US: Tax-based financial incentives for new soy processing facility in Michigan
The company initially announced the building project in October, but some tax-based financial incentives were only approved last week. ZFS Ithaca is affiliated with Zeeland Farm Services, which is the only soy processor in Michigan.
Work has already started on the initial phase of the 435 acre site, which includes a grain elevator and storage bins, said Eric Meeuwsen, general manager, ZFS Ithaca.
The company is building the second soybean processing facility as the amount of soybean planted in the state and region have continued to grow, as has the market demand for products including soybean meal, said Brian Terborg, chief financial officer, ZFS Ithaca.
“The Michigan agricultural market has grown slowly and steadily over the past 30-40 years, and they’ve grown large enough to justify a second plant in the state,” he told FeedNavigator. “But there are some challenges which ties into the reason for the incentives at the state, city and county level.”
The plant is expected to bring better prices for soybean growers and soymeal users, he said.
The project has received a partial tax abatement for the next 15 years, said Terborg. Following that, the company has been approved to have a period of tax capture.
“The two main pieces of it are an agricultural renaissance zone and that was formally approved by the state of Michigan last December,” he said. “What was just finalized was the brownfield redevelopment.”
The two pieces work off of each other to help reimburse the company for some of the expenses being paid during the development of the site, he said. The project includes some elements of public infrastructure like extending water and sewer lines and widening roads that the company is financing.
“The agricultural renaissance zone reduces the tax rate on the project for the first 15 years so they’re providing property tax relieve to help it be viable,” said Terborg. “The brownfield will pick up in year 13 when the agricultural renaissance zone starts to phase out – starting in year 13 forward the property taxes will be used to reimburse the company Ithaca ZFS for costs.”
The recaptured property tax is expected to eventually generate about $12.2m, he said.
In addition to addressing some of the expenses that the company is covering initially, the financial incentives are expected to make the project more financially viable in the short term, he said.
“Though the markets have grown, they’re still relatively small and hinder the economies of scale,” said Terborg. “We feel that they have grown large enough today to justify the plant today.”
However, when operating at capacity, the site will produce more end product than can be used in the state at the moment, he said. “It is bigger than the Michigan market so it will ship to secondary markets,” he added.
The site offers access to several transportation options, the company reported. And is located in an area with a large amount of soybean production.
It has been designed to meet soybean processing needs for the next 50 years, said the company. When completed, it is set to process about 40m bushels of soybeans annually.
The elevator is under construction and one of the grain bins has been installed, said Meeuwsen. Concrete work has also started at the site.
The expectation is that the elevator will be ready to open in June or July 2018 and be ready for the soybean harvest that fall, he said. Construction of the processing facility is the second phase of the project and is currently in the engineering stage.
The processing plant is on track to be open in spring 2019, he said.
Additionally, there are several steps being taken to improve the energy efficiency of the new site, said Terborg.