Saturday, November 14, 2015

Pepsi Layoffs Affect Us All

A recent announcement by PepsiCo states that they have laid off employees. They have not disclosed the quantity and depth of the layoffs or which of their locations in Westchester County were affected. The announcement came last Thursday when a PepsiCo representative stated it was to make their operating model more efficient and effective. While the company says they are working with the “displaced” employees, we’re sure that offers little consolation during this holiday season. Receiving news about losing your job never comes at a good time, but the practice of many companies to balance their budgets at the end of the year is a common one. So is the end-of-year layoffs. What many company executives fail to realize is that balancing their budgets via layoffs never works in the long run.

Aurora Gonzalez, a PepsiCo spokesperson, had said no employees would be laid off as part of its move from their 1 Pepsi Way headquarters in Somers. More than 900 employees working in Somers it’s said would be relocated to PepsiCo’s White Plains office or to its Purchase headquarters on Anderson Hill Road. PepsiCo also has two office buildings at 1111 Westchester Avenue and their Research and Development facilities in Valhalla. ABG has learned that the renovation of the Purchase location had been delayed and was originally scheduled to be completed this past September of 2015. Our sources are unable to confirm when the renovation project will be complete. However, the R&D facility has seen a significant reduction in office staff at that location. The nine-story headquarters at 1 Pepsi Way had been expected to be completely empty by Feb. 1.

Here’s the real “rub” that seems to bite the taxpayer almost all of the time. PepsiCo received generous taxpayer subsidies to stay in Westchester County and to renovate its headquarters. In 2012, the Westchester County Industrial Development Agency, agreed to give PepsiCo between $6 and $7 million in sales-tax exemptions for the headquarters renovation. Adding insult to injury, the NY State gave PepsiCo $4 million in tax credits and the company negotiated a 15-year payment-in-lieu-of-taxes agreement with Harrison and its school district. While many favor the PILOT program for not-for-profit businesses, a for-profit company such as PepsiCo should not be participating with it.

In exchange for this County and State largess, funded by taxpayers, the company agreed to keep 800 full-time jobs in Purchase through 2017. PepsiCo would only be in default if staffing levels fell below 540 jobs according to a County spokesperson. As of the end of last year, the company had about 1,100 full-time jobs in Purchase. While the number of jobs preserved is questionable, ABG is sure PepsiCo made sure to not drop below the agreed upon number of jobs when initiating their layoffs. Besides bankruptcy, this is one of the inherent issues with Industrial Development Agency’s giving financial subsidies and incentives to private businesses. As always, taxpayers must make up the difference of this same largess that both the County and State see as the panacea for success when the ultimate reality is more likely failure.

ABG staffers agree that we would have less of an issue if PepsiCo, as one example, was forced to reimburse the taxpayers for each layoff by repaying a percentage of the amount of money provided to them. Another idea would be to have an escrow account that the receiver of these subsidies would have to maintain to ensure the taxpayer generosity was not taken advantage of. If PepsiCo, again as an example, was forced to go to a bank or other lending institution for this same money, we’re reasonably sure the conditions would be more stringent. Finally, PepsiCo’s leadership include smart people and know that because of their size, just threatening to leave Westchester would generate a plethora of help from County and State representatives. If only the taxpayers got this kind of attention from their politicians!

Industrial Development Agency’s seem to be the politicians method of giving money to commercial entities they couldn’t otherwise align for votes. They already have what’s called “Member Items” money they can freely distribute to causes of interest. Simply, Member Items are an unaccountable form of financial disbursements up to $5,000 that most politicians have access to for their voter districts. So when you see a press conference featuring any politico standing with a group pronouncing saving this or establishing that, it’s really our money they are giving away that could have been used to fill potholes, build sidewalks, purchase lifesaving equipment, improving infrastructure and so on for our communities. This facade of preserving jobs may look noble, but the reality is that our taxes are high enough and this wasteful “help” costs the average taxpayer too much. It must stop. Only then will we get A Better Greenburgh.

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