Pure Foods Goes Bankrupt After Benefiting From $1.2 Million in Tennessee State Economic Development Funds

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Less than two weeks before Governor Haslam introduced his IMPROVE Act centered on a gas tax increase for road funding, Pure Foods, Inc., a recipient of $1.2 million in state economic development funds, filed for bankruptcy.  

The $1. 2 million from the state’s FastTrack Economic Development (ED) Fund did not go directly to Pure Foods. Instead, it was allocated for use by KEDB for construction of a speculative building that Pure Foods leased for 10 years.  

According to the Kingsport Tennessee Times News, in March 2015, the Canadian based gluten-free snack food company, Pure Foods, Inc., was set to establish its U.S. headquarters at the Gateway Commerce Park in Kingsport, Sullivan County.  The deal included an investment of $22 million, an 80,000-plus square foot facility, and the creation of 273 new jobs generating an annual a payroll of $8 million.

The Kingsport Economic Development Board (KEDB) and the Kingsport Chamber of Commerce also supported the project by providing financial assistance and various incentives, including the purchase of 33 acres of land in the Gateway Commerce Park for $6.5 million borrowed from First Tennessee Bank.

According to the Transparent Tennessee website’s FastTrack Project Database, ED grants provide additional support for companies expanding or locating in Tennessee.  Reimbursable grants are made to local industrial development boards.  The state’s database indicates that Pure Foods’ own capital investment in the Kingsport project was $32.7 million, while other sources report the investment at $22 million.

The grand opening of the new Pure Foods global headquarters was held on January 29, 2016. A number of state and regional dignitaries were present, including Governor Bill Haslam who spoke at the event. The company said at the time that its initial hiring projections included 50-75 employees in the first year, and as many as 275 employees over five years.  

But the company did not make it past the first year to fulfill those lofty hiring projections.

Just over a year later, on January 30, 2017, after a work stoppage in October 2016 for a business restructuring, Pure Foods filed for Chapter 11 bankruptcy with liabilities of at least $1 million. Among the creditors are KEDB, which now does not have a tenant paying rent to provide a return on the $1.2 million spent to build a building to house the now bankrupt company.

It is also on the hook for the $6.5 million it borrowed from First Tennessee Bank to purchase the 33 acres on which the building that housed Pure Foods was built.

In 2015, Tennessee’s FastTrack incentives for job training, infrastructure development and economic development gave 105 grants totaling $68.5 million, including the one to Pure Foods, ranging in amounts from $8,000 to $6.75 million. 

These grants were additional to the state’s Tax Incentives, Film Incentives and TNInvestco, a state-sponsored venture capital program.  Information on these programs is not available for “confidentiality purposes,” according to Anderson Economic Group’s December 2016 report, “The Economic Impact of Business Tax Credits in Tennessee,” commissioned as a result of Tennessee Senate Bill 322 passed in June 2015.

Randy Boyd, who was the head of the Tennessee Department of Economic and Community Development at the time the Pure Foods deal was announced, recently resigned and is rumored to be considering a run for governor.

 

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One Thought to “Pure Foods Goes Bankrupt After Benefiting From $1.2 Million in Tennessee State Economic Development Funds”

  1. Susan

    But wait, there is more…
    TNInvestco. $200 Million investment with only $5.3 Million return.

    http://www.tennessean.com/story/money/2016/11/10/tennessees-tninvestco-gamble-failing-audit-finds/93587844/

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