For the third year in a row, Beech-Nut and its parent company Hero AG fell short of the job requirements in the company’s 2010 PILOT tax agreement, incurring a $750,000 clawback penalty for 2019.
In 2010 Hero/Beech-Nut relocated its baby food manufacturing operation from Canajoharie and its North American headquarters from St. Louis, Mo., to the town of Florida. The company built an approximately 650,000-square-foot facility, then priced at $124 million, and entered into a 20-year Payment in Lieu of Taxes agreement with the Montgomery County Industrial Development Agency and New York state.
The PILOT agreement required the company to pay $2.5 million annually in town, school district and county taxes, but that money was reimbursed by New York state for the first 14 years of the deal, provided the company maintained its job creation and retention commitments.
Hero/Beech-Nut’s job commitment was 491 employees, which in 2010 local officials said the company was exceeding.
For 2019, however, the company reported 330 total full-time employees.
On Thursday the Montgomery County Industrial Development Agency discussed its 2019 Projects Assessment Review report, which details the agency’s ongoing economic development projects, including its Payment in Lieu of Taxes agreements, an economic development tool that offers tax breaks to companies who agree to build or expand businesses within the agency’s jurisdiction.
Sheila Snell, the MCIDA Chief Financial Officer, said the New York State Authorities Budget Office requires the annual reports to make certain local industrial development agencies are monitoring PILOTs to make sure companies are making property tax payments according to the schedule of the agreements, that sales tax breaks given to projects are being implemented appropriately and to make sure companies live up to the job creation numbers promised in exchange for the PILOTs.
“It’s similar to our annual report, but we’ve added a few things, specifically for clawbacks,” Snell said. “For those projects that we do have clawbacks on we have to ensure that we monitor those and do the clawback, if there’s a requirement to do so.”
According to the 2019 Projects Assessment Review, Hero/Beech-Nut has fallen short of its job figures each year since 2017, and has been required to pay back a total of $2.5 million in tax breaks to New York state and $750,000 in Montgomery County for 2019.
The report states Beech-Nut had committed to retaining 356 jobs, and creating an additional 136 jobs, but total employment at the facility was 330.
“Beech-Nut has had the clawback for several years now,” Snell Said. “We were able to collect $750,000 from them [for 2019], that went out to the taxing jurisdictions because they didn’t meet their job numbers.”
For 2019, Hero/Beech-Nut paid these amounts in local property taxes:
- $30,000 in town taxes
- $285,000 in Montgomery County Taxes
- $435,000 in Greater Amsterdam School Taxes
Even though it had to pay the $750,000 penalty for 2019, Hero/Beech-Nut benefited from changes to the apportionment of Montgomery County and the school district’s property tax levies due to the falling equalization rate in the city of Amsterdam. In 2017 and 2018,
Hero/Beech-Nut was paying $488,000 in property taxes annually to Montgomery County and $732,000 in annual property taxes to the Greater Amsterdam School District.
Snell told the MCIDA board that one other entity, the HFM BOCES facility built at 2755 Route 67, Johnstown, also failed to meet the job goals of its $22.9 million 2 percent interest rate bond agreement from 2014, but the educational facility is tax exempt and there is no clawback mechanism. As of 2019 HFM BOCES has paid down the principle of the borrowed money to $18.9 million, and the final maturity of the note is scheduled for July 1, 2034.
Snell said two MCIDA PILOTs were completed in 2019:
- Breton Industries, located at 1 Sam Stratton Road, Amsterdam. The company paid a total of $55,530 in total property taxes over the course of a 10-year PILOT started in 2009. The company currently has 114 employees, which exceeds its original commitment to retain 106 jobs and is close to its commitment to create 10 new ones.
- DAIM Logistics, located at 128 Park Drive, Glen Canal View Business Park, Fultonville. The company paid a total of $39,009 in property tax over the course of the three-year deal. The project consisted of the acquisition of property located within Glen Canal View Business Park and the construction of a 25,000- square-foot warehouse, office and maintenance facility on an approximately 8-acre site. DAIM committed to creating 16 full-time jobs, but exceeded the commitment and currently has 37 full-time employees.
Snell said the MCIDA added a 10-year PILOT and $500,000 loan to the Valley View Hosp/Microtel, located on 5S, for 2019, as well as a 15-year PILOT for the Mohawk Solar project, located in the town of Minden and Town of Canajoharie. Neither project has reached the stage of making tax payments or reporting job figures yet.
She said in 2020 MCIDA will be adding a PILOT agreement for premixed vitamin blend company Vida-Blend.
The MCIDA Board Chairman Matthew Beck said the board is only required to listen to Snell’s summary of the 2019 Projects Assessment Review, so the board took no vote to officially approve it.