Incentives would pay for Nestle expansion

State officials approved a plan Thursday that would provide $3.5 million in tax incentives for expansion at the Nestlé plant in Montgomery County.

It would be the third tax-incentive package for the plant, totaling more than $85 million in state aid.

The most recent deal would allow Nestlé to recoup the money that will be spent to purchase a new line of production equipment. The expansion will add 50 jobs at the plant, which produces Hot Pockets and employs more than a thousand people.

The state tax incentives, approved by the Kentucky Economic Development Finance Authority, allow the company to keep the amount of money it would otherwise pay in taxes, assuming it fulfills the terms of the deal.

The state approved the plant for $34 million in tax incentives in 1994, agreeing to fund the cost of locating the plant in Montgomery County, according to state data. At that time, the plant was to employ 250 people at an average hourly wage of $8.

In 1998, the plant informed the state it was planning a $53.5 million expansion that would add 617 jobs at $11.58 hourly. The state agreed to offer tax incentives of $50.6 million, or 95 percent of the expansion's cost.

The jobs at the plant now pay $13.03 hourly.

Jim Waters, a spokesman for the Bowling Green-based free-market think tank Bluegrass Institute, criticized the state's move.

"We don't blame the companies for accepting the handouts from Frankfort, but we don't think it's sound policy for the long-term for all of Kentucky," Waters said. "This will obviously benefit a few people in this area, but we continue to have an economic plan that allows government to decide who's going to get incentives."

Waters said the state should enact policies that help all businesses, such as dumping the state's corporate income tax.

State officials could not be reached for comment, nor could a Nestlé spokeswoman.