Amy's Kitchen studies ways to cut huge water, sewer fees for expansion
Published: Tuesday, May 14, 2013 at 7:26 a.m.
Last Modified: Tuesday, May 14, 2013 at 7:26 a.m.
Santa Rosa officials have told Amy's Kitchen that the company's expansion plans could trigger up to $34 million in water and sewer permit fees alone, a figure that stunned the company and has set off a furious effort to prevent it from once again expanding to Oregon instead of Sonoma County.
Earlier this year, officials at the Petaluma-based maker of frozen foods asked Santa Rosa officials to give them an estimate of the permit costs associated with a two-phase expansion plan that could eventually bring 800 additional jobs to the city.
The first phase proposed taking over a vacant food processing facility on southwest Santa Rosa previously home to G&G Specialty Foods, which closed in 2011.
The second phase involved building a much larger state-of-the-art food processing facility on 10 acres of pasture land owned by Jim Ratto, founder of the garbage company North Bay Corp.
The fees for the first phase were manageable — $3.3 million, according to Amy's CFO Mark Rudolph. But the figure for the second phase bowled them over.
“The one that was a show stopper for us was the one that they call the water demand fee,” Rudolph said. “It came out to a huge number.”
The city estimated that because of its high expected water and sewer usage, the company would have to pay an additional $31 million in fees for the second phase, for a total of $34 million in water and wastewater fees alone. That doesn't include millions more in fees for building permits, school impacts and property rezoning.
The city is working hard to help the company reduce its anticipated water use and thus its water and sewer fees.
Rudolph said Amy's is now very encouraged that those costs can come down significantly.
The initial estimates were so high because the company was proposing a new 250,000-square-foot processing facility that would need new large-volume connections to the city's water and sewer system.
All new construction pays such connection fees. For a typical small home, estimated to produce about 5,000 to 11,000 gallons of wastewater per month, one-time connection fees cost about $17,000.
But Amy's estimated that at full production it would be using 12 million gallons of water a month to make the company's food products, which includes a range of natural and organic foods from enchiladas and burritos to pot pies and pizzas.
That's a huge volume of water, so much that Santa Rosa is the only city with a water and sewer system large enough to handle such a demand, said David Gouin, the city's director of economic development and housing.
“The point we made to them is Santa Rosa's water infrastructure is the only one in the North Bay that can accommodate them,” Gouin said.
By law the city can't waive water and sewer fees to encourage economic development. But it can work with companies to try to get their water and wastewater needs down, and that's exactly what the city is doing, Gouin said.
Engineers in the city's utilities department are working closely with Amy's to find ways the company can use less water and discharge less to the sewer system, said utilities director David Guhin.
From using less water for irrigation and equipment cleaning to treating and reusing wastewater on site, there are several techniques the company could use to save them big on those connection fees, Guhin said.
“That whole water cycle is really important to the overall demand fee that they are going to be paying,” he said.
The city is working to help the company bring efficiencies to its current operation on Northpoint Parkway, and then incorporate those processes into any new facility, Guhin said. The city provides the same service to any business that wants to operate more efficiently, he said.
But Amy's isn't just any business. Founded in 1987, the fast-growing company today has about 1,000 employees in Sonoma County. City officials cheered CEO and co-founder Andy Berliner's March announcement that he planned to expand in Santa Rosa with a new plant that could cost from $40 million to $50 million.
The plans were welcomed news in part because in 2004, Berliner also considered expanding in Santa Rosa but instead opted to open a 200,000-square-foot facility in Medford, Ore. At the time he cited Oregon's lower land, utility and workers compensation costs and well as lower corporate taxes.
Local and state politicians and economic development officials expressed disappointment at the decision but also relief Berliner didn't move the entire company out-of-state.
All of which has many people in the business community closely watching whether Santa Rosa can manage to keep Amy's here this time.
“This is a very important part of our local economy and we want the food industry to grow and thrive here in the region,” said Carolyn Stark, the executive director of Sonoma County BEST, the Santa Rosa Chamber of Commerce's public-private job creation effort.
She said speciality food processing companies all over Northern California are watching closely.
Amy's CFO Rudolph said, “There is a lot of optimism about doing something that we should be doing anyway, which is being creative about our waste and becoming more sustainable.”
Amy's already composts a great deal of its food waste, but the city engineers have helped the company realize that there might be ways to go further by turning some of that food waste into energy, Rudolph said.
Handling waste is one of the biggest challenges facing food processors. Clover Stornetta Farms and Lagunitas Brewing Co. are both forced to truck their high-density wastewater out of the area because the Petaluma wastewater treatment plant can't handle the material.
In addition to helping the company reduce its connection fees, the city is considering ways to help it spread out and finance those costs, Gouin said.
Downtown restaurants are allowed to stretch their hookup fees over five years, and the City Council could consider extending that same right to Amy's, Gouin said.
There are also state economic development programs that can finance businesses infrastructure costs over 30 years, and the city has made the company aware of these programs, Gouin said.
While it examines the fee estimates and ways to reduce them, the company has broken off negotiations to sublet the space from the Montreal-based Saputo Inc., which owns the lease on the 56,000-square-foot G&G Specialty Foods building, Rudolph said.
That caused some to speculate that the company had pulled the plug on Santa Rosa.
But Amy's is still interested in the building because being located in an existing facility won't trigger connection fees. It also would allow the company to get up and running quickly, which is necessary to meeting strong demand, and then expand next door in the future, Rudolph explained.
But there are still questions about the neighboring property, which would need a general plan amendment because it is currently zoned for multi-family housing, Rudolph said.
The company is also looking at other local properties, he said. While it owns existing land in Medford where it could expand, the company's strong preference is to remain here, Rudolph said.
“We won't run for the hills until we've exhausted every possibility and it comes out saying this is just not going to work,” Rudolph said. “But we're nowhere near that.”
You can reach Staff Writer Kevin McCallum at 521-5207 or email@example.com. OnTwitter @citybeater
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