Small-Scale Regional USDA-Inspected Multi-Species Livestock Slaughter/Cut and Wrap Facility

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1 Concept Summary The intention of the slaughter facility workgroup is to build and operate a USDA-inspected livestock processing facility to provide slaughter and cut/wrap services to producers from Placer and Nevada Counties and throughout the greater Sacramento Region. The facility would be owned by local producers utilizing a co-op business model, and be available for use by all interested producers; however, co-op members would have scheduling priority over nonmembers. The intent of this facility is to provide livestock producers with the key infrastructure piece they need in order to direct-market their livestock products to the widest available audience. The facility will be characterized by the following: Small Scale 1,500 to 3,000 head processed annually Regional Serving the needs of producers in Placer, Nevada, and Surrounding counties USDA Inspected Meat processed at this facility will be allowed to be legally sold nationwide through all retail outlets Multi-Species Common large animal species including cattle, sheep, goats, and hogs Humane Slaughter Certification and emphasis on humane treatment of animals in order to increase public comfort and quality of meat products Adequate Refrigeration Capacity Sufficient for users to age and store meat as needed Cut and Wrap Robust individual animal tracking, skilled personnel, quality and efficient processing Energy Efficiency Alternative energy and efficient technology utilized to the greatest extent possible to reduce electricity costs and take advantage of available on-site energy sources Embodiment of Sustainability- Design and operating principles will attempt to incorporate best practices in reducing environmental impacts consistent with emerging local, regional, state, and federal policies promoting such, while achieving and maintaining a viable economic rate of return on investment. Page 1

2 Site Selection Criteria Site selection factors include land and building cost, appropriate zoning, water availability and cost, wastewater capacity and cost, utility cost proximity to suppliers and customers, transportation access, and access to capital Operation/Expansion schedule to be determined (TBD) Land and building requirements include 5-10 acres, 10,000 square feet of building space with maximum 18 foot ceiling heights; maximum utilization of space: cattle unload and covered corral, kill floor with secondary containment, holding and drip coolers, bone room, expandable modular-designed refrigeration units, packaging aging storage areas, shipping area, office and on-site inspection services, rest rooms, locker rooms and break area Utilities electric demand, usage, voltage and amps TBD; natural gas preferred with therms per month, cubic feet per hour and PSI TBD; co-location of small biomass to energy facility desirable Beef requires 300 gallons of water per head and small stock 100 gallons per head to process; wastewater at least 200 gallons per head or 600,000 gallons per year (3,000 head) required or 7.6 Equivalent Dwelling Units (EDU); environmental engineer to design best system taking into consideration ph, TSS, BOD, and FOG levels; filtration/separation tanks required for blood, fat, hair, etc; municipal water treatment, or commercial septic required Geographic preference Placer County only Zoning requirements Farm, Industrial, Agricultural Exclusive Transportation access from county-owned public road; prefer STAA Route designation; close to State HWY such as 65, 80, etc. Competitors Wolfpack (Reno), Superior (Dixon), Johansen s (Orland), Bel Campo, Butchers (Yreka), Marin Sun Farms (Petaluma), Messina Meats (Orland USDA slaughter only), Manas Meat (Esparto USDA cut and wrap only), and proposed USDA slaughter only (Amador-Calaveras) Page 2

3 Financing Model Estimated investment of $2.5 million including $250,000 for land, $1million for building, $450,000 for equipment, and $300,000 for permits and organizational costs, $50,000 for HAACP Plan development, $200,000 for on-site energy solutions, and $250,000 for operating contingencies. P³ Opportunity for public-private partnership with Placer County. County-induced community bank loan or community bank consortium dedicated loan to Cooperative for construction costs. Thunder Valley Casino Resort and other private investors could be considered. USDA Rural Development B&I Guaranteed Loan Program can make available up to $5 million with an up to 80% guarantee of principal and interest. A cooperative borrower can purchase land, develop a facility and buy equipment with the proceeds. Terms up to 30 years for repayment at negotiated interest, collateral required. Industrial Development Bonds The California Infrastructure Bank can issue tax-exempt securities up to $10 million to provide funds for a processing facility. Bond proceeds cannot be used to finance working capital. A letter of credit would be required, interest rates are generally 20-30% below comparable commercial alternatives, and the process can be completed within days. Rabobank is the largest Agricultural Bank in the U.S. and would have an interest in issuing the letter of credit noted above, if not also to purchase the private activity bonds referenced above. Farm Credit West provides real estate, and operating and equipment loans for Agribusinesses with flexible rate and term options. National Cooperative Bank is well known for providing financial solutions to meet the needs of cooperatives nationwide through a partnership with the SBA. Through SBA s 7(a) General Loan or 504 programs, financing for projects is available with terms of years, low fixed-rate financing, and low equity injections of 10%. Page 3

4 Facility Ownership Producer-owned cooperative model Each producer/owner owns at least one of the shares of available stock A governing board of the entire ownership meets at least annually to set the operating budget and provide direction to the facility manager Each share is worth one vote at meetings of the governing body Each producer/owner may sell their share at any time based on their current desire to retain or release ownership in the facility; however, at no time shall any one producer or entity own more than 49% of the available shares. Page 4

5 Producer Demand/Plant Throughput Multi-species facility able to process cattle, hogs, sheep, and goats Anticipation that cattle would form the bulk of the livestock processed by the facility Forecasted demand and financial necessity point to an estimated throughput of 1,500 cattle and a similar combined number of other livestock processed annually. This could grow to 3,000 cattle after the facility has been operational for several years. It is anticipated that the producers would vary from a group of core high-volume users (100 plus animals per year) to those who utilize the facility occasionally for one or two animals per year. Seasonality of production will be a potential cash flow issue. The bulk of animals will parallel gorge production. Higher throughput will occur from June December. January May will prove more challenging. Pork offers the most potential for year - round production, but most producers are very small in scale. Page 5

6 Alternative Energy and Waste Stream Solutions Utilize waste streams onsite to produce energy for facility needs o Evaluate best technology options to include anaerobic digestion and gasification o Design to include co-generation options (Recover heat for refrigeration requirements) o Avoid sending organic material offsite to the extent possible (Assist in CA State Cal Recycle and Air Resources Board goals for organic diversion from landfills) Consider co-location of additional small biomass to energy facility for conversion of local agriculture residue and forest biomass that would have been open burned as a disposal method to augment power needs and provide additional co-generation benefits o Would be eligible for SB1122 consideration o Could provide production of biochar as an additional output Design for modularity and throughput increases such as to take advantage of technological advances and increased refrigeration needs Incorporate Best Available Control Technology for all emissions sources Explore waste water filtration options (pre-sewer) for recovery of organic material for both digestion feedstock and as a commodity for landscape application Take advantage of Placer mpower program to finance PV Solar onsite as needed Possible backup option to utilize Sacramento Rendering if other options do not exist to dispose of or utilize waste stream Page 6

7 Plant Design Criteria Basic function is for both slaughter and cut and wrap of multi-species Design to meet USDA Processing Facility Health and Safety Standards and be a USDA Certified Facility with onsite inspection services Facility will not hold live animals awaiting processing beyond the minimum time required o Animals delivered same day or day before by the producer o Producer has secured a reservation and the facility has prepared for that number of animals to be processed that day o Producer owns the carcass and picks up after appropriate aging/cut and wrap Minimize need for offsite disposal of organic waste Maximize use of facility generated organic waste for onsite facility power requirements Consider an efficient U Shaped layout with one side for intake and slaughter and the other side for cut and wrap with refrigeration in the middle Incorporate modularity and potential throughput growth into initial design o Modularity to take advantage of technology breakthroughs and efficiency improvements o Plan for expansion in refrigeration requirements as throughput increases Utilize consultant such as Grandin Livestock Systems to design corral system to enhance humane animal treatment Potential services to be offered include: slaughter, boning, portion cutting, grinding, curing (ham), processed meat manufacture (jerky, snack sticks, bacon, sausage etc), and packaging services Another potential service would be slaughter only for halves, quarters, and primals. Page 7

8 Labor Requirements employees initially, could double with second shift; over time ancillary jobs in marketing, leather tanning, pet food, rendering, transport, restaurant sales and tourism could be created Required labor to include manager, butcher, plant personnel, bookkeeper/scheduler Placer County Subsidized Wage Program employers receive up to $10,500 for each eligible hire and first 30 days free; no limit to the number of new hires; prompt reimbursement of wages for up to six months; pre-screened applicants that meet specifications and needs; Work Opportunity Tax Credits may also be available. Sierra College or LHS Farm OJT training component to ensure pipeline of qualified labor, Employment Training Panel funding possible. Page 8

9 Regulatory Requirements Conditional Use Permit (CUP) required for Slaughterhouse per Placer County Code Slaughterhouse only allowed in Farm, Agricultural Exclusive or Industrial zoning CUP requires pre-development meeting, fees to county, CEQA compliance, and Planning Commission approval along with two presentations to the local MAC Building permit required Traffic Mitigation Fees required Traffic encroachment/road upgrades may be needed NPDES Permit may be required from RWQCB APCD permits needed for biomass or other alternative energy sources USDA Grant of Inspection required prior to USDA inspection services provided Page 9

10 Next Steps Secure USDA Rural Assistance Planning Grant to fund planning and creation of co-op Formation of Cooperative Ownership Agreement Set up bank account or treasury management Sale of Shares Securing of Loans Hire of Project Manager Search for and purchase of land RFP for Permitting/CEQA, Design, and Build Plant Marketing Hiring of Plant Manager and Staff Page 10