Talk about a smooth deal.
The Commerce and Agriculture Departments recently awarded $1.3 million in federal aid to a local New York county to help start a new Greek yogurt factory in New York. No, the money didn't go to help a mom-and-pop shop or a small business.
Instead, one of the biggest beneficiaries was soft-drink giant PepsiCo, a multi-billion dollar American giant with plenty of its own money to fund its entrance into the yogurt market dominated today by brands like Dannon and Yoplait.
The aid package to the county economic development group included $1.1 million in incentives, as well $200,000 to help build a road to its new factory. The first part of construction on the Muller Quaker Dairy plant is scheduled to be completed in 2013.
For its generosity that helps a corporate giant, the Commerce and Agriculture Departments win this week's Golden Hammer, a distinction given by the Washington Guardian to the worst examples of government waste fraud and abuse.
The Commerce Department gave a $1 million Economic Development Administration grant to the Genesee Valley Agri-Business Park in western New York to help improve water infrastructure for several of the businesses. The money was so that Genesee County "can accommodate the growing needs of new and current business tenants."
But with the government facing a fiscal cliff, it begs the question: why didn't the companies just pay for it themselves?
"Pepsi’s a $66 billion company, they definitely have the money to make those improvements," said John Hart, spokesman for Oklahoma Senator Tom Coburn. Coburn highlighted the grants to develop the agriculture park as part of his annual "Wastebook" that identifies problematic spending from the federal government.
Steven Hyde, president of the Genesee County Economic Development Center, said he was dismayed the program made it into Coburn's Wastebook.
"We’ve been talking about those infrastructure improvements way before we even met PepsiCo," he said.
The money was given specifically to Genesee County to promote economic development. Hyde said the agriculture park was one of several ideas the county came up with to spur economic growth.
"It’s funding to our county to continue building out our infrastructure,” he said. "We’ve been fortunate to see companies like PepsiCo and Alpina coming in and making considerable investment."
The new yogurt plant is expected to add about 160 to 180 new jobs and the agriculture park total could add upwards of 1,500 new jobs. That could mean a five percent increase in employment for the county, Hyde said.
"We don’t consider that waste," he said.
PepsiCo also disagreed with Coburn's assessment.
"The finding in this report is not accurate," PepsiCo spokesman Scott Gilmore said of the project's inclusion in the seantor's Wastebook. "This grant was given to Genesee Valley Agri-Business Park in support of efforts by the GCEDC to strengthen and develop the Agri Park. The Agri Park is where PepsiCo and Theo Muller Group are in the process of building a manufacturing plant that will create approximately 180 jobs in the community.
A statement from the Commerce Department said the grant was designed to promote sustainable job growth.
"This particular EDA investment will help make critical infrastructure improvements to roadways and to the Genesee County aquifer system, which is publically-owned and can be used by a wide variety of businesses in the area," the Commerce Department said. "Without these improvements, the Genesee County water system would not be able to support the growth of current businesses in the region, or attract prospective businesses to the area. By expanding the availability of clean water and providing immediate access to the aquifer, both new and existing businesses now have the opportunity to expand, hire and boost the local economy."
But Hart said the money could have been put to better use improving the economy as opposed to helping the companies in the agriculture park get the infrastructure they need.
"Dr. Coburn doesn’t believe its wise to steal from 49 other states to provide corporate welfare to Pepsi in one state," he said. "Every dollar we spend on corporate welfare is a dollar we don’t have to spend on reparing a road or bridge.”
The aid package was supported by many New York politicians, including Sen. Charles Schumer, a Democrat. "This federal grant will literally pave the way to a booming Greek yogurt and food processing hub in Batavia,” the senator said in a press release. “This critical U.S. Department of Agriculture award will lay the foundation for major infrastructure upgrades, helping to sprout hundreds of new jobs in western New York."
The agriculture park also got $200,000 for a road to serve the increased traffic flow as more companies set up shop. It's part of the USDA's Rural Development Rural Business Enterprise Grant program, which Schumer's own press release said "provides grants to small and emerging rural businesses for certain qualifying projects."
Schumer's office did not return calls seeking comment.
Will the factory create new jobs? Probably. But with reported revenue of $66.5 billion in 2011, it's doubtful that PepsiCo needed the help.