JOHNSTOWN - An agreement approved Wednesday gets a local yogurt maker closer to starting a $120 million expansion.
The Gloversville-Johnstown Joint Sewer Board on Wednesday approved a proposed 30-year allocation and capital improvement agreement with Fage USA as a precursor to the company starting construction on its expansion.
The company plans to double its production with a new building on the site at the Johnstown Industrial Park, increasing Fage's 240-person work force by another 150 employees. Fage is the sewer plant's largest customer.
The proposed agreement approved by the Gloversville-Johnstown Wastewater Treatment Facility's board allows Chairman David Thum to sign the four-part agreement. It still must be approved by the two cities and Fage. In order to deal with Fage's increased production, and much more whey, the sewage treatment plant must be improved.
In May, the four entities approved a memorandum of agreement, but the new agreement is more final and comprehensive.
Glens Falls attorney Leah Everhart told the board Wednesday the May memorandum was "really the skeleton of the agreement; this is the flesh."
Everhart briefed the board on the agreement, saying that while Fage is undergoing a "huge" expansion, the sewage treatment plant needs to "expand our own capacity."
The new agreement shows the anticipated discharge allocations from Fage USA are allowed to increase from 127 million gallons of wastewater for 2012 to 286 million gallons by 2017.
Under the agreement, the parties agree Fage's expansion cannot be done unless certain capital improvements are undertaken to increase the wastewater processing capacity of the sewer treatment plant on Union Avenue. The sewer board is agreeing to have an engineer determine what capital improvements are needed.
The sewer board will bear all costs of the design work to be completed by December, the agreement says. The capital improvements are expected to be in the millions, although the exact amount hasn't been determined yet.
Other parts of the agreement deal with testing
Fage's effluent discharge on a "random" basis.
The environmental liability was estimated at $5 million as a minimum involving the expansion project.
The agreement states Fage may terminate the agreement and its obligations at any time in the event Fage ceases business operations "for any reason." The agreement also says that if Fage doesn't ultimately pursue and complete expansion of its yogurt production by Dec. 31, 2014, the sewer board may terminate the agreement and is not obligated to undertake the capital improvements.
Everhart said that although she hasn't heard back from the two cities' attorneys yet on the proposed agreement, preliminary work on it is virtually complete.
"I think this negotiation process is about 99 percent done," the attorney said.
Board member Salvatore Giarrizzo objected to what he sees as a hurried-up process to approve the agreement, after only being handed a copy of it from the attorney Wednesday night.
"I'd like to read it," he said. "I don't even know what it says."
The board voted to have Thum sign the agreement, despite Giarrizzo's sole no vote.
Giarrizzo said he wasn't sure what will happen if the sewer plant makes millions of dollars of capital improvements to accommodate Fage and the company only provides "nominal" wastewater flows. He said that scenario provides less revenue for the sewer plant and the sewer plant would have to "eat the cost" of its improvements.
Plant consultant George Bevington said there is a bit of a "chicken before the egg" feel to the process, but noted Fage is spending $120 million and all indications are it plans are to proceed, pending municipal agreements.
"There is some projected flows," Bevington said. "That's going to be a massive project and we'll be able to react."
Michael Anich can be reached at email@example.com.