers," the paperwork states. "As a result, gross margins have been squeezed, placing increased emphasis on reducing product manufacturing costs."

It goes on to say that California's relatively high energy costs and "heavily burdensome regulatory environment" make it an expensive place to do business.

"A California manufacturing plant expansion scenario, as is the case in Bakersfield for this proposed project, will have higher costs as opposed to choosing one of the other finalists that are under consideration," the filing states. "Therefore, any and all assistance that can be provided by Kern County (as well as the state) will be important partial cost gap closers so that the project remains economically feasible for consideration with its competing locations."

The county has offered Pactiv a 90 percent sales and property tax rebate through the expansion's first five years. Hitchcock said that would save the company about $200,000. After five years, the county would receive the project's full sales and property taxes.

Maggard emphasized that the rebate offer would have no "net effect" on the county's budget through the five years.

"It's sales tax and property tax we never would have had anyway," he said.

Recent strategic moves

Pactiv recently made significant changes to its network of U.S. manufacturing plants.

Last month it broke ground on a 150,000-square-foot, $50 million polystyrene cup and container facility expected to employ more than 200 people in Corsicana, Texas. County Line Magazine reported that the company had received a $930,000 grant from the Texas Enterprise Fund, plus a $1.25 million grant from the Texas Department of Agriculture.

Last year the company closed its molded fiber plant in Griffith, Ind., as part of a move it said would streamline operations to benefit customers.

Hitchcock said Kern County has not extended an economic incentive package to a prospective employer in about 10 years. Sometimes what stands in the way of making such offers, she said, is California's requirement that building projects supported by public money pay construction workers prevailing wages.

Pactiv hopes to have the expansion operational by August, she added.

"We would feel very fortunate," she said, "if they chose to come here."

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