Great Lakes Cheese project costs soar by $121 million

What originally was a $500 million project in Franklinville – already one of the largest private-sector ventures in Western New York and the biggest in Cattaraugus County – has now ballooned to more than $621 million, as supply shortages, cost increases and rising wages have driven up the price of the 480,000-square-foot cheese manufacturing facility.

The Hiram, Ohio-based company – whose project was greeted as an economic development boon to the rural Southern Tier county – is asking the County of Cattaraugus Industrial Development Agency to increase its sales tax abatement to cover another $45 million in qualified purchases. That will save the company another $3.6 million, on top of the $16.23 million that was previously authorized by CCIDA.

Corey Wiktor, executive director of the CCIDA, said he wasn't worried by the request.

"This only ensures their commitment to the project, and ensures this legacy plan will be around for decades to come," he said. "I do not see any issues with the board supporting this request, as the reasons for the request are absolutely justified, and very reasonable, given the state of the inflation and the supply chain issues that the private sector faces daily."

Great Lakes – which spent two years searching for a suitable location for a new facility to replace its operation in the Town of Cuba in Allegany County – is constructing its production plant, along with a 16,000-square-foot wastewater treatment facility, on 130 acres of land that straddles the towns of Franklinville and Farmersville along Route 16. The project broke ground last spring.

“Look at the construction to date. You’ll be amazed at the progress,” Wiktor told the CCIDA board. "They're committed to this project."

Great Lakes previously received up to $166 million in sales, mortgage-recording and property tax breaks from CCIDA, and has already invoiced $6.27 million in sales tax-exempt purchases, according to its application. But now that's not enough.

Vice President Matt Wilkinson blamed the impact of the Covid-19 pandemic, and said that "material and labor inflation has been extreme." When the company put the construction work out to bid for steel, concrete, electrical, plumbing, roofing and walls, most of the bids came back at least 50% higher than the company's projections from December 2020, and some were more than three times higher.

As a result, both materials and labor costs jumped by roughly 60%, with materials soaring $73 million to $195 million, while labor leaped $48 million to $129 million. The rest of the project expenses remained the same. Meanwhile, the company boosted its borrowing from $450 million to $556 million, while investing $15 million more of its own equity, now totaling $65 million.

"It’s astronomical that they’re investing that with confidence," Wiktor said. "They're staying the course."

Wiktor noted that while these cost hikes are extreme, because of the impacts of the pandemic on the supply chain, it's not unusual for costs to rise between the onset of a plan and the start of construction.

"There is no question that the company could have sought alternatives, or even reduced the size and investment based off their initial cost estimates in 2020, but yet they are sticking to their word and investing this additional $121 million into the project, that will only benefit the county and region, again for decades to come," Wiktor said.

The CCIDA will hold a public hearing on the application on March 30 in Farmersville before the agency board considers the request next month at a special meeting.