Northwest Iowa pork processing plant giving rural towns hope
EAGLE GROVE, Iowa (AP) — Teacher Stacy Osborn reads her student Esther’s writing assignment, a short tale about her family playing with water balloons.
“It was fun, fun, fun. Let’s do it again,” Osborn reads, asking her kindergarten students, “Who has a question for Esther?” And, “Who has a compliment?” Hands fly up.
Then Osborn asks: “Who can write in kindergarten?”
“Esther can,” the students yell.
For the first time in years, Eagle Grove classes like Osborn’s have new students — about 75 this year, with more expected in the year ahead, the Des Moines Register reported. The district expanded its elementary and is considering adding more middle- and high-school space.
The surge comes from Prestage Foods’ new $320 million pork processing plant about 6 miles south of this town of 3,600 residents.
Prestage’s North Carolina owners are about halfway to hiring 900 workers, which is expected to bring new families, jobs, businesses and housing to a region that hasn’t yet recovered from the 2009 recession.
Eagle Grove is in Wright County, which has lost close to 500 jobs over the past decade, a drop of 6.2%. Its population shrank by 4.2% from 2008 to 2017, Iowa State University data show.
Nearby Hamilton County shed nearly 2,100 jobs over the past decade, the largest drop statewide at 21%, after Electrolux closed its washer and dryer plant in Webster City and moved it to Juarez, Mexico. The county population shrank about 5%.
The hard truth is that rural counties are dying, both in Iowa and the United States, said David Swenson, an Iowa State University economist. He found that 36% of U.S. metro counties captured 99% of the jobs and population over the past decade.
In Iowa, half of the state’s 99 counties had fewer jobs than a decade ago, and 70% had fewer people.
Prestage will help “stem but not reverse” the region’s losses, potentially for the next two decades, Swenson said. “It’s a reasonably good anchor for that regional economy,” he said.
Swenson estimates Prestage’s economic impact at $574 million, while Ernie Goss, a Creighton University economist, puts it closer to $1.7 billion, spread out across nine neighboring counties.
Goss’s study shows Fort Dodge’s Webster County snagging most the people and economic impact at $607 million.
Already, Fort Dodge is seeing its greatest housing boom in three decades.
Only five homes were built in 2017, a number that’s expected to balloon to 140 this year.
Prestage is spinning off work for warehouses, transportation companies and other businesses. “That’s money that was never here before and will circulate through the region. This will create new wealth,” said Dennis Plautz, CEO of Greater Fort Dodge Growth Alliance.
Drive south on Iowa Highway 17 from Eagle Grove to Prestage Foods’ pork processing plant, and you’ll see a Tyson Foods billboard that advertises “top dollar” pay at its Storm Lake plant: $16 an hour for beginning production workers.
Head the other direction, and the back of that billboard promotes Prestage opportunities. Prestage’s production pay starts at $15.50 an hour, moving to $16 and higher after three months.
Ron Prestage, who leads the North Carolina family’s hog and turkey business, acknowledges healthy competition for workers between the two food processing companies.
Is it a war for labor? “Absolutely, but not in a bad way,” says Prestage, a veterinarian. “People who are skilled in those jobs are highly sought after.”
A battle over workers is good, potentially driving up wages, Swenson said.
County pay has climbed nearly 15% in the past five years, said Growth Alliance’s Plautz, and the group’s economic development director, Kelly Halsted.
The Prestage plant, which opened in March, has hired about 500 workers, most of whom come from the region. The company said 60% are white, 25% are Hispanic and the remaining 15% are Asian, African and black. Forty percent are female.
The company is taking its time ramping up production. It’s processing about 4,200 pigs daily at the plant, and eventually will process 10,000 animals.
It makes sense for the facility to be in northwest Iowa, experts say.
The state is the nation’s largest pork producer, raising about 50 million hogs annually, and of the 10 largest pig-producing counties in the nation, five are in northwest Iowa. The region raises about 9 million hogs each year.
That’s why Swenson disagrees with the state’s $11.5 million tax incentive package for Prestage. The county also is providing $8 million in tax rebates.
“The plant was going to locate somewhere in that region,” he said. “There was no other place that plant would go to be profitable.”
Experts say the industry needed the additional processing capacity. Seaboard Triumph built a $330 million plant in Sioux City, opening in 2017, and recently added a second shift.
Prestage will provide 60% of the hogs from its existing Iowa facilities, and buy the rest from independent producers. It’s expected to drive local hog prices 3.5% higher.
Plautz, of Growth Alliance, said the region won’t fully feel the economic impact of the plant for another year as Prestage finishes hiring and local companies replace employees they lost to the plant.
It’s ironic that meat processing is helping to revive the region, Plautz said. Fort Dodge lost nearly 3,000 jobs in the 1980s when pork processor Hormel Foods and Iowa Beef Processors closed. “We’re still raising the hogs, and it makes sense to build where the hogs are,” he said.
Prestage’s plant in Iowa has been controversial since it was first proposed in 2016. Mason City leaders narrowly rejected it after residents raised concerns about odor and reduced water quality, driven by fears that more hog confinements would be built in the area.
Ron Prestage said the company never expanded its pig production. “We didn’t go out and build a bunch of farms and never had plans to,” he said.
And the company has invested heavily in technology designed to reduce the plant’s impact on the environment and workers: Biofilters help scrub odor from the air, and robots tackle physically demanding jobs such as splitting carcasses.
“We’ve radically eliminated the odor issues and the hardest labor jobs,” he said.
Prestage is providing guaranteed payments to the city for its new $32 million wastewater treatment plant.
The city was already planning to update its plant, but now it’s building a much larger one to help accommodate the processor’s discharge.
The shift will let the city meet new state requirements for cutting the pollution released into the Boone River, said Bryce Davis, Eagle Grove’s city administrator. And it reduces residents’ monthly cost by about $20.
Already, the plant has sparked new housing in Eagle Grove, Davis said. The same is true in Fort Dodge and Webster City.
Prestage plans to eventually add a second shift, with another 800 to 1,000 workers.
Eagle Grove is offering a tax abatement and other financial incentives for new construction: It has seen eight houses, eight townhome apartments and two duplexes.
The city also is developing a 10-acre subdivision for about 15 homes.
“If we had one house built every 10 years, we were happy,” Davis said, adding that new Main Street businesses also are popping up: craft and pet stores, a women’s fitness center and a restaurant. And the local pharmacy expanded.
Developers in Eagle Grove and Fort Dodge are using the state’s workforce tax credit program to close the gap between the cost to build a home and what it will sell for.
“If it were not for the workforce housing tax credits, none of this would have been done,” said Mike McCarville, manager of RoJohn Home Improvement and a former Fort Dodge mayor.
“You can’t build spec homes in this market and sell them,” said McCarville, who is partnering with another company to build 10 single-family homes that sell for about $230,000.
The same is true for rentals, said Jim Kesterson, a local Realtor who is building duplexes. “It costs the same to build a duplex in Fort Dodge as it does in Des Moines, but we can’t get the same rents,” he said.
Shawn Foutch, a Des Moines developer, converted the former Phillips Middle School in Fort Dodge into 72 apartments.
The project cost $12 million, but based on the rents, the project’s value is about $7 million. “Rural communities can’t afford the rents we get in urban areas,” he said.
“These small communities know they need housing, but they have no idea how to address it, how to fill that financial gap,” he said.
State workforce tax credits and city-developed lots lower the cost to construct a home, making them more affordable to buyers and reducing the risk to builders, said David Fierke, Fort Dodge’s city manager.
The city, along with the Fort Dodge Betterment Foundation, a nonprofit economic development group that’s developed three major commercial projects, ponied up $660,000 to buy about 60 acres for development.
It’s the first time in seven decades that the foundation has invested in residential development.
The city built the development’s roads and installed water and sewer lines and other infrastructure. Altogether, it was nearly a $3 million investment.
“Quality of life isn’t just trails and recreation. It’s quality housing, affordable housing,” Plautz said. Without it, local companies won’t continue to invest in the area.
In Eagle Grove, Superintendent Jess Toliver said the district is considering a few options to accommodate growth, including portable classrooms.
But even portables take time to get ready, and it might not be the best long-term investment, given the need for more middle- and high-school space, he said.
“They’re not cheap,” Toliver said. “Strategically, we need to plan and make sure we do it right, because we only have one chance.”
The district has tapped its borrowing capacity with its $12 million elementary addition, so any large construction projects will have to wait.
Until the district decides, Toliver said the schools will look at using existing space differently to make room for more students.
“We are full, but we’re not over-full. We think we can make it another year,” the superintendent said, adding that the district will hire up to nine teachers to match student growth.
The new plant, housing and other growth will add to the tax base, helping to fund expansion. But that, too, will take time. For a small rural district, “finances are always stressed,” he said.
Information from: The Des Moines Register, http://www.desmoinesregister.com