Economic development proves team effort works

By Larry Dreiling

There's an old motivational speaker's phrase about the word "team" being an acronym for "Together Each Achieves More."

Perhaps it's become hackneyed due to overuse, but in the case of the establishment of Bird City Dairy, that phrase may have some meaning.

The story begins with a farm family uprooting itself from a nearly century-old tradition of dairying in Pennsylvania to land in northwest Kansas. With one new business in place and an aggressive business plan at hand, the family decides to expand into a neighboring county.

It continues with the effort of a local power cooperative working with U.S. Department of Agriculture Rural Development to provide additional loan money on top of private credit to bring added jobs to a remote portion of the state. While the loan is relatively small, it is offered as way of support for bringing more jobs into the area.

The last place at the table of support is city government that is actively involved in community and business development and determined to assist in maintaining a high quality of life and decrease the out migration of families.

In 2000, the McCarty family--parents Tom and Judy McCarty and sons Mike, Clay, David and Ken McCarty, along with their families--left their longtime home in Pennsylvania Dutch Country and moved to Rexford, Kan.

"We were like a lot of dairies in the area," said family matriarch Judy McCarty. "A lot of farms were broken up by development. New neighbors were coming in from the city who didn't like the smell of freshly spread manure in a pasture next to the roads where the ladies made their morning walks."

An "exciting" search

A search of western Kansas by the McCartys was an exciting one, as they saw new dairies cropping up, especially in the southwest part of the state. Northwest Kansas, however, offered the family their best financial opportunities.

"We were kind of sheltered living in Pennsylvania. We came out here and saw what was going on and met some incredible people," said son Mike McCarty.

The McCarty Dairy of Rexford began milking in a double 16 parallel parlor. It soon expanded to a double 25. The family enjoyed the area and wanted to expand.

That chance to expand came not from 1,500 miles away, as was the McCartys' last opportunity, but from 60 miles away in Bird City, Kan.

"We came from 200 cows in Pennsylvania," Mike McCarty said. "We were pretty compact back there and weren't of the mentality to think of ourselves in terms of how to layout a new dairy. Experience and time made us realize we could spread out a little bit."

In November 2005, discussions began between the McCarty family and the Bird City Century II Development Foundation for a new dairy facility east of town. Getting a big operation like this was not easy.

"We had plans to do more where we were at, right at Rexford," said Mike McCarty, who manages the new Bird City Dairy. "The Bird City Century II Foundation, led by Cathy Domsch, met with us and told us they'd like us to dairy up here. We told them we didn't have the capital to expand to that yet but hey, there's me and my three brothers. We're aggressive, and we want to do things."

"It's amazing how this happened. We had to have a foundation board that had to agree. We as a family--my wife--had to agree. We had to have lenders agree. Then we had to go through the permitting process. We also had to get the community to agree."

Federal loan help

While a local Farm Credit office stepped forward with much of the dairy's financing, and Century II provided a grant, an area power cooperative stepped in to assist with a loan application to USDA-RD's Rural Economic Development Loan and Grant (REDL&G or "Redleg") Program. The program assists in the financing of job creation efforts.

With the promise of 19 new jobs in Bird City, it was easy to see how Bird City Dairy might qualify for such a loan.

Under the program, USDA-RD made a zero-interest loan to Hays, Kan.-based utility cooperative Midwest Energy, Inc. Following the execution of loan documentation and meeting the conditions of the program, Midwest Energy passed the loan proceeds on to the McCartys.

The Midwest Energy, Inc. loan is $740,000. The total cost of the project will be $9,100,000 with $8,360,000 leveraged with the other financing.

"We joined in the discussion with the McCartys and Century II as soon as we found out about it," said Bob Muirhead, director of economic and community development for Midwest Energy, Inc. "We told them the Redleg loan could fund some of the significant debt their loans carry."

Loan is unique

The loan is unique, because once the McCartys' loan went through, USDA-RD officials have decided to no longer fund these types of loans toward production agriculture operations, even if job creation is involved.

"The McCartys are in the final round of these types of loans for production agriculture," Muirhead said.

Instead, funds can be used for a variety of purposes, according to a USDA-RD release. These purposes include community facilities and infrastructure, improving access to local medical care and other projects that encourage a favorable climate for job creation and economic growth.

"USDA Rural Development hasn't had many chances to do projects that directly affect production agriculture," said USDA-RD State Director Chuck Banks. "The projects that we usually focus on are value added grant programs and renewable energy and energy efficiency improvement grant programs. This is great for wind generation projects.

"But it's great that Bird City and Midwest Energy wanted to work with us on this project. It's created new jobs and opportunities to assist the community of Bird City and that's what the grant program is all about."

Adds Mike McCarty: "We'll use the Redleg loan as subordinating financing. It will help to reduce our interest payments on the project. You just have to remember these are loans. There are a lot of misconceptions about that.

"The block grant is at 7.5 percent. The first six months are interest only; then there's a seven-year payback. The Redleg is for 2.5 to 3 percent. At about 5.5 percent, it averages out pretty nice."

Communication effort

By late summer of 2006, the dairy's design was determined and financing fell into place. Throughout the process, the McCartys and Century II held town hall meetings in the area to keep residents informed of the progress of funding, design and construction.

"The McDonald and Bird City communities have been just great to us," Mike McCarty said. "Are we perfect out here? No, but it was nice to see the support then and now."

Permits to the Kansas Department of Health and Environment for a lagoon were submitted in October 2006 and approved March 2. Construction began the following month and milking began on Sept. 14.

"This is the second one we've built. We built the first one while we were still 1,500 miles away. We got a lot more done right this time. It was a pretty rapid process. Considering how we got everyone on the same page, I have to admit I'm impressed," Mike McCarty said.

Bird City Dairy is on 215 acres with a total of 2,200 cows. The dairy milks about 1,550 head at one time and raises 200 heifer calves on site. Seventy-five bull calves are sold each month.

The DeLaval double 30 parallel milking parlor provides efficiency and a pleasant environment for both the cows and employees. It's expandable to a double 35. That point might come quite soon.

"We have plans for another 1,000 head within the next two years at which point we'll expand the parlor," Mike McCarty said.

Workers handpicked

Mike McCarty's job is one of those 19 new jobs promised to Bird City in the grant application to USDA-RD. The remaining jobs came nearly handpicked.

"Every one of the people here were people that were recommended to us by people who worked for us at Rexford," Mike McCarty said. "It was very word of mouth. There has been very little turnover at Rexford and we built a core group of employees; so we have been able to build off of that into this operation.

"Don't get me wrong, labor's tough to find in western Kansas. You should believe in the principle that everyone wants to do a good job. We let them do their job and allow them to succeed and not fail. They're co-workers not employees. If we're loyal to them, we get the loyalty back. When it snows, those guys suck it up and work 18 to 20 hour days. That's when it pays off."

The Bird City Dairy is large and efficient. The herd is milked three times a day with a daily average throughput of 135,000 pounds of milk, which is stored in two 6,300 gallon tanks and shipped daily to a Dairy Farmers of America processing plant in Omaha or Lincoln, Neb.

Cows are housed in a free-stall barn and open lots that keep them comfortable year-round. Annual feed needs are estimated at 17,000 tons of silage, 6,000 tons of hay and 150,000 bushels of corn, along with soybean meal, cottonseed and minerals.

The dairy uses sand bedding. The sand is separated from the manure in a settling lane. Bird City Dairy recycles this sand by reusing it to bed the stalls.

Bird City has only been in operation a couple of months, but Mike McCarty is already considering expansion of the parlor and adding more cows. More activity may be in store.

"We always have to keep challenging ourselves, to think out of the box," he said. "We have to keep looking at the big picture."

Larry Dreiling can be reached by phone at 785-628-1117 or by e-mail at ldreiling@aol.com.

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Date: 11/29/07

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