Bankrupt agricultural company Farmland has again delayed the release of its disclosure statement. It is also cutting jobs as part of a restructuring program – even though Kansas City authorities paid it $10m in job creation subsidies. Authorities are likely to monitor such grants more strictly in future – and companies will need to demonstrate that their intentions are honorable.

Farmland Industries has been granted another month to disclose how much it can repay of the $800m it owes to unsecured creditors. This is the fifth time the company has been given such an extension.

The company filed for Chapter 11 reorganisation at the end of May 2002, and has been shrinking ever since: in 2002, its revenue dropped by almost 45%. In its application for further delay, Farmland stated that it was still in sensitive negotiations regarding its remaining pork business. There were no objections to the application.

Farmland will have until July 31 to present its disclosure statement, and is currently trying to vacate its Kansas City headquarters. The company predicts that it will need less than a quarter of the 282,000 sq ft building, where 600 employees still remain.

Job creation was one of the factors that led the city to provide Farmland with an estimated $10m in subsidies in 1999. The company claimed that it would create or maintain a total of 2540 jobs in the area – and even at its height, the local workforce was only about 1800. The absence of these jobs is raising questions as to whether Farmland should have received the benefits in the first place.

Kansas City issued the bonds to buy property and tools, which were then leased to Farmland. Farmland will not have to pay property or sales taxes until the bonds have been fully repaid. The council also significantly reduced Farmland’s sales and utilities taxes.

Farmland’s troubles are likely to provoke arguments over how tax breaks are handled in the future – and even on whether it is appropriate to subsidize companies out of public taxes. Local authorities need to monitor companies continually to ensure they are performing as promised. In turn, companies looking for tax breaks will need to demonstrate that they will keep to their promises – which may be easier for some firms than others.

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