Feeding on the corporate dole

One urban legend, which I have heard repeatedly, claims that there are signs on the subway walls in
Illustration by Jeanne A. Benas/For The Sunday Gazette
Illustration by Jeanne A. Benas/For The Sunday Gazette

Beech Nut’s response

To view Beech-Nut’s response to criticism of its planned move from Canajoharie to the town of Florida, click here.

One urban legend, which I have heard repeatedly, claims that there are signs on the subway walls in New York City directing people to Montgomery County, where they can receive generous welfare benefits.

However, I have come to believe that where these signs really exist is on Wall Street, where corporations are directed to Montgomery County, knowing that our various IDAs and EDCs hand out tax dollars indiscriminately and with little oversight to any business that promises to create at least one new job.

Today’s welfare queens are not women collecting undeserved benefits and driving Cadillacs. Rather they are corporate heads collecting undeserved benefits and driving Cadillacs.

Not American-owned

At least when a welfare queen gets arrested for fraud, I can take some comfort in the fact that my tax dollars went to an American. But when New York state and Montgomery County collude to give millions of tax dollars to Beech-Nut Corporation so it can build a new facility and move 20 miles from Canajoharie to the town of Florida, I don’t have that same comfort because Beech-Nut is not an American-owned company.

I don’t know about you, but I have problems with corporate welfare under any circumstances, but I have greater difficulties giving tax money to corporations that aren’t even American-owned. I would also find it less of a problem giving tax money to a company that was in financial trouble, but that’s not the case with the Hero Group, the Swiss corporation that owns Beech-Nut. The Hero Group generated revenues in excess of 1.7 billion Swiss Francs (more than 1.5 billion dollars) in 2006 and had approximately 4,000 employees in more than 30 countries.

Total bill

So what are we going to have to pay Dieter and Heidi before this is all over with?

– $42 million in Empire Zone benefits.

– $38.5 million in tax incentives from Montgomery County Industrial Development Agency.

– $18 million in funds for construction, machinery and equipment from the Empire State Development Corporation.

– $3 million from a State Assembly appropriation grant.

– $2 million grant from the New York State Energy and Research Development Authority.

– $750,000 grant from the Department of Housing and Community Renewal’s Office for Small Cities That brings the total price to $104.25 million. This doesn’t include the $3.85 million that was given to Beech-Nut to help repair damage after the flood of 2006. It also doesn’t include $250,000 in grants that National Grid will be giving Beech-Nut when it moves.

The grant from National Grid opens up a whole new chapter in the history of corporate welfare. We now have one corporation providing welfare for another. And if it isn’t ironic enough that American taxpayers are giving relief to a Swiss-owned company, we have the irony of a British-owned company (National Grid) giving financial aid to a Swiss Company based in America. Call it international corporate welfare.

The total bill to taxpayers for Beech-Nut’s move from Canajoharie is somewhere around $108 million. Since the proposed new plant that Beech-Nut is going to build will cost $124 million, Beech-Nut and its Swiss owners will in essence end up with a modern 650,000-square-foot facility for which they only paid $16 million.

Supporters of the Beech-Nut move argue that Beech-Nut is going to create 135 new jobs. But we all know from past experience, that these figures are inflated. However, even if we take the 135 figure at face value, each new job is going to cost taxpayers $800,000 each. (If Beech-Nut only produces 100 new jobs, then the cost will be over $1 million per job). Since the annual median income in Montgomery County is not quite $40,000 (in Switzerland it is almost $20,000 per year more) why not just hold a lottery and give 135 jobless people $40,000 each for the next 20 years. It would be simpler and just as effective in the long run.

Cost to village

And we can’t forget the cost to Canajoharie. Canajoharie owes $3.6 million for improvements made to its water and wastewater treatment plants, all of which were made to help out Beech-Nut. Now the residents of Canajoharie are stuck with a debt they assumed would be paid over time by Beech-Nut. If the state ends up bailing out Canajoharie, then we will have to add $3.6 million to the above total. On top of this, many businesses in Canajoharie will suffer because they relied on sales to Beech-Nut and its employees for a substantial part of their revenues.

Beech-Nut’s Web site claims that “At Beech-Nut, we love being in the same small town that we’ve been in for over 100 years. We love that generations of the same families work together here.”

As the village of Canajoharie has discovered, Beech-Nut’s love is not only conditional, but it’s for sale to the highest bidder. The town of Florida has won Beech-Nut’s love for now, thanks to the dowry paid by the residents of Montgomery County and New York state. I just wonder how much the alimony payments will be when Beech-Nut decides to separate somewhere down the road.

Daniel T. Weaver lives in Amsterdam and is a regular contributor to the Sunday Opinion section.

Categories: Opinion


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