fedgazette

Future of Sioux Falls meatpacker again uncertain

South Dakota State Roundup

Published July 1, 1993  |  July 1993 issue

When John Morrell & Co. discontinued its beef slaughter operation last year in Sioux Falls and put over 400 employees out of work, the importance of the company to the local economy was widely discussed. Now Morrell, with 2,800 employees remaining in its hog and sheep operations, is in the headlines again.

Chiquita Brands International, Morrell's parent corporation, wants to sell all the company's operations in pieces or in its entirety but has set no timetable. In anticipation of an active search for buyers, the current management group of the Sioux Falls operation has expressed interest in owning the local plant and has asked for about $7.6 million annually in tax relief. But before committing any state aid, South Dakota Gov. Walter Miller wants to know more about the group's business plan and other financial backing.

One of the biggest considerations facing company buyers is the $11 million in pensions and benefits committed to retired workers, almost equal to the current number of active employees. And although the number of recipients may diminish, that $11 million remains about constant because the cost of medical benefits continues to rise.

"We want to make sure we do the right thing the first time," says Dan Scott, interim president of Sioux Falls Development Foundation Inc. Any mistakes would have a lasting impact, Scott says. "We want to make sure it will be kept open for the next 20 years, not just another 90 days."

And there is little doubt that keeping the Morrell plant open is a priority. In a report prepared for the Governor's Office of Economic Development, University of South Dakota economist Michael Madden found that in 1992 Morrell:

  • provided 2,800 direct and 5,090 other jobs;
  • generated directly and indirectly paychecks totaling $143.6 million, or 8.5 percent of total wage and salary earnings in the Sioux Falls area;
  • spent $426.9 million for its hogs, about half of which are sold by South Dakota farmers; and
  • paid property taxes of $650,000.

The state would also stand to lose about $4.3 million in sales tax, and local governments would lose $8.3 million in sales and property taxes and utilities.

"The one thing you notice when you do a study of an industry that adds value to a product is that the impact is greater," Madden says. "You're dealing with a lot of inputs, a lot of spin-off employment, more so than in many other industries."

Scott says Sioux Falls wants to be prepared for the possibility of the plant closing but is certainly not resigned to that. "We'd rather look at the current situation as a challenge, and we're looking at keeping a meatpacking facility in Sioux Falls."

Kathy Cobb

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