A cash incentive of $1 million was what it took to land Hostess Brands LLC and a projected 400 jobs after the Victory Drive plant in Columbus was bought out of U.S. bankruptcy court earlier this year.
Dick Ellis, chairman of the Development Authority of Columbus, said in an Aug. 21 letter to Mayor Teresa Tomlinson that the authority paid Hostess $500,000 on June 19.
The city, in turn, is expected to pay Hostess $250,000 in June 2014 and the same amount in June 2015, money that goes to help offset the $18 million the snack-food company said it would cost to reopen the Columbus bakery in May for the eventual July 1 startup of Twinkies and Zingers production.
“I would appreciate your response acknowledging this payment schedule,” Ellis said in the letter to the mayor, with the subject expected to be on Columbus Council’s agenda Tuesday.
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Ellis on Monday said the incentives offered to Hostess Brands and other existing or potential employers are aimed at making certain the city has a chance at landing the business and jobs that come with it.
“We’re constantly in competition, as we were for this Hostess operation to come back to Columbus,” he said. “There were multiple plants that were involved in that bankruptcy, and a bunch of them did not reopen as a result of the bankruptcy when they came out.”
To be exact, there were 11 bakeries shut down last November after previous owner, Dallas-based Hostess Brands Inc., decided it could no longer negotiate with unions over worker pay and benefits, which had been steadily eroding amid multiple bankruptcies.
The Columbus plant was among four to be reopened after New York-based private investment firms, Metroupoulos & Co. and Apollo Global Management, bought the Hostess and Dolly Madison brands for $410 million. The other surviving bakeries are in Emporia, Kan., Schiller Park, Ill., and Indianapolis, Ind.
Hostess Brands Inc. — once known as Interstate Brands Corp. — sold the Columbus property to the acquiring companies for $4.4 million, according to city of Columbus real-estate transaction records.
“We were in competition to make sure we were one of those plants that would come back into production, which it is, and they’re doing very well down there,” Ellis said.
The Columbus plant hired 200 fulltime employees initially, with plans to increase that to about 400 within three to five years. But the company has idled some workers recently.
Hannah Arnold, a public relations representative for Hostess Brands LLC, said via email Monday that the layoffs were of temporary staffers who could be recalled at some point depending on production needs.
“To meet extraordinary demand in connection with the brand’s historic comeback, Hostess hired a number of temporary employees with the expectation that after the 90 day launch period, they could be put ‘on call,’ meaning the company would call them to work as needed,” Arnold said.
“Columbus is an important bakery location for Hostess and many of the people in this category will be called back as new products are launched in upcoming weeks and months,” she added.
Mike Gaymon, president and chief executive officer of the Greater Columbus Georgia Chamber of Commerce, said incentive packages offered to new and existing companies, including Hostess, are typically customized.
“We’ve got parameters that we look at — how many jobs, how much capital investment, what their pay scale is going to be, what their fringe benefits will be, do they have to build a new building — which means there’s a lot of infrastructure cost — or is there an existing building,” he said. “All of those kinds of things go into the package, so to speak.”
Brian Sillitto, the chamber's senior vice president economic development, said the work by his organization, the development authority and the city has attracted $1.1 billion in capital investment locally over the last 10 years. That represents the creation of about 11,500 jobs, he said.
When the Hostess bakery shut down last fall in Columbus, it had 426 people on its payroll. A decade ago, before the financial and labor strife, there were more than 1,000 people earning a paycheck at the plant known for its sweet aroma during production.