Jun 29
2023
Yet another subsidy for local meatball maker
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A West Seneca-based frozen food manufacturer — the rumored maker of Olive Garden’s meatballs — won yet another tax break from the Erie County Industrial Development Agency on Wednesday, its third since 2016.
And that’s not counting six previous low-interest loans the IDA has granted to Rosina Food Products dating to 1981.
The company manufactures frozen Italian food products, including meatballs, ravioli and pizza toppings.
In a unanimous vote, the IDA board of directors approved $749,000 in property, sales and mortgage tax breaks for Rosina. Executives said the company will use the tax breaks to renovate and expand two buildings on its West Seneca campus.
Granting multiple tax breaks to a company is something of a pattern for the Erie County IDA. Moog, for example, the Elma-based defense contractor, has received no fewer than 14 rounds of incentives from the agency, dating to 1973. Other big-name firms, like General Motors and Perry’s Ice Cream, have also received multiple subsidies.
Rosina will demolish 6,000 square feet of its facility at 75 Empire Drive and add 12,000 square feet of manufacturing space for a new ravioli production line. The company will also renovate 130 Empire Drive, which is vacant, for use as office space. The company estimates the expansion will cost $16 million, though that total will be offset by the subsidies.
The incentives break down like this:
- $218,789 in property tax breaks over 10 years.
- $455,000 in sales tax breaks.
- $75,000 in mortgage recording tax breaks.
Rosina executives told the IDA the expansion will create 15 new jobs, paying an average of $45,000 annually. The subsidies equate to $49,900 per new job.
Under the payments-in-lieu-of-taxes deal — the mechanism for the property tax break — the company will pay 5 percent of its property tax bill in the first year of the deal, and 35 percent by year 10. The company will be on the hook for its full property tax bill in year 11.
Without the payments-in-lieu-of-taxes deal, Rosina would pay $1.7 million in property taxes over a decade. With the deal, the firm will pay $1.48 million.
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West Seneca Central School District will be out $12,510 in new revenue per year due to the property tax break. Over the life of the deal, the district will receive $839,000 rather than $964,500. According to its most recent financial statement, the district did not collect $394,316 in property tax revenue in the 2021-22 school year due to various Erie County IDA deals.
Similarly, the town of West Seneca will miss out on $59,050 in revenue over the decade-long deal. Erie County will miss out on $37,012 in revenue.
Rosina’s past IDA deals have been even more lucrative.
In 2019, the IDA granted the company $2.98 million in property, sales and mortgage tax breaks to build a 105,000 square foot production facility. That factory produces frozen meatballs, sliced sausages and other products. The project created 40 jobs.
That project also received $2 million in grants and subsidies from the state’s Empire State Development Corp. That total included a $1 million capital grant and $1 million in tax credits tied to job creation. Rosina said the new meatball production facility would retain 100 jobs and add 40 new ones. The expansion more than doubled its meatball production capacity, from 20 million pounds annually to 50 million.
And in 2016, the IDA granted Rosina $17,000 in property tax abatements and $65,000 in sales tax breaks to renovate its facility in Cheektowaga, which includes a commercial test kitchen. That project created four additional jobs.
Prior to 2016, Rosina received six low-interest loans from the IDA, dating to 1981, totaling $7.14 million. IDA records indicate the company repaid each loan. The IDA granted its largest loan to Rosina — for $5,000,000 — in 1993 for construction of a 4,500 square foot factory addition to hold machinery and equipment. All of the loans were for expansions and working capital.
Company executives told Investigative Post on Wednesday that Rosina has needed multiple subsidies over the years because food manufacturing involves slim profit margins.
“It’s a very tight business,” Chief Operating Officer Greg Setter said. “A lot of our competitors are outside of New York State so we need that support to help us financially to be able to compete economically.”
Setter added that without the incentives, the company would not have been able to grow as much as it has, meaning fewer jobs — and fewer meatballs.
“If we didn’t have the incentives here we would have to do smaller-scale projects,” he said. “Then we wouldn’t be nearly as successful is one way to look at it.”
On its application for the tax incentives it won Wednesday, Rosina indicated the IDA’s assistance was needed to move forward with its expansion. That application question is commonly referred to as the “but for” test, meaning the IDA should only support projects that aren’t financially feasible “but for” the incentives.
In a subsequent paragraph, the company explained that its 2019 expansion limited its ability to take on additional debt, making the tax breaks necessary.
“Rosina has limited capacity to take on more debt … especially in a time of economic uncertainty and rapidly rising inflation and interest rates,” the company wrote.
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That’s notable as the IDA voted down tax breaks for a second food products company on Wednesday because its project was feasible without the assistance.
Erie County Executive Mark Poloncarz — a member of the IDA board who voted against the other company — said he supported Rosina’s project because the company was continuing to add jobs.
The IDA board on Wednesday rejected a proposal from Iskalo Development Corp. for its tenant, Top Seedz, a company that makes crackers and other food products. It was a rare rejection. Poloncarz said at the meeting that he voted against the project in part because Top Seedz received a low-interest loan from the IDA earlier this year.
“If they weren’t creating new jobs it wouldn’t be appropriate but they’re creating new jobs, that’s the biggest thing,” Poloncarz said about Rosina. “I’ve never been of the view of doing a subsidy for an organization just because you’ve gotten a subsidy in the past.”
Setter, the Rosina COO, declined to comment Wednesday on whether the company actually does make Olive Garden’s meatballs, something that appears to be a closely-guarded secret.
“We have contracts against that so we really can’t publicly state that,” he said. “I cannot publicly deny it or confirm it.”
He added: “We make a lot of meatballs for a lot of white tablecloth restaurants and a number of the larger chains. And their meatballs are predominately [sourced] throughout North America. So you put two and two together.”
An Olive Garden spokesperson did not respond to a request for comment.
Editor’s note: This story has been updated with additional details about loans Rosina has received from the IDA, and to clarify what the company wrote on its application.
