State seeks plan to save slaughterhouse from knife

The fate of the state-owned Mount McKinley Meat and Sausage (MMM&S) plant in Palmer is still up in the air, but administrators at the Alaska Division of Agriculture said an effort to sell or lease the plant is likely this summer.

MMM&S operates a USDA inspected kill floor, which agriculture officials say is critical for Alaska's livestock industry. Over the past several years the plant has been owned by the Alaska Agriculture Revolving Loan Fund (ARLF) and operated by Alaska Correctional Industries (ACI), a division of the department of corrections that uses prison labor in several operations around the state.

Corrections officials announced several weeks ago that their department would save money by eliminating the costs of taking prisoners to the plant and guarding them there during the work day.

Cuts were made at corrections, and the agriculture division has been working to find a solution to keep the plant open. As this paper went to press, prison labor was still scheduled at the plant for next month, and officials were working to keep prison labor as an available option.

Agriculture officials say the plant was worth about $1.2 million two years ago, when the last effort to privatize failed. At that time, a minimum bid of $600,000 was set, and no serious offers came forward, according to agriculture division director Rob Wells.

Wells said the upcoming request for proposals (RFP) will likely be different -- last time around, the state was only interested in selling the plant.

"We don't know the details of the RFP, because we're just getting cranked up on it at this time, but it could be either a sale or a lease," Wells said.

Wells -- who has called the MMM&S dilemma the most complicated problem of his career -- was scheduled to meet with corrections officials today to discuss labor arrangements for the plant. The talks are meant to establish a template to keep prison labor available, if possible.

"So if somebody was thinking about using that labor, then they would know who to contact and how to pencil it in," Wells said.

Wells and farmers who raise livestock are concerned about the plant for two reasons. The plant is USDA inspected, so animals slaughtered there are legal for commercial sale and, also, the plant buys all the livestock that comes its way, so it provides the only avenue for recovery cost to dairy farmers.

MMM&S made its first ever profit of $6,600 last year. But the exit of Alaska Correctional Industries sent the agriculture division to Juneau looking for cash to keep the plant going. The division requested $300,000 from the state legislature. The request was funded, not from the state's general fund, but from ARLF itself.

ARLF currently has about $28 million in assets, according to Wells, who said most of that is loan accounts and property. The fund has about $6 million in cash assets, according to Wells.

Wells said Board of Agriculture members are concerned that if ARLF has to subsidize the division's operations, the fund's original mission -- that of backing loans to farmers -- could be in jeopardy.

The MMM&S problem also brings up fundamental questions about whether or not Alaska is willing to keep shrinking agriculture subsidies alive.

Agriculture and Conservation Board member James Drew of Fairbanks pointed out the state has subsidized any number of industries in the past, including petroleum and mining. Drew said the most likely slaughterhouse subsidy would be a low lease rate.

"With any industry, it's not uncommon to have subsidies during the difficult time of start-up," Drew said. In the past decade, the ARLF has put most of the state-sponsored Delta- and Point Mackenzie-area farms into private hands, according to Drew.

MMM&S had a difficult time surviving, primarily because livestock supply hasn't been there for the plant. But Alaskan herds are now growing, Drew said, and keeping the kill floor open is the only way to sustain that growth.

Drew also said he was hopeful that a new plan for MMM&S could be found that would gradually privatize the plant, but keep it open regularly.

"If we don't, then we really have no hope for the dairy and livestock industries in the state," Drew said. The kill floor at the plant was closed last month for maintenance. Wells said farmers were notified with mailings to minimize inconvenience.

Plant manager Frank Huffman said he's scheduled to start purchasing animals for slaughter again on June 3. Still, Huffman can't say how many months the kill floor will remain open, because he just doesn't have enough information yet.

"When someone tells me how much money we're going to get, then I can say how many months we'll be able to operate on that," Huffman said last week. If the plant itself is in limbo, so are Huffman and the three other MMM&S employees who train and supervise the prison laborers.

"We're all still here and waiting to see what happens," Huffman said.