Alaska News

Why a proposal to let private business take over state slaughterhouse has some people worried

For many livestock producers in Southcentral Alaska, the clock is ticking on what to do with a state-run slaughterhouse that's set to close at the end of June.

Some -- including state lawmakers -- are considering moving the slaughterhouse into private ownership, and at least two groups have expressed interest in taking over the Palmer facility.

About 30 people met at the Board of Agriculture and Conservation meeting Thursday to comment on a request for proposals that would move the plant into the private sector. At least one group, the Denali Meat Co., has formed with an interest in possibly taking over plant operations.

But some people at the meeting voiced concerns about the idea, suggesting that a move into private ownership could make the McKinley Meat and Sausage plant the latest in a string of failed Alaska agricultural endeavors.

"In my opinion, it would be really unwise to throw away money to invest someone else -- to give them state money without having them investing their own money in the plant," Jon Olsen told the board Thursday.

Olsen managed the plant in 1985 when the original owners defaulted on the loan and the state took over operations. While there have been several attempts to sell or lease the Palmer facility over the years, none have come to fruition.

The facility is the only U.S. Department of Agriculture-certified slaughterhouse in Southcentral Alaska. All red meat sold commercially must be processed in such a facility. Farmers agree that shutting the plant down completely would devastate livestock production in the state's population center.


But with state lawmakers facing a budget shortfall, the plant has been targeted for cuts. It's averaged a deficit of about $100,000 a year since 2008. However, last fiscal year it made $42,448 in profit.

But even that is complicated. The plant operates using funds from the Agriculture Revolving Loan Fund, so any deficit is pulled from that, not the state's general fund. Still, because it is a state-run entity, lawmakers must approve funding for the plant and have targeted it in recent years.

In an interview following testimony, Olsen said he understands the challenges facing the Legislature but he wants to make sure the board is careful in picking the right operator. He pointed to the state's failed attempt to start a dairy industry at Point MacKenzie in the 1980s as a similar example.

"I don't want the state to lose more money, like a Point MacKenzie situation," he said.

Those looking to operate the meat plant don't want to see it lose money, either. Todd Pettit, vice president of the Denali Meat Co., said in an interview that his company isn't "forcing the hand of government into privatization."

"This is to assure this plant will stay open," he said.

Budgets in both the House and Senate include one-time funding for the slaughterhouse to operate through June of 2017. But lawmakers are still addressing the budget, and there's no guarantee that money will make it through, Pettit said.

He said if that if passed, the language specifies that the funding is only for one more year. He said if someone doesn't step forward the plant will be up for closure again next year.

"We're not advocating for the status quo anymore," he said. "We advocating for a public bidding process."

Lee Hecimovich, Mat-Su/Copper River 4-H district agent, expressed concerns to the board Thursday that new owners might not work with smaller producers or youth working on 4-H projects.

Hecimovich said after testifying that she "dusted off" the same testimony she used two years ago when the plant was facing a similar scenario. She's not opposed to private ownership, but she wants to make sure whoever takes over recognizes the livestock community's concerns.

"I'm hoping this is the last time I have to do this," she said of testifying. "Whatever happens, we need a solution."

Pettit hopes so too. He said Denali Meat Co. has every intention of being inclusive to all user groups, including small producers.

"People are running for the hills," Pettit said of other industries facing cuts in Alaska, "But agriculture and red meat production are moving forward. We want everyone in the industry to be a part of it."

Suzanna Caldwell

Suzanna Caldwell is a former reporter for Alaska Dispatch News and Alaska Dispatch. She left the ADN in 2017.