Harkin move kept Agriprocessors plant afloat
BY TONY LEYS
The Des Moines Register
A controversial Postville meatpacking plant might have been forced out of business if U.S. Sen. Tom Harkin hadn't stepped in four years ago to give it a multimillion-dollar boost with federal tax money.
The money, nearly $8 million, came from an environmental program from which Agriprocessors normally would have been disqualified. The grant and loan were used to build a sewage-treatment plant that serves only the meatpacker.
The environmental program, run by the U.S. Department of Agriculture, is designed to help small towns improve their sewage systems. The new sewage-treatment plant is technically owned by Postville, but it doesn't serve the town's residents. Department administrators say that fact usually would have prevented it from receiving money from the program. But Harkin, an Iowa Democrat, used his influence to exempt the project from those rules in 2004.
"It was a sleight of hand on this deal," said Jerry Anderson, a Drake University law professor and Agriprocessors critic. "We thought it was a misuse of the law."
Agriprocessors, once the area's dominant employer, sank into bankruptcy after an immigration raid there in May. It now is for sale and is operating far below capacity. Before the company's recent economic troubles, the new sewage-treatment plant helped Agriprocessors lessen water-pollution problems that had brought repeated citations from environmental inspectors. Environmentalists say the pollution was so bad that it probably would have led regulators to shut down the company.
Harkin, who is chairman of the Senate Agriculture Committee, wields substantial power over the Department of Agriculture, which financed the treatment plant. He was the top-ranking Democrat on the committee in 2004, when he used an appropriations bill to direct money to the Postville project.
His spokeswoman, Jennifer Mullin, said this month that Harkin was trying to help the town by keeping its biggest business afloat. "A variety of Postville area leaders requested this assistance," she said in a written response to questions. "The meat plant was the major employer in the area, and we understood that its loss would do major damage to the community - a loss that is quite obvious at this point."
Mullin said the city had agreed to be responsible for wastewater from the meatpacking company years earlier, when the company was under different ownership.
"USDA often provides help of this kind to cities like Postville," she said.
But USDA officials say the arrangement was unusual.
Mark Reisinger, the agency's Iowa director of rural development, said he wasn't aware of any other case in the state in which the program paid for a sewage-treatment project that solely served a private business. He said the program has financed scores of sewage-related projects in the state. Many of them benefited businesses, he said, but they also served residential customers.
National USDA spokesman Weldon Freeman agreed that the agency's wastewater-assistance program was not intended to finance projects benefiting only industrial users. "That's not the way the program normally works," he said. He added, however, that members of Congress often carve out exceptions to federal programs in order to help their constituents.
Freeman said some projects nationally have received as much money as the Postville plant received. However, USDA records show that in the past five years, no other Iowa project has received nearly as much as Postville's $7.8 mil-lion. Only a handful of the 73 projects received more than $1 million in USDA grants and loans. The next biggest behind Postville's was a project in Harrison County, which received $1.6 million in 2006.
In addition to the USDA money, the Postville project received $1.3 million in federal economic-development money and $193,000 from the U.S. Environmental Protection Agency, USDA records show.
Patti Cale-Finnegan, an administrator for the Iowa Department of Natural Resources, said supporters of the Postville project also asked for money from a state-run program that helps small towns improve sewage systems. She said the request was denied, because the Postville project was only going to help a private industry.
Postville's residents are served by a separate sewage-treatment system. When the new treatment plant first was proposed, it was meant to serve two meatpacking companies, Agriprocessors and Iowa Turkey Products. But the turkey plant burned down in 2003, before the federal financing was approved, and it never reopened.
Environmental activists are still unhappy about wastewater that flows from Agriprocessors into a local creek, which feeds into a trout stream called the Yellow River. But they said the problem was much worse before the government helped build the treatment plant.
"If they couldn't have built that plant, they would have had to shut down. They were in constant violation," said Susan Heathcote, water program director for the Iowa Environmental Council.
Anderson, the Drake University professor, sued the state Department of Natural Resources, saying that even with the treatment plant, the company would be polluting the creek and groundwater. That lawsuit was eventually settled, and the treatment plant was allowed to go online.
Agriprocessors paid $600,000 in environmental fines in 2006 to settle pollution complaints brought before the treatment plant was built. Once the plant opened, the company was able to increase its meatpacking operations.
The USDA money included a $3.3 million grant and a $4.5 million, 20-year loan. The loan was made to the city, which agreed to stand as the plant's owner so the project could qualify for the federal program. In return, Agriprocessors agreed to make $25,000 monthly payments on the loan.
A bankruptcy trustee who is temporarily running Agriprocessors said any new owner would be obligated to make the monthly payments toward the $4 million still owed on the federal loan. If the company goes out of business, however, the city would be on the hook for that amount.
Postville Mayor Robert Penrod said he's worried about the drag the loan would present to the city. "It would be kind of disastrous," he said. Penrod said Harkin's office and Lt. Gov. Patty Judge are helping negotiate some breathing room on the loan repayment schedule, but there has been no suggestion that any of the debt would be written off.
The town has about 2,200 residents, though that figure could plummet if Agriprocessors closes and hundreds of jobs disappear. The city's tax revenues also could drop if home values decline.
Penrod said the new sewage-treatment plant eventually could be adapted for residential use, but that would require significant revamping of the city's current sewage system.
The mayor declined to comment on whether it was a good idea for the city to sign on as the owner of a treatment plant that it didn't intend to use. He noted the decision was made before he took office. John Hyman, the former mayor, declined to comment.
A spokesman for the former managers of Agriprocessors did not respond to a request for comment.