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Entrepreneur Eyes High-Tech Farm on RIDC Property

By Jason Togyer
The Tube City Almanac
June 11, 2018
Posted in: McKeesport and Region News

Entrepreneur Juan Lacey is hoping some day to grow some of these same vegetables using aquaponics technology in McKeesport. (Photo special to Tube City Almanac)

Urban farming in the Mon Valley isn't anything new --- but local businessman Juan Lacey isn't proposing an ordinary garden.

Lacey says he can grow produce and raise fish for 12 months out of the year at the RIDC Industrial Center of McKeesport using a technology called "aquaponics."

And if he can line up the financing --- if McKeesport is designated as an "opportunity zone" by the federal government --- Lacey says such a farm could be employing 16 or more people, producing fresh vegetables and fish for sale in supermarkets and use by restaurants within four to six months.

"Four acres can support 16 growing systems," Lacey says. "Each one of those creates 93,000 heads of lettuce per year, which is approximately 1.6 million heads of lettuce. That's a lot of product coming out."

James Rakocy, a retired researcher at the University of the Virgin Islands who is considered one of the fathers of aquaponics, says Lacey's goal isn't unattainable.

"Aquaponics is technically sound if the best technology is used," Rakocy tells Tube City Almanac, by email from his home in Thailand. "With good planning and smart decisions, an aquaponic operation in McKeesport can succeed and become an asset to the community."

Aquaponics is the science of raising plants in water in an environment that also includes fish or other aquatic life. In a properly designed system, the plants and the aquatic life help support one another --- waste matter from the fish is recycled into fertilizer that helps the plants grow, which also keeps the water clean.

According to some sources, Chinese farmers were developing above-ground rice paddies as early as the 13th century. But modern aquaponics stems from Rakocy's research at Auburn University in Alabama and 30 years of experiments he conducted in agriculture at the University of the Virgin Islands, beginning in 1980.

The technology appealed to the university because of the lack of abundant freshwater and land in the Virgin Islands. It was later commercialized by Rakocy and a business partner and fellow researcher, Wilson Lennard of RMIT University in Melbourne, Australia.

Lacey isn't a farmer or a scientist. He's an MBA who owns a Pittsburgh cleaning company that specializes in environmentally friendly techniques. But he has experience buying and selling produce for Sam's Club, so he says he knows what kinds of problems retailers have with their supply chains for fruits and vegetables.

He first learned about aquaponics when he moved to the Pittsburgh area nine years ago, Lacey says. A group of Pittsburgh's North Side was trying to encourage someone to experiment with aquaponics, he says.

Their effort didn't succeed --- in part because nearby residents were concerned that the operation would create unwanted smells. But after nine years of talking to people who have tried aquaponics, and looking at technology available from several companies, including Wisconsin's Nelson & Pade, Lacey is convinced that the time is right for aquaponic farming in the Mon Valley.

"This is a proven system," Lacey says. "It is not new technology. And to be honest, my goal is not just to build an operation for growing. My goal is to build an industry here."

Lacey is looking to start on a site next to PurePenn's new medical marijuana cultivating facility.

Rather than selling directly to retail supermarkets, he says, an aquaponic farming operation might supply other businesses with raw ingredients for use in their products.

"One of my goals is to be able to attract start-up businesses to McKeesport that can take some of the product and do things with it, rather than just sell it in raw form," Lacey says.

(Above: Courtesy James Rakocy at The Aquaponics Doctors website)

Aquaponic systems work best for leafy green crops, Rakocy says, such as lettuce "and particularly herbs. An aquaponic operation could be large enough to supply supermarket chains in your area with these crops.

But aquaponic operations are not economical for crops such as tomatoes, cucumbers and bell peppers, Rakocy cautions. In addition, he says, aquaponic farming is capital-intensive and works on very thin profit margins.

"Most commercial operations today are relatively small in size, to allow direct sales to high-end niche markets such as farmers' markets and 'white tablecloth' restaurants," Rakocy says. "A single-owner/operator model with a few part-time employees is a popular size to capture these niche markets and high prices."

Scaling up an aquaponics operations requires very high volume, Rakocy says, and the output must be sold to wholesale distributors. Intermediate-sized operations may find it "more difficult to achieve profitability," he says.

Lacey believes that a McKeesport-based aquaponics farm would sell at least some of its output to supermarkets. Even if its overhead was higher than that of conventional farms in the southern United States, Mexico or South America, he says, the costs of transporting the produce would be lower.

And, Lacey says, supermarkets and restaurants have been shaken by incidents where contaminated produce made their customers ill. An aquaponic farm such as his would be able to track a head of lettuce, for instance, almost from seed to table.

"When you go to a grocery store right now, you pick up a head of lettuce, there's no code on it that says where it was grown or how it was treated," Lacey says. "When there's a recall, companies go through an inordinate amount of back tracking."

The ability to control the entire supply chain, he says, means a well-run aquaponics operation will be as much of an information technology company as it is a farm.

At least half of the effort going into a new aquaponics operation, Rakocy says, "must be devoted to business planning and marketing studies."

"Entrepreneurs often assume their product will fly off the shelves --- or more precisely the growing beds and fish tanks --- and that they will get the price they want," he says. "It's not that easy."

The important thing, Rakocy says, is that an entrepreneur such as Lacey has to stay focused on the correct goal.

"The goal of an aquaponics operation is not to grow fish and cultivate vegetables," he says. "The goal is to sell fish and vegetables and make money."

Lacey is estimating that he will need to raise about $2 million to get started --- and that, he says, depends on the federal government approving the designation of McKeesport's waterfront as an "opportunity zone."

Included in the federal tax bill passed in late 2017 was a provision allowing states to request that certain census tracts in distressed communities be declared "opportunity zones."

People or companies who invest in businesses in these "opportunity zones" get preferential tax treatment from the IRS, including the ability to defer taxes until 2027 on gains that they reinvest into a opportunity zone.

The goal, according to the IRS and the U.S. Treasury Department, is to stimulate investment in distressed communities. In Pennsylvania, Gov. Tom Wolf and the state Department of Community and Economic Development have recommended that parts of McKeesport and Glassport, all of Clairton and Duquesne, and much of North Versailles Twp. be declared "opportunity zones." (See map, below.)

The IRS has yet to rule on the recommendation.

In the meantime, Lacey's dream of an aquaponics operation in McKeesport --- potentially feeding other businesses --- hangs in the balance.

Most of the operations he's looked at, he says, have run by charities as non-profit operations, but he doesn't want to go that route.

Right now, Lacey says, the closest aquaponics operation to Pittsburgh that he's identified is in northern West Virginia. If what he's calling "Mon Valley Aquaponics" opens, Lacey believes it would be one of the first in Pennsylvania.

"We're waiting on pins and needs for the U.S. Department of the Treasury to adopt Pennsylvania's request," he says.

Originally published June 11, 2018.

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