PhillyDeals: When N.J. bakery threatened move to Pa., state added sweetener

When Phil Racobaldo wanted to expand his 85-worker Deluxe Italian Bakery in Runnemede last year, he did it the old-fashioned way: He borrowed $2 million from Fulton Bank.

When Chad Vilotti and James Liscio wanted to update their 176-worker business, Liscio's Italian Bakery, in Glassboro, they also went to their bank. Then they took an extra step: They threatened to move to Pennsylvania.

The New Jersey Economic Development Authority responded by giving Liscio's up to $13.5 million over 10 years, under the Grow New Jersey tax credit program.

Liscio's certified that, "but for the Grow New Jersey award, the creation and/or retention of jobs would not occur," because it would have moved to a "less expensive" site in Boothwyn, Delaware County.

Really? Vilotti explains:

Liscio's sells more hoagie rolls in Pennsylvania and other states, than in New Jersey. A Boothwyn bakery could reduce its fuel costs and Delaware River Port Authority tolls.

New Jersey has a higher minimum wage than Pennsylvania. "Most of our people are paid above that," but the higher base pushes up the scale, Vilotti said.

Property taxes are higher in New Jersey. (Though Delco is high, by Pennsylvania standards.)

Workers' compensation insurance is cheaper in Pennsylvania. "A significant item for us," Vilotti said.

The state expects that Liscio's will use the tax break to sell more bread and hire more workers. That's the purpose of the program, Vilotti agreed.

Racobaldo knows Vilotti and Liscio. "They built a great business," he says. "I have no hard feelings." Not toward them, personally.

But Racobaldo says a bakery would have to save tens of millions to make up for the expense of moving. And he's upset that his state is helping his rivals, who go after the same contracts to deliver breads, rolls and pastries to pizzerias, diners, restaurants, schools, nursing homes: "I'm in direct competition. I pay taxes. Tax money is going to fund them now? That's not right."

It's not just Liscio's. The authority also plans to give a company backed by Philadelphia-based Amoroso's and two partners $20.7 million, over 10 years, in tax credits, so they can build a bakery in Bellmawr, instead of locating it at a site the company promises is less expensive, in Morrisville, Bucks County.

Amoroso's bakers and drivers expect that the company is going to shift production from its Philadelphia plant to the Bellmawr site, Bob Ryder, president of Teamsters Local 463, told me. Owner Len Amoroso hasn't announced a final decision. The EDA previously financed another Amoroso's-backed venture, the Omni bakery in Vineland.

The tax-break program isn't just for bakers. Grow New Jersey has also offered multimillion-dollar tax breaks to drugmaker Sandoz Inc., which threatened to move to Feasterville instead of staying in the Princeton area. Same for Burlington Coat Factory, which threatened to relocate its warehouse to Bensalem. Once the state starts funding some competitors, where does it end?

Racobaldo sees this as a free-market issue: If New Jersey is too expensive for some producers, maybe they ought to move. Or the state should find ways to cut everyone's costs.