IRWINDALE, Calif. — In modern-day David and Goliath stories, it's the factory owner that is usually portrayed as the mean Goliath.
That has not been the case for David Tran, founder and chief executive officer of Huy Fong Foods, the Irwindale, Calif.-based manufacturer of the popular Sriracha sauce with the trademark Rooster-embossed bottles.
Tran — not the city, nor residents who lodged complaints about factory smells — has been the winner in the court of public opinion of a dispute that has bubbled over into bond offering documents.
Once touted by the city as a shining example of redevelopment, city leaders' fight with the factory about odor complaints have resulted in talk the Huy Fong Foods plant could leave for greener pastures.
Officials minimized the financial impact to the city if Tran did decide to pull up roots, but the furor was included in the official statement for $13 million of redevelopment refunding bonds that priced last week.
Huy Fong officials say they have received more than 50 letters from states and cities as far away as Texas and Idaho with offers to relocate. Even Bell, Calif. sent a letter, according to Donna Lam, executive operations officer.
The story first captured media attention in October when the city filed an injunction threatening a temporary work stoppage if Tran didn't resolve odor complaints stemming from production of his popular chili sauce. The city followed up in January with an amendment to its lawsuit claiming a breach of contract for violation of site covenants that prohibit the maintenance of a public nuisance.
The 69-year-old, who emigrated to the U.S. from South Vietnam, originally opened his hot sauce company in Chinatown in 1980. He later moved to Rosemead where he operated a 68,000-square-foot plant before moving 14 miles east to Irwindale in 2011.
City leaders say they don't deserve the backlash for trying to enforce covenants Tran signed before the factory was built. Those documents stipulate that he would install air filtration equipment to prevent the kind of odor complaints the city is receiving from residents, businesses and other cities, according to City Attorney Fred Galante, a founding partner in law firm Aleshire & Wynder.
Baldwin Park residents across the street from the factory are among those the city has received complaints from.
"The city did not want to go to court — we just want them to install the filtration system they committed to building," Galante said.
Huy Fong competed with several other developers for the right to buy the land and develop the 650,000-square-foot, $40 million plant, according to city officials.
The industrial city nestled at the foot of the San Gabriel Mountains has 1,454 full-time residents, but more than 25,000 work there during the business day. Among considered advantages were that Huy Fong Foods only ships at certain times of the year and truck traffic would be limited, according to city officials.
"Just because people reside in an industrial area, it shouldn't mean they can't expect a certain quality of life," Galante said.
A strategic economic plan the city and its former redevelopment agency adopted in 2011 referred to the public-private partnership that began in 2008 as an "emblem of a true American success story, possible with the land assemblage and brownfields revitalization tools of redevelopment."
California dissolved its 400-plus redevelopment agencies in early 2012.
Further redevelopment on properties managed by Irwindale's former redevelopment agency is stalled while the city awaits word from the state's Department of Finance on the property management plan it submitted in December.
U.S. Rep. Tony Cardenas sent a letter to Huy and then made a visit April 22 to convince Tran to relocate to the San Fernando Valley if things don't work out in Irwindale.
Cardenas spokesman Paul Kincaid said the Congressman "simply wanted to visit the factory to learn more about the incredible business that Mr. Tran has built, to see how many jobs have been created and to get a full understanding of the environmental concerns present in the factory."
Cardenas "found nothing to indicate that Huy Fong would not be a wonderful employer for the San Fernando Valley," Kincaid said.
He was "impressed with the efficiency and the cleanliness of a factory that does so much business using ingredients that are, to say the least, a bit messy," Kincaid said.
Kincaid added that independent studies have confirmed that the plant "does not have an appreciable impact on the environment in the surrounding neighborhood."
The Congressman also dropped off a packet of information with state and federal incentives, according to Huy Fong officials.
Among the firm's supporters is Young Ja Whang, 69, who owns a convenience store across the street from the factory. She convinced 230 people to sign a petition.
"Before the factory was built there was a lot of junk at the site of the former asphalt plant and gang members were getting inside," Ja Whang said. "Now there is a nice company there and most of the neighbors love it."
She works at her store with her husband, Pob, from 8 a.m. to 8 p.m. seven days a week.
City officials say they are trying to balance the health concerns of residents and nearby residents with the factory owner's needs. The City Council tabled a vote on a resolution that would deem the factory a public nuisance at an April 23 meeting. They are slated to take up the matter again on May 14.
The city does not want the factory to close, nor does he think that is likely to happen.
"It is not a credible threat that he would leave," Galante said. "He spent close to $40 million to build the factory. The cost of equipment to improve air quality is insubstantial in comparison."
As part of his agreement with the city, Galante said that if Tran leaves he will have to pay $250,000 a year for in lieu taxes he agreed to for 10 years.
Tran is the third largest property owner in Irwindale and his property had a $72 million assessed value in fiscal 2013-14, according to the Irwindale Community Redevelopment Agency Successor Agency's bond documents.
According to the offering documents, if operation is negatively impacted or the plant is shut down, it "could have a materially negative impact on the assessed valuation of such property and corresponding negative impact on the tax revenues."
Tran's property makes up 3.45% of total assessed values in the city's redevelopment "project area." Based on assessed valuations for fiscal year 2013-14, the Huy Fong factory will generate $144,175 of housing tax revenues and $440,054 of non-housing tax revenues. The impact to debt service coverage would reduce non-housing service debt service coverage from 257% to 247%, according to the offering documents.
The assessed value of the entire redevelopment project area is $2.08 billion. The refunded bonds, insured by AA-rated Assured Guaranty, received an underlying A-plus rating for non-housing bonds A for housing bonds from Standard & Poor's.
The city's successor agency was responsible for $81 million in outstanding bonds as of June 30, according to the city's comprehensive annual financial report.
Despite the furor, Galante said when city officials spoke with Tran before the April 23 city council meeting the factory owner appeared willing to work with the city. City leaders expect that once a filtration system is installed, the hubbub will die down.
Tran told city leaders he would address the problem, Galante said, but he hasn't followed up with action. The city asked Tran to provide an action plan involving a skilled consultant that will result in an adequate filtration system. The one Tran installed when the factory was built obviously is not enough, Galante said.
Tran said in an interview that consultants have told him the equipment would cost around $500,000. Even more so, Tran said he is not convinced that anything he does would make city leaders happy at this point.
"The health department has told me I would have to shut down production while the equipment is being installed," Tran said.
He adds that the South Coast Air Quality Management District found nothing wrong when it inspected the plant.
Sam Atwood, a spokesman, confirmed that they did not "document any violation of any of our rules and regulations."
The air quality management district did recommend that Tran consider some sort of active carbon filtration be used during the mixing process. Air quality officials weren't present for grinding operations, Atwood said, so they cannot offer any expertise there.
"We have not been able to document a public nuisance," Atwood said. "Our focus has been on offering technical assistance. It is up to Huy and the city to decide on the next steps they want to take."
Tran said he opened the factory up to public tours in early April so people could experience conditions for themselves. He adds that he invited the mayor and council to tour the plant, but has had no takers.
To arguments that the majority of the complaints stem from the two to three month period during chili pepper grinding, he responds that everyone is welcome to return for a tour during grinding.
Tran claims that the majority of the 70 complaints stem from five households in Irwindale, but Galante and the city dispute that. In the bond documents, the city claims that 19 individuals have formally complained to the city.
Tran confirmed that he does not want to move, but the plans he once had to expand in the city, as his business grows, are now unlikely.
If the company, which had $80 million in sales last year, expands, it will not be in Irwindale.
If business continues to thrive, Tran said he plans to open a second plant in three years. Tran ended the interview in exasperation, saying "he is tired of rehashing this."
One benefit of the furor: the company has even received calls from overseas customers asking that he import the popular sauce, according to Lam.
