Creamery, city of Palmer vie for old Mat Maid buildings

PALMER — An old Palmer landmark could once again be bottling milk for Alaskans if the Division of Agriculture and city of Palmer give the go-ahead for Matanuska Creamery to move into an old Matanuska Maid building.

The move could also be part of a larger plan that includes an agricultural processing center and/or agro-tourism center in the heart of Palmer.

But the proposal is running headlong into a plan by the city to purchase the entire 8.3-acre Mat Maid block with up to $3 million in bond funds approved by city voters last October.

Under a plan presented to the Alaska Board of Agriculture and Conservation (BAC) at its May 5 meeting, Matanuska Creamery, located near Trunk Road on the Palmer-Wasilla Highway, would move its milk bottling, cheese and ice cream operation to the location between Dahlia and Dogwood avenues, east of South Colony Way, where Colonist farmers took their milk in the 1940s.

The milk processing facility closed in the 1960s when Mat Maid moved to Anchorage.

The old Mat Maid property constitutes the largest chunk — 3 acres — of the block, also occupied by Crowley Petroleum Distribution and six other smaller privately held parcels. The Mat Maid property is an asset of the Agricultural Revolving Loan Fund, part of the Division of Agriculture and controlled by the BAC.

The BAC postponed any action to allow its members the time to digest the proposal. No date was set for the next meeting.

The plan to move the creamery to Mat Maid’s old blow mold building is critical for Alaska’s agricultural industry, according to a 25-page proposal prepared by Alaska Manufacturing Extension Partnership Inc. (AMEP) titled “Saving the Alaskan Dairy Industry: Matanuska Creamery & Its Producers.” The building was used to make plastic milk jugs and was in use until Mat Maid closed in late 2007.

“This proposed move is, however, the last chance for the dairy industry to thrive before it completely collapses for decades to come,” the report contends. “Fortunately, there are many opportunities with moving into the new facility, opportunities in which the Alaska Dairy industry has never had before, and with the mindset of sustainable production in a growing market, the whole industry stands a lot to gain from this move.”

Karen Olson, Matanuska Creamery’s chief executive officer, insists the move to Palmer isn’t the only option for the creamery. But she said the business needs to leave its current location because high rent, lack of public water and sewer and other issues are hurting the business.

Olson said a planned unit development, similar to a rezone, is in the works and will be introduced at the city’s May 19 Planning and Zoning meeting, with an anticipated hearing at the June meeting.

City Manager Doug Griffin said the issue will likely be on the city council agenda in July for its first discussion.

Griffin said he sees two major areas of concern: the creamery’s hookup into the city wastewater treatment system and zoning. Griffin said the city needs to know what sort of discharge Matanuska Creamery would add to the sewer system and if the city’s treatment facility can handle the influx.

“We would have to have time to go through analysis about what would be accepted,” Griffin said.

Olson said the proteins from the milk would benefit the city’s system, feeding it beneficial bacteria.

While Griffin said the limited number of trucks hauling raw milk in and product out of the facility might not be a zoning issue, “It’s something the council will have to look at. It’s not totally incompatible.”

Griffin said the overarching concern is the creamery’s need to move soon. Olson said she’d like to be in a new location by the end of summer. Griffin said he cannot see the city’s planning process for the Mat Maid block to be far enough along for the creamery to move into the facility by the end of the year.

“It’s valuable property,” Griffin said. “It’s historic property. It’s going to take time.”

The proposal floated by AMEP on behalf of the creamery asks that a $1 per year lease be granted for multiple years. That won’t work for the city, says Deputy Mayor Richard Best. The city would want a paying tenant, if it acquires the property in the future.

“It would be different if it were for fair market value,” Best said.

Like Griffin, Best said he sees the process of procuring the property and determining its uses as one that cannot accommodate the creamery’s accelerated schedule.

“There’s so many different opportunities there,” Best said. Some of the notions suggested include a new city hall or borough office space, a museum or a conference center.

The ARLF is required to sell or lease the property at a price in the best interest of the state and/or to benefit agriculture. It was last offered in an over-the-counter for $975,000 in 2009, and drew no buyers.

Matanuska Creamery’s request for a $1 lease on the property would run counter to the city’s own effort to request a government-to-government transfer of property or a property exchange. Best said the city did not receive a grant of property at statehood, and some longtime Palmer residents say the dairy in their town was considered an eventual asset for the city, but the property wasn’t transferred. While the city hasn’t made an offer to buy the state-owned property, the city was at the May 5 BAC meeting to make sure the ag board understands its interest.

“We’d like to have a seat at the table,” Griffin said.

BAC Chairman Ben VanderWeele said once the board has a detailed proposal from the creamery, it will meet to consider whether to give weight to the city’s request or the Matanuska Creamery proposal.

VanderWeele said on one hand there is the urgency of a segment of the agricultural industry and on the other, the slow-moving wheels of a municipality, which would also like to acquire the land without financial outlay.

“The city council can’t decide what it wants to do,” VanderWeele said, adding that he is leaning toward helping agriculture. “But you can only help them so much.”

Olson said she is crunching some numbers on loans and other financial issues before submitting the detailed proposal to BAC.

Besides moving the creamery to the Mat Maid property, some have suggested it be part of an agricultural complex that includes a processing center for local vegetables, with possible lines to juice, blanche or flash freeze Alaska farm products, a retail center, and perhaps historic and educational exhibits and a farmers’ market.

Olson said she likes the concept of tying the creamery to other agricultural enterprises in the Palmer location. She said Matanuska Creamery is the obvious anchor for any effort that uses a mall-type concept of one large enterprise and many small enterprises in one location.

“We’re one of the few — if not only — year-round (agricultural) processor in the state,” Olson said. “If we’re going to get somewhere, let’s put all of this processing together.”

She said there’s also been some talk of a restaurant and other facilities to make the property a destination.

Both Griffin and Best insist they support agriculture in Palmer. Griffin said an agricultural hub would be keeping with Palmer’s history, bring in tourists and could generate some grant funding.

“It definitely deserves a look,” Griffin said.

The flip side is if the BAC grants the lease, all of the city’s plans, at least in the short run, would have to work around the creamery.

“You’re kind of tying up the heart of the property,” he said.

For the city, there’s no halfway effort, Best said. The city will acquire the entire block and move forward with a master plan, or it’s all off.

“It’s all or nothing,” Best said. “I think that’s the only way the property gets developed — if we have sole ownership of it.”

Olson said the creamery must move somewhere. There are three dairy farms left in the Valley and they cannot expand in an uncertain business climate, Olson said, and they must expand if the creamery is to meet demand and survive.

Olson said the dairy industry in Alaska was once producing 30 million pounds a year of milk. Today, market demand outstrips production.

“Now we struggle to do 6,” she said. “We could be selling 9 million (pounds). We’re just not meeting it.

“We are all in a quandary,” said Olson, a former dairy farmer. “People don’t understand what an economic driver this little company is.”

The AMEP report estimates the three dairy farms have about a $4.8 million impact on the Alaska economy, including the hay, grain and meat industries.

Olson said that while some may think the creamery is asking for too many financial concessions from the state, its farmers are still paying for bad decisions made by former BAC boards, including the precipitous closing of Mat Maid, which forced dairy farmers to dump their milk until Matanuska Creamery could come on line, and the low prices paid for milk under Mat Maid.

“The farmers have already paid for whatever’s happened in there,” she said of the facility.

According to the AMEP proposal, it would cost the creamery more than $300,000 to move, including about $200,000 in renovations to the old blow mold building. The creamery is requesting refinancing of existing loans and new loans from ARLF to cover those costs.