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Economic connection: Dairy...and garbage

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Economic connection: Dairy...and garbage
Perham Minnesota 222 2nd Avenue SE 56573

A stampede of dairy cattle could help accomplish what a roomful of county commissioners, city council members, and other government types have been unable to over the past three years:

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Push forward a plan to expand the solid waste incinerator in Perham.

Dairy cows, about 35,000 in Otter Tail alone, along with 300 dairy farmers and 100 or more employees of Bongards' Creameries are helping make a case for the proposed $9.8 million expansion of the Resource Recovery Facility.

Three representatives of the area's dairy sector appeared before the Otter Tail County Board Meeting August 19, held at the New York Mills county facility.

"There's a real demand for dairy processing. The state is about at capacity as far as processing facilities...in fact, we're exporting some milk for processing," said Clitherall area dairyman Ken Herbranson. "If the Perham Bongards' plant shut down, we would be in a world of hurt."

Who said agri-business has lost its clout and muscle in west central Minnesota?

Dairy, creamery, incinerator connection is textbook economics

The relationship between solid waste, the Perham Resource Recovery Facility, Bongards' Creameries and the dairy farmer is a textbook example of micro-economics.

Solid waste from several area counties is hauled to the Perham incinerator. The garbage is burned, which generates millions of pounds of steam. The steam is then sold to Bongards', which is a revenue source for the incinerator operation. Meanwhile, milk from central Minnesota dairy farms is hauled to Bongards', where it is processed into cheese and whey products--fueled in large part by the steam generated from our garbage.

Nobody is suggesting that Bongards' would shut down if the solid waste incinerator expansion didn't occur. However, with Bongards' planning to increase its production as much as 20 percent in the next two years, the creamery will most likely utilize any increase in steam the plant could generate.

Perham city makes another pitch for incinerator expansion

The dairy industry representatives were welcome allies for Perham city administrator Kelcey Klemm, who delivered what might have been a last-ditch attempt to sell the county on the expansion of the facility. At a meeting in late July, the county board went on record as opposing the expansion--based largely on concerns that taxpayers would be saddled with not only the solid waste incinerator's present debt of $9.1 million, but another $8 million in expansion costs.

Klemm proposed a complete refinancing of the entire debt, totalling about $17.8 million. The refinancing would actually save about $350,000, because of lower interest rates.

Under this proposal, Otter Tail County's portion of the debt would be $6.2 million. Wadena County's would be $1.8 million; Todd County's, $2.1 million; and Perham's about $891,000. The debt load is divided based on percentage of solid waste generated.

The remainder of the debt would be split among counties that would join the consortium--such as Becker, which has been very interested. Becker would generate about 10,000 tons of solid waste a year, and would assume about $3 million in debt. Other prospects include Clay, Cass and Hubbard Counties.

"Garbage Gap" needs to be closed to clear way for expansion

With the expansion, capacity at the incinerator would increase from the present 36,000 tons annually to as much as 62,000 tons. To cash flow the operation, there is a 10,000 ton "garbage gap." Somewhere, the Perham facility needs to draw another 10,000 tons--presumably from another county partner.

This "garbage gap" is one of the county commissioners' concerns with the expansion. Without firm solid waste contracts of about 55,000 tons a year, the numbers may not make sense.

Dairy sector impact another dimension to talks

The testimony from the dairy industry officials brought a new dimension to the discussion.

"I'm encouraged by what we heard today...and I was happy to hear Bongards' expression of commitment," said Commissioner Syd Nelson. "Processing plants are going by the wayside, and to have one remaining right in our county is wonderful."

"The plant has a very real impact on Otter Tail County," said Christa Schlosser, a field rep for Bongards'. "We buy milk from five co-ops, and virtually every dairy farmer in the region is affected by what happens in Perham."

The economic impact of one dairy cow is estimated at $15,000, noted Schlosser. About 2 million pounds of milk are shipped to Bongards' each day. About 500,000 of those are from the Perham Co-op alone, noted Perham Co-op Creameries' manager Dale Tellinghuisen, who represents about 305 members in Otter Tail and at least three other counties.

For all practical purposes, Bongards' is the only processing plant remaining in west central and northwest Minnesota. If dairy farmers had to ship their milk another 100 miles to a creamery, it would be another 80 cents per hundred-weight in out-of-pocket expenses, noted Tellinghuisen.

Dairy production in growth mode

Interestingly, despite all of the talk about the decline in agriculture, dairy is actually growing, contends Herbranson. There are three new dairy farm start-ups in Wadena County alone, he added. Farms are fewer, but larger, and milk production is perhaps higher than ever, said Herbranson, who has 500 cows at his Clitherall area operation.

"Most of us in the business are in a growth mindset," said Herbranson.

Based on a Bongards' survey, dairy farmers in the region are planning a 20 percent growth in production over the next five years, said Schlosser.

Bongards' is a major player in the incinerator discussions, said Schlosser.

For advocates of the Perham incinerator expansion, they need all the players they can get--major or minor.

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