Planned beer-keg processing plant to employ 250 in Tucson

A Colorado-based company plans to hire nearly 250 workers to warehouse and recondition stainless-steel beer kegs at a new, 270,000-square-foot industrial facility on Tucson’s southeast side.

MicroStar Logistics, a major supplier of outsourced beer kegs based in Denver, plans to invest $70.5 million in facilities and equipment at the vacant industrial site at 9825 E. Old Vail Road, including a construction cost of $37.1 million, according to materials submitted to the Tucson mayor and city council.

The new facility will be used for warehousing, distribution and processing operations, including keg maintenance, rebranding, refurbishment, repair and cleaning, according to a jobs incentive package presented at a council study session on Tuesday.

Construction is expected to start in August and be completed by the end of July 2024, according to the company’s city incentive application.

MicroStar was expected to make a formal announcement of the project this week.

Tucson-based Diamond Ventures will develop the industrial-zoned site just west of South Houghton Road and fund about half of the cost of the project, the application says.

‘Shared keg’ service

MicroStar reconditions beer kegs as part of its main business model of “shared keg” service, which allows empty kegs to be returned to the nearest participating brewery, thereby reducing transportation costs.

The company, which also offers keg rentals, more recently launched a network to process and manage reusable plastic shipping pallets used for beer kegs.

In February, MicroStar announced it would launch its pallet-management network with Constellation Brands, which recently purchased a new fleet of reusable plastic pallets.

Constellation brews Modelo and Corona beers for the U.S. market at two breweries in Mexico, including one in Obregon, Sonora.

MicroStar Chief Operating Officer Glen Opp told the city council he’s been visiting Tucson for the past few years and looked at other communities before choosing the Old Pueblo as a plant site.

“It’s the community, the people in the community we can employ, and our connection with our customers, specifically in Obregon, there’s a huge connection there,” Opp said.

MicroStar says it’s the largest independent owner of beer kegs with nearly 6 million in use under the MicroStar and KegCraft brands in the U.S. and Kegstar in Australia, the United Kingdom and Europe.

Citing a study by Deloitte Consulting, the company says stainless-steel kegs are the most environmentally-friendly delivery method for beer, supplanting some 6 million cans and bottles annually.

Tax breaks eyed

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According to City Manager Michael Ortega’s summary of the project presented to the mayor and council, the Microstar project will create a total of 243 new jobs with an average wage of more than $55,000.

As planned, the MicroStar project qualifies for the city’s Primary Jobs Incentive Program, which requires an employer to invest at least $5 million in new or expanded facilities within the city limits and create at least 25 primary, non-retail jobs that meet certain wage and benefit requirements.

The city memo says Microstar plans to hire 59 workers at annual pay of more than $54,932 — the average local wage benchmark required to get the incentive — and an average wage for all new jobs is projected at $55,278, about $5,000 more than required based on Arizona’s average wage.

Qualifying employers can get incentives of up to 100% of city construction sales tax revenue generated by the project, applied toward offsets to impact or permit fees, off-site public improvements, or workforce training for the project.

The estimated value of the incentive to MicroStar is $482,615, the city manager said.

Over five years, the project is expected to generate direct revenue to the city of $3.1 million, and more than $15 million to other taxing districts, according to an economic analysis by Sun Corridor Inc., the Tucson region’s main economic-development group.

MicroStar still must sign a development agreement with the city, which is expected to come before mayor and council for approval in late August.

And the incentive payment to MicroStar is contingent upon the project meeting and maintaining its employment projection of 59 jobs at qualifying pay levels for five years.

Sustainability on tap

During Tuesday’s council study session, the council voted unanimously to direct staff to develop an agreement to be presented to the council on Aug. 22.

Ward 4 Councilwoman Nikki Lee welcomed MicroStar to her ward and said the company’s business and environmental and sustainability goals align with the city’s own goals.

Council member Kevin Dahl of Ward 3 also welcomed the company and, citing growing regional concerns about future water supplies and efforts to conserve, encouraged the company to incorporate sustainable water-use practices in its plant design.

Asked about expected water and chemical usage at the keg plant by Mayor Regina Romero, MicroStar’s Opp said the company reclaims and reuses most of the water it uses and uses very low levels of cleaning chemicals.

At a similar plant MicroStar opened in Eagle Pass, Texas, in 2019, the company uses water reclamation systems and treats its wastewater to adjust its pH to neutral before discharging it, he said.

“We build water reclamation into all those processes, we bring water effluent back to the areas that we can and we can control the levels, and make sure we’re a good citizen,” Opp said, offering to provide the city with a sample of wastewater from its Texas plant.

Opp told the council the company’s keg-sharing business model also lowers the carbon footprint of its brewery customers, which include some 700 craft brewers in the U.S. and big brewers besides Constellation including Pabst.