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City Council to consider agreement for Leprino’s bonds

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A new wet whey facility and wastewater system upgrades are two projects Leprino expects to complete at its Omaha Road plant with money raised by new Industrial Revenue Bonds. (Lisa Dunlap Photo)

Chaves County expects to negotiate for payments starting next week

The county expects to start negotiations next week concerning a new payment agreement with Leprino Foods Co. should the company issue new Industrial Revenue Bonds (IRB) through the city of Roswell.

County Manager Stanton Riggs said he has had some initial talks with company representatives about its plans for new bonds, and he expects to talk next week about an updated Payment in Lieu of Taxes (PILOT) agreement.

At a Thursday meeting, the Roswell City Council Finance Committee voted to move the issue about the bonds forward to the full council.

Although the Leprino plant on Omaha Road near East Grand Plains is on county property, the city is able to act as the issuer of the bonds since the site is within 15 miles of the city limits.

City Attorney Aaron Holloman explained that the “inducement resolution” to consider the matter, as well as a decision about advertising for a public hearing, would occur at the June 13 City Council meeting. The public hearing to consider the ordinance for the bonds is now scheduled for July 11.

Leprino — Roswell’s largest private employer with more than 560 employees — has issued bonds several times through the city beginning in 1993. Some are now due to expire, so the company is asking for up to $150 million more in bonds for up to 30 years.

The money would be used for improvements, upgrades and expansions of the Leprino plant. Leprino is a global manufacturer of mozzarella cheese and dairy-based nutritional products. It grosses about $3.2 billion a year and is one of the largest privately owned companies in the world.

“At this point, we are uncertain about the timing of the issuance of the bonds, or whether they will be issued in series,” Kim DeVigil, Leprino’s communications director said.

But she added in her email that the company has identified two projects costing about $70 million that likely would be funded by the first issuance, if there is more than one bond sale.

Those projects are construction of a new wet whey facility and upgrades to the wastewater system. Longer-term projects would be upgrades and equipment replacements for the cheese and nutrition areas of the plant, upgrades and replacements of utilities, and additional wastewater system upgrades.

“While these potential improvements likely will not require the reconstruction of the floors and walls that contain the facility (though some may), they nonetheless represent a substantial capital investment in the renewed longevity of the facility, without which the facility would fall into disrepair,” DeVigil said.

Previously, the bonds were purchased by chairman James Leprino and his late brother, Mike A. Leprino Jr.

DeVigil said the prospective buyers for new bonds are still to be determined.

“Leprino is still working through the details of arranging a buyer for this transaction,” she said. “However, it will likely be an affiliate of Leprino Foods Co.”

Industrial Revenue Bonds are a means for a company or qualifying nonprofit to raise money for capital projects while receiving tax benefits, as well as attractive interest rates.

The tax benefits occur because the businesses issue the bonds through a municipality or a county and give a master lease on their property to the issuing governmental entity, in this case, the city of Roswell.

The city then leases the property back to the company for the life of the bonds. When the bonds are repaid, the property reverts back to the company’s ownership.

During the time the property is government-owned, no property taxes are owed. Holloman and DeVigil said Leprino also is eligible for a Non-Taxable Transaction Certificate (NTTC) through the IRB.

According to online information from the New Mexico Department of Revenue and Taxation, those certificates allow companies to be exempt from paying gross receipts taxes on the purchase of certain services and goods.

Instead of paying taxes, the company has agreed in the past to make annual payments to the county.

Riggs said that the payments began as $100,000 a year but have increased to $130,000 now.

He said the amount is “nowhere near” what the county would receive if the property were on the county tax roll, but that the county is better off negotiating in “good faith” about the matter since the city and Leprino could move ahead with the bond issue even without the county’s approval.

He added that it helps both the company and the county to come to an agreement, given that the money is used to maintain roads near the plants.

“It helps their roads. That helps their employees. It helps the truckers who are bringing the milk in,” he said. “The benefit we get is that we get some money dedicated to that area. And that is one of the areas where we have one of our highest loads traffic-wise because of the milk trucks. And a milk truck that is turning on a road when it is 100 degrees outside and 140 (degrees) on the road, it damages the road. It just does. So anything we can get to help us with those costs are appreciated.”

He added that having a large employer in the area, as well as a dairy buyer for a county that is the largest milk producer in the state, is vital as well.

“The meeting I was at, they have committed to be here a long time,” he said. “That is good for the area. That is good for our economy.”

Whether the Roswell Independent School District will be involved in discussions is unknown at this time. RISD officials said that they have yet to have any discussions with Leprino concerning the matter. State law changed in 2002 to require school districts to be included in discussions about in-lieu payments, but that requirement is only when a municipality is issuing the bonds on behalf of an electrical generation facility.

Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 311, or at reporter02@rdrnews.com.