Held 'hostage' by Tyson: An Iowa town's dilemma

Editor's Note: This story was originally published on July 8, 2016 and was updated on July 16, 2016, after Tyson Foods offered to buy out its lease, which doesn't expire until 2020. 

CHEROKEE, Ia. — A few years ago, it would have been hard to find a parking spot along Cherokee’s bustling Main Street.

Now, not so much.

“Main Street is quieter,” said Darren Zwiefel, who owns Darren’s Clothing Co.

He and others say traffic has slowed in their downtown shops since Tyson, the town’s largest employer, closed its meat processing plant here in 2014.

City leaders believe they can recruit someone to fill the building Tyson vacated — reinvigorating Main Street and bringing back at least some of the 450 jobs lost when Tyson closed.

If only Tyson would let them.

The multinational food company has refused to break its long-term lease on the plant it no longer uses, electing instead to continue paying $130,000 annually in rent, along with maintenance costs and taxes on the empty 250,000-square-foot building.

Tyson officials have told the city they would consider handing over the shuttered plant — but not to any firm that they believe is competition.

As a result, Cherokee City Councilman Chad Brown says he and other city leaders feel like Tyson is holding Cherokee "hostage," preventing the northwest Iowa community of 5,000 from recovering from the economic gut punch it suffered when the plant closed.

“I think it’s typical large-scale greed,” Zwiefel said. “These organizations get so large that they forget about the impact they have on the people who have served them over the years.”

Tyson spokeswoman Caroline Ahn said the company wants another business to take over the Cherokee plant, though she did not specify what types of companies would be acceptable. She said Tyson had been in talks with three food companies, but that those prospects did not fall apart because of competitive interests.

"We would be willing to entertain an offer from another company, including another food company, that is also consented to by the building owner," Ahn said in a statement. "To date, we have not received a fair offer to take over the lease or purchase the assets that were in the facility."

Though Cherokee’s May unemployment rate of 3.6 percent was lower than the state average of 3.9 percent, other data suggest that residents have left the area or quit looking for work.

From 2010 to 2015, Cherokee County shed 4.1 percent of its population. And the county has lost 18 percent of its jobs since 2000, according to Iowa Workforce Development.

Since 2000, 70 percent of the county's manufacturing jobs have vanished. Locals fear that Tyson’s rigid refusal to let in competition is only prolonging the damage.

The company’s lease doesn’t expire until 2020. And Tyson could choose to renew it for an additional 15 years.

Even with slower business, Zwiefel is proud of the diversity of the town’s Main Street businesses. Downtown has a bookstore, a bike shop, a furniture store and a pub.

Yet Cherokee isn’t quite whole.

“We’re one step away from realizing some great things,” he said. “And that next step is some new industry. We’re ready to support it. We’re built to support it.”

A history of meat-making

Cherokee has hosted some form of meat production for the past half-century.

Wilson Foods built the plant in 1965 for pork and beef slaughtering. But as it changed hands over the years, it transitioned to processed meats such as hot dogs, hams and deli meats.

Tyson acquired the Cherokee property in 2001 with its purchase of Iowa Beef Processors.

Over the years, the plant donated countless boxes of hot dogs for nonprofit cookouts and local school fundraisers. At the annual Hot Dog Days event, downtown merchants would grill and give away as many as 8,000 donated hot dogs in 90 minutes.

That celebration ended when Tyson left.

Former workers at the plant say things changed quickly when Tyson took over. The payroll shrunk. Drawn-out contract negotiations with the union grew tense.

Morale sank. And rumors of closure abounded.

“It was a long time coming,” Brown said. “It just seemed like they were looking for an excuse to leave.”

In a July 2014 news release announcing the closure, Tyson cited the age of the plant and the prohibitive costs of renovating it. The company said that it and plants in New York and New Mexico were “struggling financially.”

City leaders say Tyson operated as a good corporate citizen for more than a decade. For its part, the city provided water and sewer services to the plant, even though it sat outside the city limits and did not pay city property taxes.

Facilities built especially for the plant can supply up to 2.5 million gallons of water per day, plus the ability to treat 1 million gallons of wastewater daily, city officials said.

“We want to fill that building,” Brown said, “and we want to use the resources that we have out there.”

Fighting off competition

Those on-site utilities are a major reason the plant has drawn interest from real estate brokers and food processing companies.

City officials say that over the past 22 months, several companies have been interested in occupying the plant. But they contend that Tyson's restrictions on competition have made it much more difficult to find a new tenant.

Brown said the company is essentially holding the facility "hostage." The city says Tyson has not clearly defined what it considers competition.

“It’s a meatpacking plant. It’s not meant to be a bookstore,” Brown said. “It’s a single-purpose facility. It disgusts me that they do this, since the community has supported them for so long.”

Aside from its fresh meat products, Tyson owns many consumer brands of processed foods, including Sara Lee baked goods, Jimmy Dean sausages, Hillshire Farm deli meats and Ball Park hot dogs. Tyson has been unclear about what type of food processing would be acceptable in Cherokee.

City leaders said they were told dog food production would probably be tolerable, but a dog treat producer would not be allowed.

“The joke is, if it’s broccoli processing, then apparently that would be acceptable,” City Administrator Sam Kooiker said.

Tyson’s ambiguity has many locals wondering whether its motivation is more about competition for labor than for products at the grocery store.

The company operates several plants in and around northwest Iowa. It employs 1,150 workers at a hog processing plant in Perry; more than 2,600 at pork and turkey plants in Storm Lake; and more than 4,000 in Dakota City, Neb., just over the border from Sioux City.

In addition, several other food and meat processors call northwest Iowa home.

“It appears they’re making their decision based on concerns about the labor pool,” Kooiker said. “… That means they’re intentionally working to keep wages low.”

Tyson still big in Iowa

Despite pulling out of Cherokee in 2014 and idling a Denison beef plant in 2015, Tyson remains a big player in Iowa.

With 11,500 employees at seven plants, Tyson employs more people in Iowa than in any other state except Arkansas, which is home to its headquarters. The company estimates that it contributes $4 billion to Iowa's economy.

Since closing the Cherokee plant, Tyson has added 400 jobs in Iowa, Ahn said.

The company continues to work with the plant's owner and local economic development officials on plans to market the Cherokee plant, she said.

"We share the community’s interest in finding another business to use the plant," Ahn said.

Ahn did not detail Tyson's competitive concerns, though she said the company has not ruled out food processors.

"Offers coming from potential companies will be evaluated on a case-by-case basis," Ahn said.

Unless Tyson and the property owner agree on a new tenant, Tyson is contractually obligated to maintain its lease until 2020, she said.

"To date, neither the City of Cherokee nor the building owner have offered any ways to relieve us of our lease obligations or to facilitate a reasonable and economically viable transition of the facility," Ahn said.

What's the motivation?

When a grocery or convenience store is vacated, it’s not uncommon for stipulations of its sale to exclude competitors. It’s a given that one brand wouldn’t want its competitor moving in on its turf.

But the same logic doesn’t apply to a giant meat processing plant, said Peter Fisher, a professor emeritus of urban and regional planning at the University of Iowa and research director at the Iowa Policy Project.

The location of one processing plant does not have the ability to affect the price of hot dogs or lunchmeat, but it can affect the competition for workers, he said.

“It is competition. It’s just not on the product side, but on the labor side. I don’t know what else it would be,” he said. “It’s kind of surprising that it would be worth that much to them to lease it for that many years.”

Still, Iowa State University labor economist Peter Orazem questions whether it would be possible for Tyson to control the regional labor market by keeping one facility offline.

He thinks Tyson may have another motive for holding on to the plant — such as choosing to use it for warehouse space or wanting to have time to move out its equipment. He doesn’t see any competitive advantage in keeping the vacant plant.

“These are nationally competitive brands. There are many places to produce those brands,” Orazem said. “And there are competing brands produced in lots of different places. Whatever the competitive strategy is from Tyson, it doesn’t seem like a particularly rational strategy.”

Velo Mitrovich, editor of Meat Packing Journal, said it’s common for retail stores to get tied up in noncompete clauses. But he never has heard of a situation like the one in Cherokee. His United Kingdom-based publication covers the global meat-handling and meat processing industry.

“If any one agriculture company could afford it, it would be Tyson,” he said. “But you don’t get that big throwing good money away.

"The whole thing seems a little bit odd to me,” he said. “It seems like they’re making a lot of effort to be spiteful in a small town in Iowa.”

Property owner’s hands are tied

The road leading to the old Tyson plant is so seldom traveled now that grass crawls up through cracks in the pavement.

Weeds pepper the parking lots, and a gaping hole frames the front wall of the building, where trucks and crews have moved out equipment and machines.

“I’ve never been in a ghost town, but it’s the closest thing I can say it was like,” said Jerry Menke, a former manager of the plant who has inspected its condition since the closure. “It’s just an eerie feeling to know that at one time, it had 600 to 700 employees, and now they’re all just gone.”

Locals worry that the facility, on about 46 acres just south of the city limits, is growing more unusable by the day.

“It’s like leaving a house to sit empty,” City Councilman Will Miller said. “It’s not good for it. It is going to continue to deteriorate.”

Miller said he doesn’t want to vilify Tyson, but he would like to see the company cut its losses in Cherokee.

“I wish they would just let go of the lease,” he said, “and say, unfortunately, we couldn’t make it work in Cherokee and, hopefully, somebody else can.”

But Tyson has upheld the lease agreement’s rules on maintenance and upkeep of the plant, said Mark Langfan, a New York real estate investor whose family owns the property.

Langfan, who is an attorney, said he cannot force Tyson to leave. Tyson officials told the city they do not plan to renew the lease past 2020.

Though he’s getting paid either way, Langfan said he feels terrible for the people of Cherokee. He would much prefer the plant to be a hub of employment and productivity.

“The issue is of corporate responsibility when they leave a community,” he said. “… I just don’t understand how a company in America could take the kind of roughshod position that they’re taking here.”

Tyson proposed an agreement with Langfan to market the property, though the pact would bar the plant from being occupied by "any party Tyson considered, in its sole discretion, to be a competitor of Tyson." It also barred the plant from going to someone who might then transfer the property "to a competitor of Tyson."

Langfan said he could not agree to those terms.

In a June letter to Tyson, the landowner said, "Tyson is doing a terrible wrong to the hardworking people of Cherokee."

"I cannot believe that an American company, as storied and civic-minded as yourselves would actually knowingly perpetuate such hardships on the workers who helped build the company all these years, and a municipality that had so actively sought to partner and support your company," Langfan wrote.

City looking beyond Tyson plant

North Carolina-based Prestage Farms had identified Cherokee as a possible home for its proposed gigantic pork processing plant after its planned $240 million facility fell through in Mason City.

On Tuesday, Prestage announced that it would put its new plant in Wright County.

Though Cherokee lost the Prestage bid, city officials are hopeful that land next to Tyson's empty building eventually could give rise to a new meat plant. There, a new plant could connect to the valuable city utilities that have sat idle since Tyson's closure.

The city is working on plans to annex some rural property, opening land for future industrial development — whether it be for a meatpacking business or some other eventual suitor.

Aside from needing the jobs, City Council member Brown said the community is already well acclimated to the meatpacking industry.

“I think Cherokee would welcome it,” he said. “(Meatpacking) has been here forever."

A previous version of this story incorrectly stated the number of workers Tyson employs at turkey and pork plants in Storm Lake.