The Caddo Parish Industrial Board -- a parish-appointed committee that helps structure business incentives -- on Thursday received preliminary approval from the state to sell up to $40 million in revenue bonds to build Libbey Glass a warehouse and distribution facility in west Shreveport.The expansion is not expected to create any full-time permanent jobs although about 200 construction jobs will be tied to the project."The key to the thing is it preserves the jobs that are here," said industrial board President Francis Gowen. "If they moved to Tyler, Texas, and did this acquisition and warehouse there, they could very easily move their manufacturing plant to Texas too."
The industrial board will own the 650,000-square-foot facility and lease it to a Chicago-based real estate investment trust, which in turn will lease it to Libbey Glass. The 20-year arrangement, which will rely entirely on private dollars for funding, will end up saving the company interest expense while keeping expensive real estate debt off the publicly traded company's books.
"It's hard to get a lower interest rate than they would on these bonds," said Ray Cornelius, the industrial board's bond counsel with New Orleans-based Adams and Reese.
It's not the first time local government has stepped in to help Libbey Glass, which has operated in Shreveport since 1974 and is the company's largest North American facility. The parish, city of Shreveport, Caddo Parish School Board and Caddo Parish sheriff's office recently crafted a 20-year agreement with the plant that will save Libbey Glass an estimated $10.7 million in property taxes on the new warehouse.
"The real motivation here is to make this plant competitive enough that there's a good comfort level that this plant is going to remain open for the foreseeable future," said Caddo Parish attorney Charles Grubb.
Last fall, Libbey Glass announced it was closing one of its plants in California and is considering layoffs at other plants. In 2002, the company closed a division in Ohio and moved its operations and 80 employees to Shreveport.
"The fundamental issue that Libbey does face is that, generally speaking, glassware can be made much cheaper in foreign plants," said analyst Jim Barrett, vice president of research with New York-based C.L. King & Associates.
That competition could increase as the World Trade Organization considers lowering tariffs on imported products.
"I would think for those reasons, the domestic glass industry is facing a very difficult future," Barrett said. "That is the future the company sees in front of them."
To help protect local jobs, the tax-abatement agreement includes provisions that will require Libbey Glass to maintain 900 jobs during the first five years. The guarantee drops by 100 jobs every five years through the length of the agreement. If employment drops below the agreed-upon figure at any point during the 20-year period, Libbey Glass will have to pay that year's property taxes.
"Those are the levels of jobs they are guaranteeing to be here in order to continue to qualify for this, but it's certainly not their intention to predict those will be the job levels," Grubb said.
"They told us they are not predicting to reduce those job levels, but they don't have a crystal ball. They said it was important to them that they wouldn't have to guarantee employment levels as they are today."
The Libbey Glass plant manager did not return phone calls Thursday.