Tallgrass Brewing halts production

The parking lot at Tallgrass Brewing Company sits nearly empty Friday morning. The Manhattan brewery suspended production Thursday.

Tallgrass Brewing Company suspended production Thursday, but founder Jeff Gill remains hopeful the work stoppage will be temporary.

Gill, who founded the brewery in 2006, said Tallgrass is “very close” to getting the investors it has been seeking. This would lead to a new group taking controlling interest in the company.

“We would very much like that to happen within the next month,” Gill said.

Tallgrass, which distributes to 18 states, is in its current situation in part because of growth.

In 2015, the company moved into a $5 million brewery at 5960 Dry Hop Circle in the Manhattan Business Park near Manhattan Regional Airport. This provided 48,000 additional square feet of production capacity.

“We did an expansion at a time simultaneous with the growth of breweries in the United States,” Gill said.

Gill said that growth created challenges for Tallgrass and other regional breweries. The company started a recapitalization process with an unnamed investment group to “inject working capital into the company.”

During that time, Gill transitioned out of his leadership role but remains a board member.

“I haven’t been really a part of operational decision making for a year,” he said.

Gill said the company has about two to three months of product left. If the company finds investors within the month, he said Tallgrass would likely be able to get beer on the shelf with only a few weeks gap in the supply chain.

Gill said the company’s 20 employees have been furloughed. “I told them, ‘We’re trying to get this figured out, and when we do, we’d like to have you back,’” he said.

Tallgrass Taphouse, a downtown brewpub, also opened in 2015. The restaurant, which has Tallgrass branding but is owned by ICON Investments, will remain open.

In 2014, the company reached an agreement with the city to receive $432,923 in economic development funding for the new brewery. This included $250,000 in forgivable loans and $180,000 in grants.

City manager Ron Fehr said the grants are based on jobs, and the loans, which the company received fully with the acquisition and renovation of the building, are forgiven based on compliance with the agreement.

The agreement includes performance targets for capital investment, job creation, and wage structure and benefits package.

Each year, the city uses the compliance percentage to figure out how much Tallgrass has to pay back the yearly $25,000 principal plus 3 percent interest.

In 2016, which is the city’s most recent published economic development report, Tallgrass had 94 percent compliance on its agreement. Most of the city’s agreements require a total compliance level of 85 percent or greater for full loan forgiveness.

The 2017 economic development report hasn’t been published yet, but Fehr said Tallgrass paid the city $6,050 on March 1 primarily because of a drop in jobs based on projections. Tallgrass had projected it would create 40 jobs over 10 years.

Fehr said the city has paid $67,500 in grants halfway through the 10-year agreement. He said officials are calculating how much Tallgrass would owe in loan repayments if the company doesn’t restart its operations.

The company’s next review by the city is schedule for January 2019.