Gluten Free Oats proposes to buy property from city

Posted 5/14/20

Gluten Free Oats presented a proposal to the Powell City Council on Monday that would provide a one-time payment of nearly $750,000 to buy out the city’s interest in the company’s land …

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Gluten Free Oats proposes to buy property from city


Gluten Free Oats presented a proposal to the Powell City Council on Monday that would provide a one-time payment of nearly $750,000 to buy out the city’s interest in the company’s land and facilities. Gluten Free Oats, which includes the GF Harvest company, currently leases the property from the city.

The meeting was only to provide an overview on the proposal and the reasons for it. The city must get an appraisal of the property, advertise the sale for three weeks, and hold a public hearing. After that, the council can execute the purchase agreement with the company, if it votes to approve it.

Over the last 15 years, GFO has received a number of grants through Wyoming Business Council, including trade show grants to help promote its products.

Gluten Free Oats partnered with the city for funding through the Business Council’s Business Ready Community program, which helped GFO build and grow its business. Among the various grants Powell received in this partnership was $1.5 million in 2006 to purchase the Homesteader Industrial Park, where the GFO mill sits today. In 2010 and 2011, the city received $770,000 from the state for GFO to increase its mill capacity, and in 2014, the city received $946,000 for GFO to construct its steel warehouse.

The company has also received a $50,000 loan from the city’s economic development fund, for construction, which GFO has paid back. The city has also provided about $59,000 in-kind donations during phases of the construction projects, in the form of engineering, inspections, and building permits.

GFO put up about $500,000 of its own money for matching funds and other investments, said Powell Economic Partnership (PEP) Executive Director Rebekah Burns.

As part of the stipulations of the grants, the City of Powell owns GFO’s land and facilities, and GFO leases them from the city at about $5,500 per month. The payments then go into an economic development fund used to support PEP, a revolving loan fund for small businesses, and a community project grant program.

Without the one-time payment, the company would pay $1.5 million over the next 29 years. If the council approves the offer, Powell will no longer receive lease payments, but it will have the lump sum to support economic development.

“You really can’t do much with that [lease payment],” GFO co-owner Seaton Smith told the council. “With $750,000, now you can do something.”

Councilor Scott Mangold said that from the beginning, the goal of the grants and loans was that the company would eventually pay it all back and buy out the city.

“This is probably the step we were talking about a long time ago. So I don’t see where it would be much of a problem,” Mangold said.

Burns told the council that, from 2016 to 2019, the company paid $1.3 million in payroll to its employees — it now has on staff 17 full-time and six part-time workers — and pumped over $10 million into the local economy.

“That’s a large impact for the city of Powell,” Burns said.

The company also contracts with local growers to produce on thousands of acres.

As a specialty foods manufacturer, Burns explained, GFO is struggling to compete against major conglomerates, such as General Mills and Kellogg’s, which dominate shelf space in grocery stores.

Smith talked about how much marketing money they spend just on free products. On one product, they spent $30,000 on free samples, and it never panned out.

“It’s tough to play in that market,” Smith said.

Hoping to capitalize on the niche market in hemp-based foods, GFO is partnering with Mother Hemp Farms to develop a product line. The company received the state’s first license to produce and process hemp in February.

Councilor Floyd Young asked if hemp could contaminate the oats with gluten, and Smith said that wasn’t possible.

“This is a necessary step,” Burns said. “There is no going back. The market share is what it is, and we have got to move forward.”

To bring the hemp plan to fruition, Smith said the company needs to pursue traditional lending options, which it can’t do while so many of its assets are publicly owned.

“This isn’t the sunset of GF Harvest. This is just the beginning,” Smith assured the council.

Smith said he was in discussions with City Administrator Zack Thorington, Mayor John Wetzel, and the city’s attorneys prior to Monday’s presentation, on a deal to buy the city out with a 1% discount, for a total of $742,500.

The company began in Smith’s garage in the early 2000s. Many members of the Smith family suffer from celiac disease, a disorder that causes an immune system reaction to gluten, a protein found in wheat, barley and rye. It’s not found in oats, but cross-contamination in processing can spread gluten to oat products.

The goal of the company was to produce foods that adhered to strict purity protocols, as they are called, so people seeking gluten-free diets had a reliable source of foods.

“For a celiac, it’s not just a fad thing. It’s sick or healthy,” said Kelly Spiering, president of the PEP Board of Directors.

Smith explained the way the big conglomerates test products for gluten in large quantities off the assembly line doesn’t provide as much guarantee of purity as GFO does.

“Somebody’s going to be sick,” he said.