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Agenda - 12-11-2007-3d
ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: December 11, 2007 Action Agenda Item No. ,3 SUBJECT: Final Feasibility Study Report for the Regional Value-Added Shared Use Food Processing Center DEPARTMENT: Economic Development PUBLIC HEARING: (Y/N) No ATTACHMENT(S): (Under Separate Cover) INFORMATION CONTACT: Feasibility Study Report Noah Ranells 245-2330 Willie Best 245-2300 PURPOSE: To present the final feasibility study report for the Regional Value Added Shared Use Processing Center. BACKGROUND: During the past few years, the local and regional farming community has evolved to meet local market opportunities. The tremendous increase in consumer interest in locally grown, healthy, nutritious, and fresh farm products has supported an increase in farmers selling at farmers' markets, direct to consumers, from farm stands, and through local co-ops and conventional grocers. In addition, there is strong interest from local school districts, universities, and hospitals to obtain locally grown or raised farm products. An oft-cited limitation to marketing local farm products is the lack of processing facilities. In 2005, the Orange County Board of County Commissioners appointed interested citizens and farmers to a working group that examined, among other concerns, the need and justification for a value-added, shared use processing facility. The report submitted by the Agricultural Center Work Group, presented to the Commissioners on May 25, 2006, contained a recommendation that the Board move to conduct a feasibility study for avalue-added, shared-use processing facility. In October of 2006, the BOCC Chair Jacobs sent a letter to neighboring counties (Alamance, Caswell, Chatham, Durham, & Person) and to local grocers (Weaver Street Market, & Whole Foods) offering the opportunity to partner with Orange County to conduct the feasibility study. County staff were invited to make presentations at neighboring various agricultural boards and county commissioner meetings. As a result, a strong partnership effort was created among Alamance, Chatham, Durham, & Orange counties, along with support from Weaver Street Market and Whole Foods to fund the $15,000 feasibility study. On April 24, 2007, the BOCC authorized staff to negotiate a contract with Smithson Mills, Inc., to commission a Feasibility Study for a Regional Value Added Shared Use Processing Center and a contract was signed. The major components of the feasibility study were 1) a survey of potential users, 2) site evaluation, and 3) governance of the center. An Advisory Group with diverse membership was formed and met twice to help guide the process. In addition, a meeting was held on November 27, 2007 for the consultant to present the report findings with commissioners representing each county, as well as one or two staff from each county. The contract was completed and a feasibility report presented to EDC staff on November 30, 2007. The feasibility study indicated a strong justification for creation of a regional value added shared use food processing center based on over 62 completed surveys as well as a strong "buy local" movement. Following an extremely thorough four-county search for a potential site, the consultant noted that the Orange County-owned, former Orange Enterprise building on Valley Forge Road in Hillsborough was the most desirable site to recommend for further consideration. At the November 27, 2007 meeting, commissioners from Alamance, Chatham, Durham, and Orange expressed their appreciation for the feasibility report and agreed to address the report at their respective commissioner meetings as well as the relevant advisory boards. It was also agreed that each respective county commissioner group would indicate their interest to proceed as part of a regional partnership to develop the center. Lastly, it was agreed that the regional partnership would consider hiring a project developer to steward the project through fundraising, facility renovation, equipment acquisition, and developing targeted programs for clients. An Executive Summary is available for review on pages 4 through 6 and includes 13 steps during the next 18 to 24 months, culminating with the hiring of an Executive Director to manage the center. FINANCIAL IMPACT: There is no financial cost incurred by accepting this report. RECOMMENDATION(S): The Manager recommends that the Board accept the report, consider scheduling a work session to discuss the findings of the Feasibility Study, and provide any feedback and further guidance to staff. Report on the Feasibility of Establishing a Regional Shared Use Food agricultural Processing Facility Serving ~-lamance, Chatham, urham and ®range Counties Prepared for the County Commissioners By Smithson Nlills November 2007 This Project Received Support Prom ~~ i /~~~~~ fit. - ~,,~'y "'i CHATHAhT CnTI~TY' yes. ~Y'l L~Nf I~ t M1 P <<~ gas°l` „~-..~.-r;,~--. Acknowledgements The author gratefully acknowledges the support of the following organizations and individuals: Alamance County Chatham County Orange County Durham County Weaver Street Market Whole Foods Markets Bill Lelekacs, NCDA&CS Property & Construction Division Mary Lou Surgi, Blue Ridge Food Ventures Chatham Marketplace Carolina Farm Stewardship Association Alamance Community College Rebecca Knight, Mars Hill College Ashley Reed, Mars Hill College 2 Table of Contents Executive Summary .............................................................................4 Section One: Introduction ...................................................................7 Section Two: Secondary Data and the Local Food and Agricultural Economy ...............................................................10 Section Three: Market Demand ................................................18 Section Four -Equipment ........................................................28 Section Five -Site Review ......................................................36 Section Six -Facility Design ....................................................43 Section Seven -Project Development Recommendations......48 Section Eight -Facility Management and Client Use Policies..51 Section Nine: Conclusion and Proposed Development Sequence ..................................................................................54 Appendix A: Survey Instrument Appendix B: Blue Ridge Food Ventures Client Use Forms and Policies Appendix C: Blue Ridge Food Ventures Operational Forms and Policies Appendix D: Resume, Gerry Cohn American Farmland Trust Executive Summary From June to November 2007, a feasibility study was conducted on establishment of a regional shared use food and agricultural processing center serving Alamance, Chatham, Durham, and Orange counties by Mr. Smithson Mills of Mars Hill College. Contracted deliverables included measuring community demand, identifying suitable physical sites for project development, and identifying organizations and individuals able to lead development of the project. Estimated overall cost of project development and ongoing operational costs after the facility is open for food processing were also determined. The four-county area has several positive characteristics for the development of a regional value added food and agricultural processing facility, including: • A strong entrepreneurial presence; • An existing local food production, distribution and sales system; • Awell-established "buy local" movement; • A culinary education program at the community college level; • A lack of available approved manufacturing space for entry-level food businesses; • Measured strong demand from potential facility clients. Over a three month period, 62 valid surveys were returned from small businesses and individuals wishing to commercially manufacture food products at a shared use facility. These include farm-based producers, restaurateurs, caterers, and food entrepreneurs manufacturing shelf stable foods for wholesale distribution. The quantity and quality of the survey responses indicates that the region has sufficient demand for development of a regional facility with a wide range of food processing equipment and that is scalable for future expansion. Business development support and education, especially training in starting afood-based business, developing business plans, and meeting food safety requirements, are needed components of a shared use facility. Based on survey responses, client use at the facility is estimated at 142 production hours per week after the end of the first year of operation. On a 50-week basis and at an average use fee of $22 per hour, the facility maybe able to generate more than $150,000 in fees in its second or third year of operation. In the same timeframe, gross income for clients manufacturing at the facility should range between $800,000 and $1.2 million per year. Survey responses show demand for the most commonly used equipment found in regional shared use food processing centers throughout the country. Equipment needed for first phase acquisition is listed and priced at $354,756. This cost may be substantially reduced with donated equipment from area supermarkets and restaurants. Sixteen farm-based local meat producers requested value added meat processing at a shared use facility. Because regulatory oversight for meat processing is quite demanding 4 the project should move cautiously towards limited value added meat processing only after opening the facility for FDA and county health inspected processes. This will allow. the facility to establish management policies and begin to interact with regulatory officials before "jumping in" to the much more stringent meat regulatory environment. A building located at 500 Valley Forge Road in Hillsborough is recommended as the site for project development. This 10,400 sq.ft. metal structure meets all criteria for project development, including ample utilities, a loading dock, offices, and adherence to modern building codes. Most importantly, it is owned by the county and the potential for low cost acquisition is a real possibility. No other public or nonprofit-owned building in the four- county area was identified that could host this project. A proposed facility floor plan is presented in this report with a facility renovation cost estimate of $401,940. With confirmed community demand and the identification of a viable location, the researcher recommends that stakeholders move forward with project development immediately. A project developer is recommended to lead efforts until the facility opens for entrepreneurial development. This individual will be responsible for overseeing every part of the development phase, including fundraising, facility renovation, equipment acquisition, and developing targeted~programs for clients. A strong candidate for this position is Mr. Gerry Cohn, Southeast Regional Director for the American Farmland Trust (AFT). Development of this project by AFT will ensure that farm-based producers are served in their efforts to produce locally grown value- added products, and will allow AFT to pursue an innovative grass-roots strategy to increase the economic viability of small farms in the four-county region. As a nonprofit organization, in certain cases AFT can serve as a fiscal agent during the fundraising and construction period. A reasonable rate for project management compensation is in the range of 10% ofpre-opening development costs. After opening for business, the project will require the services of a highly qualified executive director. This individual should be hired before the doors open and have significant experience in food processing as well as strong interpersonal skills. The project will rely heavily on support from existing service providers, including cooperative extension, small business centers, and the ACC culinary program. Estimated base annual operating cost for this facility, including salaries, utilities and maintenance, is $121,905. Annual equipment acquisition is recommended at $50,000 per year. A nonprofit agency is recommended to own the project and oversee staff and program development after opening. The board of this organization should include representation from all key stakeholders, including appointees from participating county commissions and producer representatives. The board should support funding development and general project oversight, with daily management authority allocated to the executive director. Upon conclusion of this feasibility study, project stakeholders are encouraged to pursue the following action items over the development period, estimated at 18 to 24 months: 1. Formally allocate the former Orange Enterprises building for development of a regional value-added food and agricultural processing facility; 2. Pass resolutions for formal commitments to project participation by county commissions in Alamance, Chatham, Durham, and Orange counties; 3. Pursue initial grant funding to secure the services.of the lead project developer; 4. Contract with the lead project developer for services; 5. Continue pursuing grant funds necessary to complete facility renovations and equipment acquisition and installation; 6. Upon securing facility renovation funds, hire an architect to develop blueprints and oversee bidding for construction services from a general contractor; 7. Working with county commissions and the community advisory committee develop plans for creation of a nonprofit management entity to own and oversee operations of the project; 8. File articles of incorporation and approve board members and bylaws for the management entity; 9. Oversee the bid process and contract award for a general contractor to undertake facility renovations and improvements; 10. Acquire phase one equipment needed for opening; 11. Establish a $1/yr lease agreement for the facility between the county and the management entity, active upon securing the certificate of occupancy or on opening for business; 12. Secure start-up funds for hiring an executive director of the management entity; 13. Hire an executive director between 3 and 6 months before the facility is open for business. Total development costs over a three year period are estimated at $1,172,000, with project income estimated at $275,000. After the third year of operations, the project should approach or achieve current-account break-even status. Finally, stakeholders are encouraged to continue working together to ensure the project is developed as a truly regional project, enlisting support across political jurisdictions and defined service areas. Projects of this scale should serve clients from within a 75 mile radius; economically speaking, county lines and city limits should not become barriers to developing a truly regional value added food and agricultural processing center. 6 Section One: Introduction I. Background In February 2006, the lead researcher and author of this report gave a presentation at the Orange County Agricultural Summit on the development of shared use food and agricultural facilities in North Carolina, with particular focus on the development of Blue Ridge Food Ventures, a regional shared use facility that opened that same month in Asheville. Following this presentation, Orange County economic development personnel began discussions with Mills on the process of establishing a similar facility in the region west of Research Triangle Park. Over the next 12 to 15 months, a consortium of funders (including county commissions from Orange, Alamance, Durham, and Chatham Counties, as well as Weaver Street Market and Whole Foods Market) allocated resources necessary to conduct a feasibility study on developing such a facility in a four county region including Orange, Alamance, Durham, and Chatham. In May 2007, Orange County entered into a contract with Smithson Mills to lead the feasibility study over a six month period, with a final report on findings to be submitted by October 31, 2006. The terms of the grant funded period and the length of the contract were subsequently extended to November 30, 2007. As lead researcher for this project, Mr. Mills worked closely with economic developers and agricultural extension personnel in the region, as well as personnel in the North Carolina Department of Agriculture & Consumer Services' Property and Construction Division. Additional research support was provided by individuals and organizations in the regional food and agricultural economy. II. Scope of Services Mills was contracted to lead a feasibility study that would address each of the following items: 1) Provide third-parry verification of research methodologies and analysis of primary data gathered by participating counties, including potential client surveys and market surveys. 2) Identify production lines that respond to the documented need/desire to produce given products. 3) Provide guidance on legal organization structure such as incorporation, acquisition of product liability and personal injury insurance. 4) Establish protocols for client management, including recommended facility use policies, proper interface with regulatory agencies including the county health inspectors and NCDA Food & Drug inspection, and provide guidance on the 7 viability of limited meat processing under USDA or NCDA certification. Recommendations would also include storage fees and production fees. 5) Identify all costs associated with facility operations (not including facility development costs), with a recommended plan for achieving current-account break-even. 6) Review proposed facility layout and design, including cold and dry storage and food production segregation. 7) Provide estimates of total cost of facility build-out and equipment acquisition. 8) Provide final feasibility study organization and presentation in the manner and frequency and to the entities requested by the County. 9) Conduct three area visits and interviews with community partners. 10) Instruct participating counties on conducting area publicity, primary data gathering, and organization of meeting and visits with potential project collaborators. ITI. Report Layout This report focuses on outcomes derived from executing the scope of services outlined above. Section Two examines secondary data pertaining to the four-county region, and identifies essential support services and aspects of the local food and agricultural economy that may contribute to the positive development of the project. Section Three reviews results of a community wide survey of potential users of a shared use food processing facility and determines the viability of such a project based on measured community demand. Section Four analyzes survey results to recommend food processing and handling equipment needed for identified potential user profiles to succeed in expanding or starting value added food businesses at a shared use food processing facility. Estimates of equipment acquisition costs are presented. Section Five reviews site selection in the four county area and makes recommendations for optimal sites. Section Six presents a proposed facility design and floor layout for a shared use food and agricultural processing facility in a 10,000 sq. ft. building located in Hillsborough. Estimates of potential fixed-asset facility renovation costs are discussed. 8 Section Seven reviews potential site development processes and recommends options for lead agency development and project oversight. Estimated project development oversight costs are presented. Section Eight provides recommendations for facility management and client use policies after the development phase is complete and the facility is open for entrepreneurial development. Estimated post-opening project management costs are discussed. Section Nine summarizes study fmdings and recommends next steps for project development following conclusion of the feasibility study. The appendices of this report include the primary research survey instrument, examples of client use forms, examples of facility management forms, and the resume of a candidate for project development. Finally, a case study on the development of Blue Ridge Food Ventures prepared in February 2007 for the North Carolina Rural Economic Development Center is included in the fmal appendix. 9 Section Two: Secondary Data and the Local Food and Agricultural Economy The research region has a wide range of services and organizations, as well as positive economic and social trends, that bode well for the development of a regional value added food and agricultural processing facility. I. General Demographics The region encompassing Alamance, Chatham, Durham, and Orange counties had a population estimated at 569,709 in 2006. Durham is by far the largest and most urban in nature, with 246,896 people, followed by Alamance (142,661), Orange (120,100), and Chatham (60,052). Select demographics for each county are presented in the following tables:l Table: Durham County Population Population 2006 ~ 246,896 Population Density 2000 768 Percent Population Change 1990-2000 22.8% Median Age 32.2 Percent Born in NC 54.8% Income and Poverty Median Household Income 2000 $43,337 Per Capita Income 2000 $23,156 Population in Poverty 2000 28,557 Poverty Rate 2000 13.4% Education Percent with Less Than High School 17.0% Education Percent with High School Diploma 19.2% Percent with Bachelor's Degree or Higher 40.1 % Graduation Rate 68.8% Labor Force and Employment Percent Working Age Population 67.4% Unemployment Rate 2006 3.9% Agriculture and Natural Resources 1 Source: North Carolina Rural Economic Development Center 10 Total Agricultural Receipts $7,329,000 Total Farms 2002 238 Percent Family Owned Farms 96.6% Average Farm Size 2002 109 Tobacco Dependency Ranking Low Table: Alamance County Population Population 2006 142,661 Population Density 2000 303 Percent Population Change 1990-2000 20.9% Median Age 36.3 Percent Born in NC 69.9% Income and Poverty Median Household Income 2000 $39,168 Per Capita Income 2000 $19,391 Population in Poverty 2000 14,183 Poverty Rate 2000 11.1 % . Education Percent with Less Than High School Education 23.5% Percent with High School Diploma 31.2% Percent with Bachelor's Degree or Higher 19.2% Graduation Rate 66.7% Labor Force and Employment Percent Working Age Population 62.1% Unemployment Rate 2006 5.5% Agriculture and Natural Resources Total Agricultural Receipts $36,038,000 Total Farms 2002 831 Average Farm Size 2002 117 Tobacco Dependency Ranking Medium Table: Orange County Population Population 2006 120,100 Population Density 2000 295 11 Percent Population Change 1990-2000 26.0% _ Median Age 30.4 Percent Born in NC 46.4% _. ~~~. Income and Poverty Median Household Income 2000 $42,372 Per Capita Income 2000 $24,873 Population in Poverty 2000 15,318 Poverty Rate 2000 14.1 % Education Percent with Less Than High School Education 12.4% Percent with High School Diploma 15.9% Percent with Bachelor's Degree or Higher 51.5% Graduation Rate 81.1% Labor Force and Employment Percent Working Age Population 71.3% Unemployment Rate 2006 3.3% Agriculture and Natural Resources Total Agricultural Receipts $29,199,000 Total Farms 2002 627 Percent Family Owned Farms 90.6% Average Farm Size 2002 113 Tobacco Dependency Ranking Low Table: Chatham County Population Population 2006 60,052 Population Density 2000 72 Percent Population Change 1990-2000 27.3% Median Age 38.8 Percent Born in NC 62.7% - -- ---- Income and Poverty Median Household Income 2000 $42,851 Per Capita Income 2000 $23,355 Population in Poverty 2000 4,723 Poverty Rate 2000 9.7% Education 12 Percent with Less Than High School Education 22.1 % Percent with High School Diploma 26.7% .Percent with Bachelor's Degree or Higher 27.6% Graduation Rate 67.1% Labor Force and Employment Percent Working Age Population 62.3% Unemployment Rate 2006 3.9% Agriculture'and Natural Resources Total Agricultural Receipts $134,480,000 Total Farms 2002 1,128 Percent Family Owned Farms 94.7% Average Farm Size 2002 105 Tobacco Dependency Ranking Low The region recorded 2,824 farms in 2002, with an average farm size of between 105 and 110 acres. Over 90% of those are classified as family farms. The largest number of farms are found in Chatham (1,128), followed by Alamance (831), Orange (627), and Durham (238). The region enjoys several strong locally managed farmers markets operating during the growing season in Hillsborough (Wednesdays and Saturdays), Carrboro (Wednesdays and Saturdays), Chapel Hill (Thursdays), Fearrington Village (Tuesdays), Pittsboro (Thursdays), Durham (Saturdays- year round), and Burlington (Thursdays. and Saturdays). The region is situated between two of the state-run farmers markets, in Raleigh and Greensboro. While the number of farms in a given area is not necessarily an indicator of viability for projects of this type, the documented existence of such farms, coupled with the existence of a healthy direct-to-consumer market for locally grown foods, does indicate that several farm-based producers- should have an interest invalue-adding their production to extend seasons or access new markets. This was borne out in the results from the survey respondents. II. Local Support and Infrastructure The clients for this research formed a community advisory committee to provide input and guidance to the researchers. Noah Ranells, agricultural developer for Orange County Economic Development Commission, convened the first meeting of the advisory committee on June 6~' at the Orange County office of the N.C. Cooperative Extension Service. The following individuals were invited to discuss the feasibility study and understand the process that would be undertaken: 13 Fletcher Barber, Director Rett Davis, Director Orange County Center Alamance County Center N.C. Cooperative Extension Service N.C. Cooperative Extension Service Mike Lanier, Agent Judy Lessler Orange County Center Carolina Farm Stewardship Association N.C. Cooperative Extension Service Roger Cobb, Agent Kelly May Alamance County Office Alamance County Chamber of Commerce N.C. Cooperative Extension Service Barry Jacobs Sheila Neal, Director* Orange County Commissioner Carrboro Farmers Market Erin Kauffinan, Director Noah Ranells, Agricultural Developer Durham Farmers Market Orange County Economic Development Commission Paul Walker, Agent Dianne Reid, Director* Alamance County Center Chatham County Economic Development N.C. Cooperative Extension Service Commission Marti Day Andrea Reusing, Owner/Chef* Area Extension Agent, Dairy Lantern N.C. Cooperative Extension Service Nick Didow Scott Rockafellow Kenan-Flagler School of Business NC Small Business Technology & University of North Carolina at Chapel Hill Development Center Sam Groce Mac Williams, Director* Chatham County Center Alamance County Chamber of Commerce N.C. Cooperative Extension Service Bill Lelekacs, Engineer Glenn Woolard* Property & Construction Division Chatham County Center NC Department of Agriculture & Consumer N.C. Cooperative Extension Service Services Jesse White Debbie Roos, Agent* Office of Economic & Business Chatham County Center Development N.C. Cooperative Extension Service UNC-Cha el Hill Ruffin Slater, CEO* Dan Thomas, Chapel Hill Store Manager* Weaver Street Market Whole Foods Market Bo Carson* Amy Turnquist* Research Triangle Partnership Sage & Swift ??? Conner* Eddie Culberson* Durham Chamber of Commerce Durham Soil & Water Conservation District Dub Gulley, Director* Small Business Center Durham Technical Community College 14 * Indicates not in attendance Over the following month, some other service providers were contacted to also help support the project, especially in disseminating a potential users' survey. These include the following individuals: Milele Archibald, Director Doris Schomberg, Director Small Business Center Culinary Program Alamance Community Colle e Alamance Cornmuni College John Parker Penny Hawkins, Owner/Chef Good Work The Carolina Gourmet The members of the advisory committee represent a broad cross-section of agricultural and business service providers located throughout the four-county region, culinary professionals, directors of two area farmers markets, and chief officers of two of the largest local food retail outlets. The level of involvement from the community speaks well of this project's inclusiveness, as well as the success in soliciting for surveys from community members who might be interested in accessing a shared use food processing center. The region has a remarkably strong, diversified economy, as well as a strong food infrastructure that is willing and able to support local value added food production. Two major food retailers in the natural/local food market were active participants and provided monetary support for the feasibility study. Decision makers at Whole Foods Markets and Weaver Street Market expressed strong interest in sourcing products from local food entrepreneurs and farms manufacturing at a value added food processing center. Dan Thomas, the market manager of the Chapel Hill Whole Foods, met with the lead researcher and was enthusiastic about sourcing high quality value added food items made locally. Weaver Street Market assisted the project by giving researchers their local vendor list. Over 100 Weaver Street vendors were mailed a potential users survey. Other retail outlets including the new Chatham Marketplace in Pittsboro, and a planned locally owned supermarket in Burlington, expressed interest in the project and assisted in disseminating. surveys to potential users. Area restaurants owners, most notably Andrea Reusing of Chapel Hill's Lantern Restaurant, actively promoted the feasibility study through word of mouth and informing other independent restaurants of the project. Geographically, the four counties are not a distinct social or economic area. They are instead a part of a much larger, mostly urban region usually identified with Research Triangle Park (RTP), one of the largest high technology business parks in the country and located in eastern Durham and western Wake counties. Raleigh, located just to the west of RTP, is the state capital and the second largest city in the state. The North Carolina Rural Economic Development Center reports that Wake County had a population of 786,522 in 2006. 15 Toward the west is the area usually referred to as the Piedmont Triad Region, which includes the cities of Greensboro, Winston-Salem, and High Point. Alamance County is often associated with the eastern edge of this small megalopolis, but is in many ways characterized as the point where the "Triangle" meets the "Triad." Guilford County, just west of Alamance, had a population of 451,905 in 2006. Within a fifty mile radius of Chapel Hill, there are an estimated 1.8 million people. w ~~ ' ' Fiurli _ - tO , 21 - - -- -- - ~ Carr } b - - 2 5 ~'', t .~ Rc " .l ~ Unton Rtd c a i , 57 86 t , J Attamahati I ~ g ~ Caidwell,:_ 1 c ~ r slpee; . 6 e' 49 a Burlington r i2 a ;; 7 1 Cedar Gro~ie Schley i o R ~ N j y~ 26 .a ~ E iE(Qn , Rave ~~. a GiYel ?Q ~s ~.-. ~ F dJleban e ~ ~ Ise e ID 7: , ® Etiandl ~ Hi~ISborou$h ~ j~~ c on[ I 18ttatna ~~~,,~f.R~sterrt r.~~~ 2stot~r IBttt(ie agtr;~1,~. i~t•J 1:~ ~i ~~ a G aham~~~ n~~u~ 2 5wensnnvllle ' ~t ALAMA`NC E ~- 3_~~ _"t~: ,z; P~ 2u Chapel Hill ~° . 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A 61er 3 Hls;h~Feils_ op~~ ~ __ ~ : ~ North Carolina Highway Map (close-up of four-county area), 2007 The area enjoys a highly developed transportation system. The most important transportation arteries are Interstate 40 and Interstate 85. Interstate 40 is one of the nation's most important east-west highways, running all the way from Wilmington, NC to Barstow, CA. Interstate 85 is a major north-south transportation route for the nation's 16 East Coast. In North Carolina, I-85 is the major connector between Raleigh and Charlotte, the state's two largest cities. Interstates 40 and 85 merge in Orange County near Hillsborough and run together westward through Alamance County. Another important part of the region's infrastructure is the presence of several large colleges and universities. The University of North Carolina's flagship campus is located in Orange County's Chapel Hill, with a student population in 2006 of approximately 27,700 and a faculty population of 3,200. Duke University, located in Durham, had a 2006 student population of 12,824 and a faculty population of 2,664. In Alamance County, Elon University had a 2006 student enrollment of 5,230 and 291 full time faculty. Through working with faculty and students, these campuses may be ready venues for sales of specific food items manufactured in a shared use facility. The area is also home to three campuses of the state's community college system: Alamance Community College in Graham; Durham Technical Community College in Durham; and Central Carolina Community College's Pittsboro Campus. Alamance Community College's Culinary Technology program is a potentially important community asset for the development of a shared use food and agricultural processing facility. Chef Doris Schoenberg, Department Chair, was an active. participant in meetings during the feasibility study and has expressed a keen interest in steering her students to such a facility. 17 Section Three: Market Demand This section reviews results of a community wide survey of potential users of a shared use food processing facility and determines the viability of such a project based on measured community demand. A key component of this study was assessment of local market demand, defined as a measurable need or wish on the part of prospective clients to use ashared-use food and agricultural processing facility. Several characteristics of the region, coupled with results of a community survey of prospective facility users, indicate that there will be sufficient demand to support and justify the development of a shared-use facility in the four-county region: • A strong entrepreneurial presence; • An existing local food production, distribution and sales system that includes small farms and food entrepreneurs; • Awell-established "buy local" movement that supports local producers at direct retail establishments, supermarkets, and restaurants; • A culinary education program at the community college level; • A lack of available approved manufacturing space for entry-level food businesses; • Measured strong demand from potential facility clients. When compared to other communities where shared use food and agricultural facilities have succeeded, the four-county region of this study has stronger positive characteristics than any other area that the lead researcher is aware of. I. Methods Market demand was primarily measured through the use of a potential user's survey, which profiled prospective users according to selected characteristics and documented potential facility usage, including equipment needed and hours of anticipated use.. The survey instrument (Attachment A) was titled "Piedmont Regional Value Added Shared Use Food Processing Center 2007 Needs Survey for Prospective Users," and. was based on an instrument presented in the publication Establishing ashared-Use Commercial gitchen, authored by Dr. Cameron Wold and used in feasibility studies throughout the country. From early June to early September, the survey instrument was widely distributed by members of the community advisory committee through direct mail and email, and was publicized in regional media outlets including the Triad Business Journal, the Chapel Hill News, the Carrboro Citizen, the Chapel Hill Herald, the Durham Herald-Sun, and the North Carolina Department of Agriculture and Consumer Services' Agriculture Review. Area retailers, including Chatham Marketplace and Weaver Street Markets, assisted in having surveys sent to local vendors. The Alamance and Orange Centers of the NC Cooperative Extension Service mailed surveys to prospective users and/or identified potential users from lists supplied by their respective county environmental health inspectors. The Carolina Farm Stewardship Association, a nonprofit organization based 18 in Pittsboro, distributed the survey via emails to its members. Additionally, a list of licensed meat handlers in the region was accessed from NCDA&CS, and these businesses and individuals were mailed surveys to their listed addresses. II. Survey Results A total of 67 surveys were returned to researchers within a timeframe of just over 3 months. Of that number, 2 surveys were determined to be invalid due to no contact information being supplied. Two other surveys showed respondents reporting that they would not use a facility if it were available in their region, and another survey respondent wanted to use a facility for slaughtering poultry (a use for which shared use food processing facilities are not designed): Researchers classified the remaining 62 completed surveys into 3 tiers, with tier one respondents being deemed highly likely to make use of a shared use facility, tier two respondents being somewhat likely to make use of the facility, and tier three respondents being least likely to make use of the facility. Tier designations were based on respondent's thoroughness in completing the survey, their expressed levels of intent to use the facility, their specific stage of business preparedness, and specific production activity. Twenty four respondents were identified as tier one potential facility users, followed by 20 tier two potential users, and 18 tier three potential users. Responses to some of.the most important questions in the survey are discussed below, with questions pertaining to equipment needs discussed in Section Four: Equipment. Respondents were given a list of business types to choose from to describe their activities, and were allowed to select all that applied to their business operations. The identified business activities were as follows: 19 Question 1: Indicate your current business activity, how long you have been in S ecialty/Gourmet Food Producer 3 (7%) Church/School /Civic Grou 1 (2% Caterer 3 (7%) Restaurateur 1 (2%) Other. 3 (7%) Farmer, Ve etable and Fruit 10 (31 %) Farmer, Livestock & Poult 10 (31 %) Farmer, Value Added Meats 2 (6%) Farmer, Value Added Non-Meat 0 S ecialty/Gourmet Food Producer 4 (12%) Church/School /Civic Grou 1 (2%) Caterer 1 (2%) Restaurateur 1 (2%) Other 3 (9%) Farmer, Ve etable and Fruit 34 (30% Farmer, Livestock & Poult 24 (21%) ' Farmer, Value Added Meats 7 (6% Farmer, Value Added Non-Meat 7 (6%) S ecialty/Gourmet Food Producer 11 (10%) Church/School /Civic Grou 2 (2%) Caterer 10 (9%) Restaurateur 10 (9%) Other 9 (8%) Well over fifty percent of all business types selected involved farming of some type, with the most common selection being "farmer, vegetable and fruit." Most respondents who selected farming as their business operation also selected more than one type of farming. Among tier one respondents, 44% of selections were for some type of farming, with 19% being restaurateurs, 16% being specialty/gourmet food producers, and 14% being caterers. Eleven of 24 tier one respondents chose some type of farming as their business type, followed by 15 of 20 tier two respondents and 13 of 18 tier three respondents. Tier one respondents were more heavily represented by restaurateurs, gourmet food producers and caterers then was found among all respondents. This was because many of these business types exhibited a greater degree of understanding of the use of a shared use food processing center than other business types, and exhibited a stronger interest in using the facility on a weekly or ongoing basis. Many farmers in tiers two and three said they would only use a facility occasionally or seasonally for a few hours each year. 20 Only 7 of the 62 valid surveys were from individuals or organizations that were purely in the planning stage of their business, with 55 respondents currently engaged in some form of food or agricultural production. Many identified farm-based producers indicated planning for expanded business activities including gourmet food production, catering, and value added meat and non-meat processing. Question 2: What food item(s) are you now or would you be interested in re arin ? e®e o e s Bakery Items 23 9 14 Catered Meals 11 9 2 Sauces/Salsa/Condiments 30 11 19 JamslJellies 16 4 12 Pasta 5 2 3 D Mixes 9 3 6 Herbal su lements 7 2 5 Value-added fruits/ve etables 15 3 12 Chutney 4 1 3 D' 7 4 3 Beef 12 5 7 Poul 16 6 10 Pork 13 6 7 Seafood 5 3 2 Other- not s ecified 1 1 Other- pesto 1 1 Other- chocolates 1 1 Other- cre a fillip s 1 1 Other- herbal teas 1 1 Other- hone 1 1 Other-lamb 1 1 Other-.wild ame 1 1 Other- sous 1 1 Other- recooked meals 1 1 Other- oat 1 1 Other - ravens 1 1 Other -flour 1 1 Respondents identified 74 types of food products that they are currently producing, and 112 foods that they are interested in preparing. Most food preparation types listed are under the regulatory jurisdiction of the FDA and the NCDA&CS Food & Drug Safety Division. However, 16 farmers indicated a desire for value-added meat processing. This type of activity is regulated by the US Department of Agriculture and the NCDA&CS Meat & Poultry Inspection Division. Eleven respondents indicated a desire to prepare catered meals, which is under the jurisdiction of county-level environmental health departments. Regulatory issues are discussed in Section Eight: Recommendations for Facility Management. 21 Question 3: What facilities or services are you currently using to meet your food processing needs (e.g., church kitchen, rental kitchen, restaurant, home kitchen)? From question 3, we see that 21 of the 62 respondents said they are not currently processing. This indicates that not more than 41 of the total respondents are currently engaged in value added food & agricultural processing. Of those who are processing, 20 indicated their production space as their home kitchen. These respondents may not be in compliance with state and federal regulations pertaining to food manufactured for wholesale or direct retail. Six of the seven respondents who said they are using a co- packer indicated they were having locally grown animals processed for meat. Rental Kitchen: 1 Restaurant: 11 Home Kitchen: 20 Co-packer: 7 Not Currently Processing: 21 Other: Client's kitchens Other: Has 800 sq.ft commercial kitchen Other: catering service Other: On-site preparation Other: ofFice dehydrator Other: commercial kitchen bakery Other: mill & blending plant Question 5: Are you interested in buying locally-grown ingredients for your business? Yes: 43 No: 14 Many respondents to question 5 indicated that they are active participants in the area's local food movement and will source locally-grown ingredients for their value added food products. Several respondents indicated that price and availability would be important factors in whether or not they will source locally. Estimated Facility Usage Respondents varied widely in their responses to questions pertaining to their estimated usage of a shared use food & agricultural processing facility. Only 45 of 62 valid respondents gave any clear indication of hourly usage. In some cases, for purposes of analysis, responses were pro-rated to a weekly basis, such as when a respondent wrote "10 hours each month," the response was interpreted as 120 hours per year, equaling 2.4 hours per week in a 50 week work year. In order to more accurately gauge potential weekly usage, the researcher has weighted responses according to whether they are from tier one, two, or three. Under even the best of circumstances, hourly use and participation by potential clients will be far lower than 22 what is reported on a written survey. The sum of tier one hourly use estimates is weighted by multiplying the sum by SO%. Tier two usage amounts are multiplied by 2S%, and tier three usage is multiplied by 10%. Nineteen tier one respondents reported they would use a facility 169 hours per week, nineteen tier two respondents reported they would use a facility 192 hours per week, and seven tier three respondents reported they would use it 103 hours per week. Using the formula explained above we have the following estimate: Question 7: How many times and hours per week might you be interested in using this facility? Weighted results. Reported Use/Week Weighting Formula Total Estimate Tier One 169 X SO% 84.5 Tier Two 192 X 2S% 48 Tier Three 103 X 10% 10.3 Total 142.8 Among existing shared use food processing centers in North Carolina and nationwide, a common hourly use fee is $22 per hour for actual food manufacturing hours, not including hours spent packing jars in boxes or applying labels. Based on survey responses, and using an average of 142.8 hours of weekly usage, and with a standard fee of $22 per hour, the facility can estimate an annual use fee income at $156,200. Question 8: Are you interested in using a facility for long term or short term storage? If yes, please describe duration, volumes, and type of product needing storage: Twenty-eight respondents answered that they would need long term or short term storage. Several indicated they would like long-term storage for locally grown frozen meats. Yes: Meat: 7 Yes, general: 17 Yes: frozen fruit Yes: frozen filled pasta Yes: freezer Yes: ice cream No: 1 S Question 10: What typ e of a business are you planning to run? Part Time 11 Non-profit 4 Hobby/Gifts 1 Full-Time 3S Supplementallncome 19 Other: Expansion of current full time business Other Agritourism on-site sales and seminars 23 Estimated Sales Goals Survey respondents were asked "What is your annual sales goal for products manufactured at a shared-use facility?" Only 38 of 62 respondents answered this question, with several saying it was difficult to give an estimate. Fourteen tier one respondents reported an aggregate annual sales goal of $616,000. Seventeen tier two respondents reported an aggregate sales goal of $1,870,000. Finally, seven tier three respondents reported $165,000 in annual sales. Using the same weighting formula for sales goals as used for hourly usage gives the following output value estimate: Question 11: What is your annual sales goal for products manufactured at a shared- use facility? Tier One $616,000 X 50% $308,000 Tier Two $1,870,000 X 25% $467,500 Tier Three $165,000 X 10% $16,500 Total $792,000 In order of value, the 38 respondents answered as follows: 1,000 (2) 2,000 (1) 5,000 (3) 6,000 (2) 10,000 (8) 15,000 (3) 20,000 (4) 30,000 (1) 35,000.(1) 50,000 (5) 60,000 (1) 90,000 (1) 100,000 (3) 150,000 (1) 500,000 (1) 1,000,000 (1) The median estimated annual production value, where half of respondents reported less and half reported more, is between $15,000 and $20,000 per year and is in line with experiences at other shared use facilities in the country. 24 Question 13: Do you have a business plan? Yes: 27 No: 28 Of 55 respondents to this question just under 50% said they have a business plan. Those clients accessing ashared-use facility may benefit from business planning assistance. Question 14: Would you be interested in sharing services in addition to the food nrocessin~ facilities? Phone answering 14 Personal com uter 12 Food brokering and sales 20 Secretarial 7 Posta e meters 10 Co machine 21 Offices ace 11 Fax 14 Highs eed internet 13 Marketing website 25 Shi in 18 Retail consignment store 20 Other: Gra hic desi er 1 Other: Bookkeeping service 1 Question 15: Would any of the following seminars or classes be of interest to you? Nutritional considerations for re ared meals or food roducts 14 Starting a business legally 16 Obtaining and using credit 9 Questions 14 and 15 indicate that most respondents understand they will need additional business development services beyond simple access to processing equipment and space. To succeed in creating new jobs and increased income, shared use facilities must provide comprehensive training and educational services to their clients. Seminars, workshops, and ongoing training programs are integral parts of these projects' activities. 25 County of Orrin Oran a 19 Alamance 19 Chatham 10 Durham 6 Wake 2 Caswell 1 Fors h 1 Rowan ~ 1 Guilford 1 Wa ne 1 Of 55 respondents, 19 were from Orange County and Alamance County each. Most Orange County respondents listed an address located in the northern half of the county, while most respondents from Alamance were from the eastern side of the county. Among respondents from Chatham County, about half were from the Siler City are and half were from the Pittsboro area. Question 19: How far would ,you be ~ villing to drive to use a processing center? ~~ .. .- o - - .. .= 2 1 10 2 11 1 12.5 ~ 1 15 5 17.5 1 20 8 25 7 30 13 40 2 45 2 50 8 55 1 75 1 100 1 230 1 Fifty five respondents reported how far they would be willing to drive to access a processing center. The average distance reported was 34.4 miles. The median average, where half of respondents would drive less and half would drive more, was 25 miles. Experience at other facilities in North Carolina and nationwide shows that serious food entrepreneurs are often willing to drive 75 to 100 miles to access the equipment and services they need to succeed. The outlier who reported 230 miles is a current user of Blue Ridge Food Ventures in Asheville who lives in Durham. 26 IIT. Market Demand Conclusion The survey responses clearly indicate sufficient demand to justify the development of a regional shared use food processing center in the four-county region. Farmers, food entrepreneurs, and caterers are all well-represented among the respondents. It is important to note that the primary purpose of a potential user survey is to gauge the level of existing community demand within a given time frame, in this instance the time period from June to September 2007. While several of the individuals and businesses who responded may ultimately be clients of the facility if it is built, the survey is intended to be a sort of snap shot in time that demonstrates the level of community demand during the feasibility study period of time. It is not intended to generate a list of future users of a facility. However, respondent contacts may be useful to keep the community informed of developments should the project move forward to an implementation stage. The results are a useful guide to the demographic profile of the types of individuals. and businesses who are likely to use a facility of this nature in the future. The individuals may change over time, but the kind of user base as demonstrated in the surveys is likely to remain essentially the same for several years forward. 27 Section Four -Equipment This section recommends food processing and handling equipment needed for identified potential user profiles to succeed in expanding or starting value added food businesses at a shared use food processing facility. Estimates of equipment acquisition costs are presented. The potential user survey asked respondents to select from a list of common food processing equipment those items they need to process their food products. Using a tiered valuation system based on the quality of survey responses, demand for specific pieces of equipment is presented below. In highest demand are arange/oven, acutter/mixer, food processors, awalk-in cooler, and packaging equipment. In lowest demand are dairy pasteurization, acider press, a rack oven, and a pie maker. hart 1: ~quif llemand Matrix Equipment Demand Matrix: Valuation Total 45 40 - 35 25 20 10 ;:. 5 0 - , i ~, Ill il!' .. ........ °° e~ ~~~ y°~ .yep ,°° ~~o •`~o, ,~~ oo ey5 ~oA \o~ •`o~ ,~°~ ~~~ ~o~ `~~ c~~\°~ ~°`\~~i-'`~°°° `°G~y •.~`ey ~`°~ m°~° ~`ee~, ~ e J``tim'o• ae`Qc m°~aA ~°~ °°°y5 r~a~m •`e~m ~~r °'aa ca °J ~,~~~' °°aQ ~,~~~ ~~~° ~ \~,~5r ytiea ~,~5'~~ °~ Q ~m~,Q~ a° Q •~°e ~,~a`°~e ~` uo ~d a~c1 ~ ~~°, a Survey responses show demand for the most commonly used equipment found in regional shared use food processing centers throughout the country. The exception is a measured demand for meat processing equipment, including a smoker and other value- added meat processing systems. In all 16 farm-based producers out of the 62 valid respondents expressed a desire for meat processing. While meat processing must be considered for this project, it is important to understand that meat processing, either raw or cooked, for retail and wholesale distribution comes under an entirely different set of regulations than either non-meat products or catered meals. While most shared-use food processing centers come under the purview of county health inspection and FDA regulations, very few have met state or federal regulations for value added meat processing. In this case, the relevant regulatory authorities are the USDA's Food Safety Inspection Service and the NCDA&CS's Meat & Poultry Inspection Division. Regulatory oversight for meat is quite demanding and it is questionable whether regulatory official in North Carolina would support meat processing at shared-use facilities. 28 The researcher therefore recommends that the project move cautiously towards limited value added meat processing only after opening the facility for FDA and county health inspected processes. This will allow the facility's director to establish clear client management policies and begin to interact with regulatory officials before "jumping in" to the much more stringent meat regulatory environment. Equipment for meat processing is therefore not recommended for first phase equipment acquisition. The table below shows recommended equipment for acquisition, whether such equipment should be bought new or used, and estimated total costs of acquisition: EQUIPMENT FOR A REGIONAL SHARED USE FOOD PROCESSING FACILITY Used Total Unit Total Equipment Essential Desired Or New Comments __ - Units Cost _. Cost _ _ Needed E ui ment for First-Phase Ac uisition Versatile, . water bath Braising an, tilt X Used for canning 1 4,000 4,000 Brooms X New 6 10 60 Can openers - Edlund #1 - mnl o X New 3 85 255 Carts - 30"x60" More if flat bed X Used ossible 3 350 1,050 Chairs - Meeting/Break Used/ Room X New 24 25 600 One in each Cooler - 2 door production reach in 2X 2X New room 4 2,500 10,000 Cooler -produce walk in 18 x 20, exterior compressor X New 1 22,000 22,000 Cooler -meat walk in 12x18, exterior com ressor X New 1 12,960 12,960 Manager and batch code Com uters X New rinter 2 1,000 2,000 Cutter Mixer - (HCM) 30 qt. Used 1 3,000 3,000 Used if For coolers Dunna a racks X available and freezers 20 75 1,500 29 Used Total Unit Total E ui ment Essential Desired Or New Comments Units Cost Cost Exhaust hoods w/ If used, fire suppression then 60 & makeup air, 50% of linear riced er foot X cost feet 1,000 60,000 Code Quoted requirement, with Facility bid with GC Renovation E e wash stations X New Plumbing 4 24 Estimate New, Used Filler, Simplex hard to Double head, e iston X find for wet ack 1 8,750 8,750 First aid kits X New 2 32 64 Floors uee ees X New 5 20 100 Forklift, 5000 Ib. Electric or gas X Used 1 15,000 15,000 Freezer -sub zero, 16' x 20' X New 2 27,200 54,400 Hand Truck X New 2 65 130 Vacuum Sealer - double chamber Modified air -w/map capabili X New packaging 1 8,000 8,000 Ice Machine - 3 tons er da X New 1 5,000 5,000 Keypad entry controls stem X New 2 500 1,000 Label applicator 'ars and bottles Used 1 3,000 3,000 Lockers -men's & women's, 1/2 sized w/6 er bank X New . Nice to have 10 60 600 Maintenance tools ands are parts X New set 3,000 3,000 Microwave, commercial rade X New Nice to have 1 950 950 Mixer - 80 qt. with bowl dollies, M802 w/ stainless bowl X Used 3-phase 1 8,000 8,000 Mixer 20 qt., stainless bowl X Used 1 4,000 4,000 30 Used Total Unit Total E ui ment Essential Desired Or New Comments Units Cost Cost Mop Buckets w/ . wrin ers X New 2 85 170 Make sure Mo floor sink X New it's a bi one 1 375 375 Mo s X New 3 15 45 Oven -deck, double deck w/ roasting floor, gas fired X Used 1 4,500 4,500 Double - Oven convection stacked are full pan size, space gas fired X New efficient 2 4,000 8,000 Pallet jacks, . 2 1/2 ton capacity manual o eration X New 2 400 800 25' linear feet, double Pallet racking X Used stack 2,500 2,500 Proof cabinet - double rack 1X 1X New 2 900 1,800 Pulper/Siever, Fruit and Robo-Cou e e X New ve etables 1 6,000 6,000 One in each Range - 6 burner, production gas fired X New kitchen 2 2,286 4,572 RoboCoupe, or similar X Used 1 900 900 Rolling racks - full size sheet pans X Used 4 125 . 500 Security cages - drystorage sized for pallet, Dog Kennels rice er allet X will work 13 75 975 Security cameras w/ monitor X New 5,000 5,000 Shelving, wire Dry and cold rack, triple deck X storage 20 100 2,000 Sinks - 2 comp X washin 3 350 1,050 Sinks - 3 X Utensil 6 500 3,000 31 compartment washing Used Total Unit Total E ui ment Essential Desired Or New Comments Units Cost Cost Quoted Sink Hand Wash Code with Facility with Foot requirement, Renovation Activation X bid with GC 6 500 Estimate Slicer, model 2612 X New 1 3128 3,128 Self- Steam kettle contained - 40-50 al. w/ tilt X Used boiler 1 10,000 10,000 Steam kettle - Self- 70-80 gal w/ contained ti out a itator X Used boiler 1 14,000 14,000 Self- Steam kettle, contained tabletop 20 qt. X Used boiler 2,000 2,000 Tables - 5 foot stainless Used or on wheels X New 5 300 1,500 Tables - 6 foot stainless Used or on wheels X New 8 450 3,600 Tables -break Used or room/meetin X New 5 200 1,000 Waste cans - 32 al. W/dollies X New 6 75 450 Water heater w/ storage system, Quoted 250 gal./hour cap. with Facility gas fired Renovation w/circulation pump X New Bid with GC 1 8,000 Estimate Wire cooling racks on wheels - 4 tier 24x60x4 X Used 4 300 1,200 Subtotal 308,484 15% Installation & Shipping 46,272 TOTA~,NEEDED EQUIPMENT 354,756 32 Equipment for Consideration Automated Bottling Line Equipment Accumulator table - fillip line Used 1 4,000 4,000 Conveyor - fillin line New 1 4,500 4,500 Depends on Shrink tunnel New bottling line 3300 3,300 Food pump and stainless pipe fittings aukesha a New 1 7,000 7,000 Scrambler table Depends on -filling line ~ New bottling line 4000 4,000 255 Batch Code printer, excluding computer New 1 5,000 5,000 Meat Proce ssin Smoker, 16 Cubic Convection a Feet 1 10,000 10,000 Hobart Slicer Used 1 3,000 3,000 Meat handsaw Used 1 1,500 1,500 Commercial Meat Grinder Used 1 3,000 3,000 Commercial sausage filler New Manual 1 1,500 1,500 Other Possible E ui ment Continuous Blancher New 1 8,000 8,000 Mixer - 60 qt. with bowl dollies, Used 1 6,000 6,000 Only if Dehydrator -rack ~ demand T e small New increases 1 700 700 Vegetable polisher (potato/carrot), roller type, Can buy Depends on conve or feed used cro s 1 45,000 45,000 Steam generator Needed if - 20-30 h New kettles are 10,000 ~ 10,000 33 not self- contained Only if lots of Dough Divider New bakers 1 4,000 4,000 Only if lots of Dou h sheeter New bakers 1 8,500 8,500 Filling dry Filler, auger pe New materials 1 20,000 20,000 Small of medium dry Filler, wei h ack New materials 1 9,500 9,500 Blast Freezer Vegetables 10 X 16 New and Fruit 1 24,000 24,000 Box taping High speed machine New packagin 1 4,000 4,000 Fryer - 2 basket, w/wheels.& quick disconnect, as fired 1 3,500 3,500 Short, 5' Hard Vegetable rollers, 3' Wash Line Used wide 1 20,000 20,000 Size reduction equipment Urschel Used 1 24,000 24,000 Pulper, One step up Langsenkamp from Robo- e New Cou e 1 20,000 20,000 Griddle Used 1 2,100 2,100 Subtotal 256,100 15% Shipping and Installation 38,415 TOTAL EQUIPMENT FOR CONSIDERAT ION $294,515 TOTAL, ALL EQUIPMENT $649,271 The total estimated cost of equipment to be acquired and installed in the first phase of development is $354,756. Not included in this list are meat processing equipment, an automated bottling line, and an automated vegetable washing and grading line. While such equipment may be in demand from some users, the researcher recommends taking a cautious approach to investing in these expensive systems until sufficient experience in daily management is gained, regulatory officials have been thoroughly consulted, and a clear demand that justifies investments is verified. 34 Space for a vegetable washing and grading line is included in the facility design shown in Section Five. The possibility does exist that demand for this line maybe justified through meetings with prospective users and other developments during the project development phase and before the doors open. In this case, and with support from the project developer, area service providers, farmer organizations, and the community advisory committee, the project may choose to invest in this line in the first round of equipment acquisition. Estimates for a small, used hard vegetable wash line are in the range of $15,000 to $25,000. 35 Section Five -Site Review I. Characteristics of Successful Sites The researcher was charged with leading an effort to identify the most feasible site for development of a shared-use food and agricultural facility in the four-county area. Several key factors were used to evaluate if certain sites might be suitable for the project, based upon characteristics of successful examples elsewhere in the country. Characteristics of successful sites include form of site ownership, affordability (including acquisition costs and renovation costs), access to utilities, suitability and size of floor plan, location in proximity to users and ease of access, and proximity to service providers and others who could provide project support. Site Ownership All of the successful shared use food processing centers the researcher is aware of are owned by local governments, state governments, or nonprofit agencies. There are many good reasons for this. First of all, benefits from these projects are designed to accrue primarily to the clients who access the facility for services, and not to the owner of the project or site. Regional shared use facilities struggle to break even from user fees, even when the clients themselves are able to make profits, expand their businesses, and create jobs and income. There is an inherent tension between the project's need to charge reasonable use fees and its clients who desire to minimize costs and increase business profits. The tension is further exacerbated if a landlord desirous of profitable rents also is introduced to the mix. Additionally, projects that will rely on grants from foundations and governments are at a disadvantage when the physical infrastructure is owned by afor-profit entity: Most grant funds are eligible only to SO1-c-3 nonprofit corporations or governmental entities. Very few grant making organizations would be willing to invest in fixed infrastructure improvements at a site owned by a private entity. Furthermore, a project will likely need to secure along-term (ca. 10-year or more) lease or other legal agreement to entice grant makers to invest in any project, whether or not the site is owned by a nonprofit or governmental agency. On a balance sheet, securing a site on a nominal long-term lease is very favorable from the perspective of grant makers. In this case, the existing physical infrastructure can be considered a committed asset, of the project, and in certain cases the valuation of the building and land can be counted as a match toward grants. In a traditional private lease agreement, the value of the rent cost is a liability rather than an asset to the project, and funds would be necessary to secure rent before income from use fees begin. Cost Two important site costs must be considered before securing the project location: acquisition costs and physical infrastructure improvement costs. In most existing cases, initial acquisition costs for shared use food processing centers have been either nominal (such as a $1/year lease), or far below market rates. Project 36 developers should avoid any situation that would require borrowing money to purchase or lease a commercial site. Experiences at earlier projects have shown that loans most likely cannot be repaid with future grant funds, and mortgage payments will significantly drain project income from client use fees that would otherwise be spent on project operations including utilities and payroll. A "free" building, even one requiring significant renovations and upgrades, is preferable to an acquisition that might cost the project several hundred thousand dollars. Almost any site chosen for this project will require significant renovations and upgrades. Installation of floor drains and HVAC systems, construction of food grade walls and ceilings, and plumbing and electrical upgrades are among the most common site improvements needed. Site renovation, even more than equipment acquisition and installation, will likely be the most expensive single investment the project will make. That said, a site that has been recently used for a commercial purpose and that meets current building and safety codes can cost much less to renovate than a very old building that has sat idle for a long period of time. Unforeseen renovation costs, such as replacing a worn-out roof, rewiring the entire electrical system, or building handicap accessible entrances and bathrooms, can quickly derail a project's budget projections. Utilities Large regional shared-use facilities must have access to modern commercial-grade utilities, including sewer lines, three-phase electricity, potable water, and (preferably) natural gas. High speed Internet access will make a facility much more effective in assisting clients for marketing or researching technical issues surrounding production. Many key pieces of equipment, including ranges and boilers, work best on natural gas. While gas lines are not an absolute necessity, they are preferable to powering many pieces of equipment on electricity or propane and can help reduce ongoing utility costs. Floor Plan A regional facility such as the one contemplated in this research will require not less than 7,500 square feet of usable heated space, and ideally would have not less than 10,000 square feet. At least two-thirds of the space will be needed for production areas and storage. Many projects significantly underestimate the amount of cold and dry storage space needed, and must resort to facility expansions shortly after opening for business. Short of acquiring a fully developed FDA food processing space, the project will be best served by acquiring a well built commercial building with strong floors, high ceilings, and lots of open space. An effective development strategy is commonly referred to as the "kitchen in a box" development, where FDA production rooms (kitchens) are built entirely within an existing open commercial space such as a former warehouse or factory floor. The four production rooms at Blue Ridge Food Ventures in Asheville, for example, were built inside an existing 7,000 sq.ft. room that had served as the main research and development factory of a former textile mill. 37 A desired site should also have ample space for offices, break rooms, and meeting rooms. Acquiring a building with existing offices will help reduce renovation costs. Proximity to Users and Ease of Access Results of the community survey indicate the average distance potential users are willing to drive is just over 34 miles. A site located in the four-county area should take into account the greatest demands of use from specific counties and communities. The survey results show a large concentration of potential users near the interstate corridor between Hillsborough in Orange County and Graham in Alamance County. While serious food entrepreneurs are not likely to be intimidated by longer commutes, new startups and farmers will be more likely to use a facility that is within a half hour or so of their homes or primary places of business. Optimal sites should have easy road access for commercial trucks and other vehicles. Much of the equipment installed will be delivered by truck, and either a loading dock or on site use of a forklift are essential. Proximity to Service Providers A key determinant of this project's success may be the degree to which existing business and agricultural service providers assist clients and project managers in delivering a full range of business development services. Extension personnel, culinary trainers, small business center directors, and others will be able to play a meaningful role in the project if they can access the facility with minimal travel. One inherent advantage this project enjoys is relatively close proximity to Raleigh, the state capital and headquarters for many state service agencies including NC State University, the North Carolina Department of Agriculture & Consumer Services, and the North Carolina Department of Commerce. UNC-Chapel Hill, located in Orange County, may also be a source for important business development assistance from the Kenan- Flagler School of Business. II. Review of Potential Sites The researcher spent several days in the four-county region investigating the availability of potential sites that meet most or all of the criteria discussed above. Visits were made to all four counties but focused largely on the area with highest measured community demand, in northern Orange County and eastern Alamance County. A brief discussion of other locations is first presented below. Chatham County Chatham County enjoys a strong presence of small farms, established nonprofit development agencies (R.AFI-USA and Carolina Farm Stewardship Association), and Eastern Carolina Organics, the largest organic produce cooperative in the state. The community is largely rural, but is also somewhat divided between the more urban northern and eastern side, centered on Pittsboro, and the western side near Siler City. A lack of sufficient water supplies and other infrastructure needs, as well as the county's 38 relative distance from most identified potential users, makes this county a low priority area for potential site development. Durham County By far the most urban part of the research area, downtown Durham has many underutilized former factory warehouse buildings that could be renovated for food processing. However, recent renovations of former tobacco handling facilities has raised real estate prices and ushered in a wave of urban residential redevelopment. Durham is home to one of the largest food bank centers for the Food Bank of Central and Eastern North Carolina. The researcher met with FBCENC directors as well as Dr. Nicholas Didow of the Kenan Flagler School of Business, to discuss potential areas of collaboration between the food bank and a regional shared-use food processing center. The possibility of co-location for a new food bank center with a processing facility was discussed. However, no consensus among participants was reached. Food banks and shared use commercial processing facilities maybe able to fmd common areas of interest, including shelf stabilization of donated foods through further processing, need for significant cold storage, and a desire to distribute foods to a local community. However, their missions are extremely different. Whereas a shared use food processing center strives to create jobs and income for local food based businesses, a food bank strives to efficiently deliver food to low income families and individuals who are threatened by lack of food security, hunger, and malnourishment. The profit motive of food entrepreneurship is really not in line with the culture of food bank operations, and while mutually beneficial relationships maybe established, co-location or co- management of the two is not recommended. The Durham Food Cooperative was also contacted about potential partnerships. The manager of the co-op expressed some interest in hosting a shared use kitchen at the current co-op site. However, the building is approximately three thousand square feet on two floors and the floor plan is not suitable for large commercial kitchens and storage. The researcher detected a relatively low level of interest in this project from Durham service providers. No sites that are government ornon-profit owned were identified in Durham County that could host a regional shared use food processing center. A bright area of interest in this project came from South Eastern Efforts Developing Sustainable Spaces, Inc (SEEDS), a Durham nonprofit that promotes urban community gardens in the city. SEEDS submitted a survey to use a shared use facility and may provide a valuable link to low-income communities and individuals in Durham. Chapel HiIUCarrboro The southern half of Orange County is economically centered on Chapel Hill, home to LTNC-Chapel Hill, and Carrboro, a former mill village adjacent to Chapel Hill. While several positive factors are associated with this area, including a strong local foods movement, the flagship store of Weaver Street Markets, and the Carrboro Farmers Market, this area has some of the highest real estate demands anywhere in the four- 39 county region. Several service providers confirmed that low cost sites for project development are unavailable in this area. The most viable areas with the study region are Alamance County and northern Orange County. Alamance County Alamance County enjoys several positive factors, including the culinary training program at Alamance Community College (ACC) in Graham, many small farms, and many abandoned or underutilized former factory buildings. Nineteen of 62 completed surveys came from individuals and businesses in Alamance County: Additionally, county service providers and community leaders have exhibited strong support for the project. The Alamance County Center of Cooperative Extension was helpful in disseminating surveys. The director of the Small Business Center at ACC met with the researcher and mailed. surveys to her clients, and the Alamance Chamber of Commerce was extremely helpful in arranging tours of potential sites. Because Alamance has one of the lowest per capita incomes in the region, the county maybe eligible for certain types of federal, state, or private foundation grants unavailable to other counties. Finally, the researcher discovered that efforts have already been underway to determine the feasibility of a shared use kitchen facility in the county. Penny Hawkins, a culinary professional and resident of the eastern Alamance town of Mebane., conducted secondary research into shared use facilities in 2005 and worked closely with ACC Small Business Director Milele Archibald to measure community support for a facility. Kelly May, Director of Research and Communications for Economic Development at the Chamber, gave aday-long tour of potential project sites to the researcher. Sites visited included the former Hopedale Mills in Haw River, Glencoe, White Furniture in Mebane, 612 Main Street in Burlington, and Saxapahaw. One fact is clear from the tour: Alamance County has a large number of potentially available commercial buildings for project development. However, none of the facilities identified meet the optimal size range (7,500 to 15,000 square feet), and all are privately owned. Discussions with leasing agents and real estate managers indicated that the average asking price for commercial warehouses and abandoned factories is a lease of $3.00 per square foot per year. No owners or representatives expressed an interest in selling sub-divided areas of far larger buildings. Finally, all spaces identified as potential sites were in poor condition, requiring substantial investments to upgrade or renovate for food production use. In sum, while many positive factors exist, Alamance County does not appear to have a location that meets all or most of the criteria for site selection discussed above. Hillsborough/Northern Orange County Hillsborough and northern Orange County enjoy several of the same positive factors associated with Alamance County: Many small farms, active support from local service providers, and measured demand from potential facility clients. Additionally, 40 Hillsborough is centrally located in relation to other counties and their county seats (see maps below), and is located at the merger of Interstates 85 and 40. Like the rest of Orange County, Hillsborough enjoys a strong economy, and real estate pressures are intense. Initially, the researcher was unable to locate a site that would meet most or all of the criteria for a shared use facility. Fortunately, Noah Ranells of the Orange County EDC showed the researcher a building located at 500 Valley Forge Road and approximately half a mile from Interstate 85 on the eastern side of Hillsborough. This building, a 10,400 square foot metal industrial structure, is the former site of Orange Enterprises, Inc., anon-profit agency in Hillsborough, N.C., that employs people with disabilities and subcontracts services to other businesses for mailing and packaging. The building is owned by Orange County government and now houses election materials. The Orange Enterprises building is able to meet all of the key criteria for development as a regional shared use food processing facility. It is owned by the county and is a modern commercial building that meets code, including handicap-accessible bathrooms and entrances. The building consists of a large warehouse-type area on concrete slab (ca. 6,500 square feet), a loading area and storage room with a dock (ca. 1,500 square feet), and multiple offices and meeting rooms (ca. 2,000 square feet). The building has access to all major utilities. The building is located in the part of the four-county region with the highest level of measured demand for a facility, and is easily accessed from both I-40 and I-85. Service providers from Orange County Government and the county's Cooperative Extension Center are housed just minutes away. Distance to County Seats Belo w: Drivin Distance, Pittsboro to Orange Ente rises, 32.7611 MkP7VEST.= ~ ~ ' ( a Scn+mrr r ~ : non ~~Cumm/f}A~d ~~' Aitsro¢hati'~ i9J 2 ~' ~~C; .... r'~ f ~ ~ ~ r Tv- ~ Oeh~ma~ i ~ ti01 f,.. E. o ,~,~~ ,1 X24 ~~p~_:'~ ~ ~-- ~' rayt, ~ ~ u' -"'.+i~a ~`-r ~`_'r'pi0 ~~ ~ d ~ S ; r70k1{xCas. ~w~~'-~..~ ~ orvsmnll~ ~;' . ~ ~SZI is7^ ~, '. p } t T ~,~. I',.4' ~ ~1~~-raAi .~~ ,y '~:.7 J 3i iii t r~~ ~'~ s. ~ "fS~lr Ififl ~: ~- re ~ nn~~~mm~~nn ~(,,,v n7+f~,vp fur. ~~ , ~~ ~.~ ~ ~ uM Sri YS71 ~ t~ ~ ~Sl~ un~` ~,tY ~~ 'lshtpgifl'; •. 1 ~ `a, L ~-kSYitu~YY'ar~! Y ` ~ ul 63YA7 ~'i~trF. ~yd _ ! ~^-'~ "Mai 6da G. NwG~nl1~ a I~FD' files 41 Bela B ~w: llowntown Burlington to Urange ~nterpnses,L4.U1 M i i ~ X ,~~ G.en uw1 ~~ i a ~ ~ 46 ~ J ~ ~I ~ ! tan ~ f5f~ nlr f~ ~:. gt~ ~ d v__~ra~rn r ~• r ~ ~«a~u ~T+ y ~ 1 + `~y ~ j 1 1 .4- Q.~WLStiAJttl',.Tx 'i. ~ , j ~. Mq LYa R3N'7 tihY 51Q.G~ files glow: llowntown llurham to Urange rnterprlses, 1L.y1 M11 r ~6 `~ 1 ' ~ ._... I"~ I ~ ~ t L ~ ^- ,~-- ; ~ , ,, , .~ ~~ --i - ~~ G L 7 i ,- } .~ _ `' 1 ~~~ ~ ~ ~ 1f~-7 r' ~ ~--- ~f~ ! J q .•' ~~ ~~` ,.,~~~~y~~~n,d~ ~ J ~ ^, {.mot ~i~-,~ati ~~ _ %. j 1_ ~~;.f: ~~l ~ f ~~11 .f. t Otk [' qr ` ,~' t``c'f ,, Q;A571tocCvnikc,_L' ,~.. ~ ~ f ,l Mw~Sti O hVf a 1~tgt~. ;s Development costs for the former Orange Enterprises building are discussed in the next chapter. 42 Section Six -Facility Design This section presents a preliminary facility design and floor layout for a shared use food and agricultural processing facility in a 10,400 sq. ft. building located at 500 Valley Forge Road in Hillsborough. Estimates of potential fixed-asset facility renovation costs are discussed. The former Orange Enterprises Building in Hillsborough is the most optimal location identified for development of a regional shared-use food processing center. The existing building measures 80' by 130'. It includes a parking lot and a loading dock, and is sited on approximately 4.66 acres (Orange County parcel PIN#: 9874315787). The building is comprised of three general areas: A ca. 2,000 sq.ft. office area in the front of the building that includes nine offices and two pairs of men's and women's restrooms; a large warehouse/shop area in the middle of the building that measures approximately 6,500 sq.ft., and a loading and storage area in the rear that measures approximately 1,500 sq.ft. All three areas are serviced by three large HVAC systems that appear to be in good working order. The existing electrical boxes indicate the building is equipped with 3- phase electricity capable of powering food production equipment. The preliminary layout is designed to meet the overall needs of prospective users in terms of layout, workflow and equipment, and to accommodate future expansion of use, especially to meet the measured potential for USDA value added meat production. It is important to remember that shared use facilities cannot meet all needs of all users. Experienced facility managers have noted that the best shared use food processing facilities meet the needs of 80% of their clients 80% of the time. Specialized or expensive equipment cannot be secured for the use of only one or two users. Similarly, special design elements or certifications (such as gluten-free or kosher certified) are best avoided. Organic production, however, can be conducted in the same facility with conventionally processed foods. The design of the facility was developed with a "best fit" approach to the existing floor plan of the Orange Enterprises building. Given a preexisting site, certain special considerations are dictated by the site and the renovations required. Bill Lelekacs, an engineer with the NCDA&CS Property and Construction Division, assisted researchers in developing a proposed facility layout which is presented below. Please note that equipment shown in the floor plan is for illustration only and does not specifically match recommended equipment. The proposed renovation includes the following key floor changes for the three sections of the building: Front Office Area • Merger of two large offices to create a meeting and employee welfare room measuring 15' 11" x 36' 10" • Creation of an open space retail area from two existing offices 43 Middle Warehouse/Shop Area • Construction of a 29' 10" x 33' wet kitchen, 10' ceiling height with food grade panels (ca. 987 sq.ft.) • Construction of a 29'9" x 32'2" dry kitchen (bakery/prep room), 10' ceiling as above (ca. 960 sq.ft.). • Construction of a 19' x 22' mixed use food grade room (future expansion space, 418 sq.ft.). • Construction of a 7' x 12' utility/boiler room. • Construction of a 11' x 12' equipment storage room • Prepared space for installation of two walk-in coolers, 18' x 20' produce cooler and 12' x 18' meat cooler (ca. 1140 sq.ft.). • Prepared space for installation of two,walk-in freezers, 16'6" x 19'4" each (ca. 1280 sq.ft.). • Construction of new roll-up door and loading dock. • Prepared space for installation of 450 sq.ft. of pallet racks (901inear feet, double stacked). Rear Loading/Storage Area • Preparation of 22' x 34' produce wash/grade/pack area (ca. 748 sq.ft.). • Preparation of 22' x 44' dry storage area (ca. 968 sq.ft.) The proposed design is intended to allow maximum flexibility in use of production spaces, and to maximize availability of cold and dry storage. Altogether, the 10,400 square foot facility has 3113 square feet of production space, 1140 square feet of cooler space, 1280 square feet of freezer space, and 1550 square feet of dry storage space comprised mostly of 6' x 6' storage cages and 5' x 5' pallet storage racks. Additional dry storage space can be utilized in the existing offices and leased to clients in need of regular office space. The facility can accommodate a number of concurrent production types and minimizes potential of cross-contamination through use of separate, self-contained production areas. Wet Processing The "wet kitchen" is approximately 987 square feet, and is intended to be especially useful for sauce, salsa, jam, jelly, soup, and other types of production. Equipment is positioned to permit a relatively efficient production flow while maintaining a significant amount of open floor space. This permits use by other manufacturers at the same time, and allows for moving needed equipment in and out of the production area according to client needs. Experience at other shared use facilities indicate this will be the most commonly used production space. • Dry Processing The "dry kitchen" is approximately 960 square feet that contains equipment commonly used in dry types of production. Items such as cakes, pies, cookies, burritos, dry rubs, and herbs can be processed and mixed in this space. Standard convection ovens are recommended rather than rack ovens to maximize production times and to regulate utility 44 use depending on production volumes. Where possible, equipment is recommended to have casters to allow needed equipment to be moved in and out according to client needs. Vegetable Wash Line The facility includes a space for inclusion of a small automated vegetable wash and grade line. This line could be used by a number of farm-based producers for consolidated packing of fresh produce to meet wholesale distribution, direct retail, or institutional sales. There is a growing interest in institutional purchases of locally grown produce, however a lack of unified washing, sorting, and grading often precludes local growers from accessing these accounts. Before installing a vegetable washing, grading, an packing line, the project is recommended to incorporate a targeted institutional sales program, in conjunction with marketing specialists with the NC Department of Agriculture and specialized area agents of the NC Cooperative Extension Service. A useful model for replication is the Madison Farms project in Madison County, NC, where up to 25 farms pool their production at a shared use wash line to serve institutional clients including the public schools, area colleges, and the regional hospital. Mimed Use Room The mixed use room measures 418 square feet and is designed to accommodate light packaging needs. This room can be later retrofitted to provide USDA or state-inspected value added meat processing. Certified meat smoking, sausage production, or preparation of primal cuts for locally grown meats could be conducted in this room, upon development of sanitary operating procedures and plans for hazard analysis and critical control point management (commonly referred to as HA.CCP plans). Meat processing is not recommended until after the project has been open for a substantial period of time. The Orange Enterprises site also has a fairly spacious gravel parking lot able to accommodate between 20 and 25 parking spaces. While a paved surface is optimal, the investment in paving is a low priority compared to internal renovation needs. Development Costs Development cost estimates are based on experiences at Blue Ridge Food Ventures and takes into account potential inflation of certain construction activities. A table showing estimated development cost ranges, not including equipment, is presented below: 45 ~-d is ~.., eeR91,,,t,. _... r x ar ~ ~ . vwsr ~ ~" ~.,, w~lome: >nlae nlo, ~.><. (rx~... ~: „~>~;: - ~s~d: m ~: .: ~ ~r,.K _ .. .. ................ ~~~ o~ . girls ~ ~ ~ ~e eoe.uor~ .a eoe.aer -" ~ XU I' ~ 1~°0~? CIY;= sarasen ~::uole~a a'~i~, $~ ~' 'PlC.WMN:; 9JMD nn(q 'r of , _ ~: ~' r~ „~;: ,rx ". Ir-.~ +~ !~~ FVPfNn f 1oE)~91D ~r.•,c:' Ilex ''nv rm,la lRa .. no• minlo xra ~' Ir x m' ` .... ~ ~ %. ~ ~. rxr .:..., .:.... ampo none .. ~ ~.:. ,, ~,... .r °1 aG .irooixie woiai ' vcv man ~~, ~ I~Irr x xc +r K.Ir ~ ; ~;: M+® ItSn 70011 .... }( ( cTSie7 MJ (r tOUa Ma .. ~ ., .; ~„A, pa caaea'lat c'ur' ..,- ~.e m>.~,.~ d' .~. ~fi ~ yr .. ... "`. j '1 u~wru F ¢. o. .p car xnanl S~xm~~ K,~ ~. 5~. urea" x ~ tin' lElnln MU -~ r .; RCr 1 ~ :, ems. u,R'°Qa R~• ~ ~.. ._.. .i - ., ` ' : ~ wF...:. ~. . iam1~w1310~ : ' :~..~~ tYS 'ixaSH'. .. ^ <" ~vv ooc~ vgv ova ~` ~' q, ~' .. :.. .. ~ ..:. .. /~ ~ ! ~l .: Oe6(OIfK OIQ ,:: ~ AArWI © OrM1; ~ oe~ ~rs . !astoon me IOL. 0. .. ~'.u Estimated Facility Renovation Costs Former Orange Enterprises Building General Conditions Su envision 17,000 Dis osal 2,000 Bld Permit 1 % 3,465 Clean-u 2,000 Demolition & Patch General 3,000 Slab 16,500 Roof Cuttin 7,000 Clean and Seal Slab 20,000 Framin & D all 55,000 Roof Patchin 5,000 Caulkin and Sealants 1,000 Doors & Hardware 7,000 Acoustical Ceilin s 12,000 Paintin 10,000 FRP Board 5,000 Fire Extin uishers 2,000 HVAC Extension 12,000 Fire S rinkler Extension 7,000 Fire Alarm S stem Extension 3,000 Plumbin -Drains & Su I 70,000 Sink Hand Wash x 6 3,000 Circulatin Hot Water Heater 8,000 Electrical 35,000 Floor tilin and slo in 44,000 GC Overhead 10% 34,650 GC Profit 5% 17,325 TOTAL ESTIMATE $401,940.00 The total estimate for fixed asset facility improvements is $401,940. This amount maybe reduced through directly contracting with skilled craftsmen for certain components such as floor tiling and sloping and installation of doors and hardware. 47 Section Seven -Project Development Recommendations The project development phase is a necessary precursor to project implementation as an economic catalyst for farmers and food entrepreneurs in the four-county region. Based on measured levels of community demand, and the successful identification of a suitable building, the project should be developed as a full-scale regional value added center, fully staffed with comprehensive support and targeted business development services for its clients. The projected economic impacts of this project amply justify the necessary expense of project development. Because the building is owned by Orange County, allocation of the site for project development is necessarily a political decision to be made by the elected representatives of the county who serve on the Orange County Board of Commissioners. As active clients of this study, the Commissioners are presumably aware of the interest in establishing this facility and should have some indication of potential economic benefit to the greater community. Allocation of the building for this use on a nominal long-term lease agreement with a nonprofit management entity is therefore recommended as a viable option. I. Project Developer Before a legal management entity is established, the development of the site must be managed by an individual with the necessary skills to take the project from feasibility stage to full project implementation. This individual should be hired on a short-term (ca. 24 month) period, presumably-under contract to Orange County and under general oversight and direction of the community advisory committee. It is important to note that this individual is not to be tasked with post-opening facility management. That individual is described in the following chapter and requires skills different from those of the project developer. Project development should be led by an individual able to accomplish the following tasks: • Work well with regional stakeholders and the advisory committee to achieve consensus on project development; • Develop a funding strategy, write grant requests, and successfully lobby for financial support from elected officials, state and federal government grant- making agencies, and private grant-making foundations; e Manage grant funds for project development and adhere to all reporting requirements; • Work closely with relevant regulatory agencies during facility renovations and equipment acquisition, including the local health department, NCDA&CS's Food and Drug Protection Division, the US Food & Drug Administration, USDA's 48 Food Safety Inspection Service, and NCDA&CS's Meat and Poultry Inspection Division. • Promote the project's development to potential users and the general public in the primary service area of Alamance, Orange, Durham, and Chatham counties; • Work as the "owner's representative" and negotiate services with architects, general contractors, and specialized construction personnel before and during facility renovations; • Negotiate purchase and installation of key equipment needed to open for business; • Lead a search for the permanent facility manager/executive director and identify strong candidates for the job; • Develop a legal management structure for the facility as a 501-c-3 nonprofit corporation. A strong candidate for this position is Mr. Gerry Cohn, Southeastern Regional Director for the American Farmland Trust (AFT). Mr. Cohn has expressed interest in leading the project development phase as a component of his duties at AFT (See Mr. Cohn's resume attached). In October, the researcher held a conference call with Mr. Cohn and his supervisor at AFT headquarters in Washington, DC, and the interest in supporting local farms and food entrepreneurship through the development of this project was confirmed. AFT is a logical choice for project development for several reasons. First, AFT as an organization is recognized as a strong advocate for farming nationwide. The mission of American Farmland Trust is to stop the loss of productive farmland and to promote farming practices that lead to a healthy environment. Development of this project by AFT will ensure that farm-based producers are served in their efforts to produce locally grown value-added products, and will allow AFT to pursue an innovative grass-roots strategy to increase the economic viability of small farms in the four-county region. Secondly, AFT (through Mr. Cohn's representation) has an established presence in the region and has worked closely with leaders in Alamance, Orange, and Chatham counties. Mr. Cohn's office has recently moved from Graham to Hillsborough, and he should be able to incorporate project development duties into his normal work schedule. As a nonprofit organization, in certain cases AFT can serve as a fiscal agent during the fundraising and construction period. As circumstances permit, AFT could directly apply for several pools of grant funds, allowing grant management to be handled by the same entity overseeing project development. It is important to note that several organizations, including participant counties, service providers, and nonprofit agencies can also apply for and receive grant funds that can be used for the project's development. A demonstration of broad community support, especially across political boundaries, is a strong positive factor for many successful grant applications. 49 Compensation for the project developer must be negotiated with stakeholders, especially the participating county commissions. A reasonable rate for project management compensation is in the range of 10% of overall development costs, including facility renovations and equipment acquisition and installation. The very first grant requests should incorporate funds necessary to hire the project developer, and subsequent requests should build in compensation for project management during the development phase. The County is encouraged to consider a one year lease at $1/year, with at least nine one year renewal options, contingent upon the project's economic viability and ability to cover utilities and associated maintenance costs. The lease should begin upon opening of the facility to entrepreneurial development and food processing services. By securing the facility at a nominal lease, the intrinsic value of the building can be considered a match . for some types of grant funds, and demonstrates a tangible investment of resources at the local level (a common requirement for securing grant funds). One attractive feature for the County of the $1/year lease option is the likelihood that facility fixed-asset renovations should substantially increase the value of the building. Following renovation the building should be worth far more than before additions of floor drains, processing rooms, expanded loading docks and improved storage areas. 50 Section Eight -Facility Management and Client Use Policies I. Regulatory Compliance Following project development, the facility is recommended to open as an FDA approved food processing center able to accommodate a wide range of processing needs. The facility design has purposely left sections of the floor plan open to future expansion of production types as specific demand is justified. Pursuing USDA or state-inspected value-added meat processing is not recommended until after the facility is open and client use policies are well-established. Regardless of who is hired for the position, the facility manager will have a steep learning curve in understanding how to meet county health and FDA inspection regulations. An understanding of the local regulatory environment and relationships with regulatory officials will need to be established before the more burdensome task of value-added meat processing is contemplated. No products containing more than 3% meat are allowed for manufacturing under FDA regulations. Meat preparation is allowed for catering, including those preparing hot meals for festivals, food carts, and other prepared dinners. These clients are subject to county health inspection regulations, just like restaurants or other establishments serving food hot and ready to eat. II. Project Executive Director The project will best succeed by hiring an executive director with significant food production and culinary experience. This individual should be hired a few months before the facility is open for entrepreneurial development. Key skills and training recommended for this position include: • Experience working in food and agricultural production environments; • Formal training in food systems management or the culinary arts, or equivalent experience; • An understanding of small scale food processing and food-based business management; • Certification for acidified foods processing and graduation from a recognized Better Process training program; • Strong interpersonal skills and an ability to work well with service providers, community leaders, farmers, and food entrepreneurs; • Meticulous detail to sanitary operating procedures and an ability to enforce strict sanitary policies in the facility; • Good public speaking skills and an ability to promote both the project and products manufactured by clients; • A strong work ethic and an ability to work long hours and on weekends as necessary. 51 III. Pro-Forma Operating Costs Estimated year one post-opening project management costs are outlined below: Estimated Year One O eration Costs Cate o Cost SALARY- EXECUTIVE DIlZECTOR 45,000 SALARY FRINGE 13,500 LEGAL AND ACCOUNTING 2,000 STATE FILING FEE 205 OFFICE SUPPLIES 1,000 CLEANING SUPPLIES 2,500 WASTE BIN FEE 1,000 MARKETING 5,000 MAINTENANCE-LABOR 5,000 MAINTENANCE-PARTS 5,000 CLEANING SERVICES 3,500 STAFF TRAVEL 1,000 TELEPHONE 1,200 CELL PHONE 1,000 Building Maintenance and Utilities 32,000 INSU]KANCE 3,000 Base Cost of O erations 121,905 EQUIl'MENT ACQUISITION 50,000 Total Eg enses 171,905 Operational costs can be managed best through enlisting support from other service providers, including Cooperative Extension offices in each participating county, marketing and project development support from the Orange County EDC, and business development support for clients from the Small Business Technology Development Center and offices of the small business centers at Alamance Community College, Central Carolina Community College in Pittsboro, and Durham Technical Community College. Instructors and students at Alamance Community College's Culinary Technology program may also provide key assistance in training and education for prospective clients. 52 Project leaders should pursue the possibility of incorporating the duties of a cooperative extension agent for support of the project, especially in working with prospective clients on business planning and marketing. All clients accessing the facility for production should be required to carry a minimum if $2 million in product liability insurance. The facility itself should also have this coverage, as well as personal injury insurance in the event of on-site accidents. Advice and guidance on securing this insurance is available from other facility directors in the state. Client management policies and operational farms used by Blue Ridge Food Ventures are found in appendix _ of this report. Over the first year of operations, the executive director will need to codify and establish firm client use policies. Fortunately, a large body of information is available from existing projects, especially those at Blue Ridge Food Ventures in Asheville and Creative Food Ventures in Jefferson. Facility directors are in regular communication with each other via conferences, listservs, and informally via telephone and email. Most are more than willing to share best practices and experiences with particular challenges in their daily work. This informal network of shared use facility directors may evolve into a more formal organization in the future to advocate for greater state support for shared use facilities throughout the state. 53 Section Nine: Conclusion and Proposed Development Sequence The feasibility study phase of this project's development is now complete. The. researcher has found sufficient demand, a viable location, and a willing individual and entity to take on the arduous task of leading the project development phase. This project will benefit greatly from the previous efforts to develop shared use food processing centers elsewhere in North Carolina. Advice on proper management, regulatory compliance, equipment maintenance and acquisition, and market development is readily available from facility directors and other research publications currently in the public domain. Project leaders are encouraged to access and read the following research reports to gain more insight into developing these kinds of projects: Feasibility Study For Establishing a shared-use value adding agricultural processing/commercial kitchen facility, by Cameron Wold (NCDA&CS, 2002). Available from the North Carolina Department of Agriculture & Consumer Services, Division of Marketing, Agribusiness Development Office. Developing Shared-use Food and Agricultural Facilities In North Carolina, by Smithson Mills (North Carolina Rural Economic Development Center, 2007). Available upon request from the NC Rural Center, or from Mr. Mills. Upon conclusion of this feasibility study, project stakeholders are encouraged to pursue the following action items over the development period, estimated at 18 to 24 months: 1. Formally allocate the former Orange Enterprises building for development of a regional value-added food and agricultural processing facility; 2. Pass resolutions for formal commitments to project participation by county commissions in Alamance, Chatham, Durham, and Orange counties; 3. Pursue initial grant funding to secure the services of the lead project developer; 4. Contract with the lead project developer for services; 5. Continue pursuing grant funds necessary to complete facility renovations and equipment acquisition and installation; 6. Upon'securing facility renovation funds, hire an architect to develop blueprints and oversee bidding for construction services from a general contractor; 7. Working with county commissions and the community advisory committee develop plans for creation of a nonprofit management entity to own and oversee operations of the project; 8. File articles of incorporation and approve board members and bylaws for the management entity; 9. Oversee the bid process and contract award for a general contractor to undertake facility renovations and improvements; 10. Acquire phase one equipment needed for opening; 11. Establish a $1/yr lease agreement for the facility between the county and the management entity, active upon securing the certificate of occupancy or on opening for business; 54 12. Secure start-up funds for hiring an executive director 'of the management entity; 13. Hire an executive director between 3 and 6 months before the facility is open for business. 55