Council Votes to Maintain Candy Company’s Tax Break

July 27, 2011
By

Representatives from Necco - including a high-ranking executive from American Capital, Miles Arnone (left) - came before the Council Monday night to plead their case for keeping a local tax break - which amounts to about $300,000 in savings per year. Most sympathized with the company and it’s parent, American Capital, and agreed to continue the arrangement.

City Councillors voted 10-1 to allow Necco to keep its tax-break agreement despite being decertified from the state economic development program that administers the agreement and despite violating most parts of the agreement.

The local tax break amounts to a savings of some $300,000 per year for Necco. With the break, they pay the City around $750,000 per year in local property taxes.

Last month, in a meeting before the state Economic Assistance Coordinating Council (EACC), Necco was decertified from the program for lack of job creation. That decertification from the state triggered a number of decisions that had to be made locally about the tax agreement, which is supposed to become null and void once the state decertifies.

However, Mayor Tom Ambrosino advocated keeping the local agreement, and after a comprehensive legal ruling from the EACC’s attorneys, Necco and Revere were allowed to keep the local tax break – which set a new precedent for the state program.

Ambrosino conceded, though, that it was ultimately the Council’s decision to keep or kill the agreement.

Neither the mayor nor most councillors wanted to broach the subject.

Councillor George Rotondo did, and he put in a motion calling for a discussion of the issue. He supplemented that with an advertising campaign for his mayoral run focusing on Necco as a prime issue in the campaign.

On Monday night, Rotondo went against the grain, calling for Necco’s 2003 tax break agreement to be rescinded and, perhaps, renegotiated.

However, Necco’s parent company – American Capital of Maryland – sent in one of its executives, Miles Arnone, to scream and yell, and a majority of the councillors seemed to side with Necco, wanting to give them a break in tough times.

With several union leaders on hand leading the usual campaign for collectivism, the issue was defined around jobs – and for good reason because Necco’s parent company has routinely said they might leave if the tax break isn’t continued.

“In a perfect world, [Rotondo] would be right,” said Joe Lake, a union leader with the Department of Public Works (DPW). “But we all know we’re not in a perfect world. We’re in a major downturn of economic growth and that has to be considered.”

Rotondo, though, took a hard-line stance and seemed to get pounded from all directions, but said afterward that he took the heat because he believes a lot of the residents of the city agree that Necco shouldn’t be subsidized any longer.

“The taxpayers of Revere can’t afford to bail out Necco and American Capital,” he said. “The contract clearly states that they have violated it…If your website is right and you have $100 million in sales, then I find it hard to believe you’re going to pick up and leave over the loss of a $300,0000 a year tax break.”

For that he received an unprecedented verbal beating from Arnone – who took exception to Rotondo’s detailed questions about the financial health of the candy company.

“If you knew anything about finance you would know that you don’t go around talking about the health and well-being of your company when you’re down 30 percent because then your vendors get nervous,” he said. “What’s ridiculous about me having to come here and answer your questions in this charade is that it makes our vendors and customers have concerns about whether we will be here tomorrow.

“They don’t want to do business with us because they read funny little ads run by people in the newspaper that are campaigning for mayor,” he continued. “I have to answer questions from CVS and Target and other companies because they see this and want to know what’s going on.”

Later, as Rotondo made further questions, he added, “I like the electioneering…Stop pretending to be disrespectful.”

Most of the rest of the Council, also, was not following Rotondo down that path. Most, in fact, were quick to apologize to the American Capital executive.

Councillor Richard Penta apologized as did Councillor Charlie Patch – both attempting to offer the peace pipe.

Councillor Dan Rizzo – also a candidate for mayor – said he was fully behind the tax break and wasn’t about to risk jobs or tax revenue.

“I want to apologize for you guys having to be here again,” said Rizzo. “You were here in January and since then you’ve come into compliance. As far as I’m concerned, it’s all just to use Necco as a punching bag to promote being pro-taxpayer. It represents to me a lack of knowledge of basic finance – not municipal finance – but basic finance and leadership.”

On the other hand, Councillor Bob Haas pushed Arnone for some answers and Arnone accorded him a bit more decency than he did Rotondo.

“These are very important issues,” said Haas as other councillors were cutting him off. “We can’t just whitewash this.”

Later, he said, “I was somewhat surprised that when I asked the questions, I didn’t get any answers. I was somewhat taken aback that they had four powerhouse guys up there and no one would answer the question. The question was pretty simple – how does the decertification at the state affect the City. It was bash, bash, bash and that’s all and people thought George got beat up on the issue, but really there was an issue there and we don’t have the answers.”

It was Ward 4 Councillor Stephen Reardon, though, who was probably the only councillor that came down to Earth on both feet.

“I am not prepared to offer any apologies to Necco tonight,” he said. “That is due to the fact that the contract has been violated…This agreement made no contingency for what might go wrong with the economy…I don’t think you’re going to walk out of here if we take away this TIF agreement, but we also have to deal with reality. I have to tell you the agreement is awful – just awful. In the real world, it’s not tenable. It’s a lousy agreement, but we have to stick by it because it’s a lousy deal for us if we don’t.”

That was the overwhelming sentiment, and Rotondo’s motion to discontinue the tax break was shot down.

Instead, Councillor Tony Zambuto – a loyal supporter of Necco from day one – offered a motion that called for keeping the TIF agreement in place. That motion carried the day, with only Rotondo voting against it.

For now, the candy company’s tax break will continue as is

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