A Krimpet In The Keystone State Budget
In an age of salt-banning pols and
transfat fines, Ed Rendell is standing up for the fat kids. The Pennsylvania governor announced Tuesday that Tasty Baking Co., maker of Philadelphia's iconic Tastykakes, could take $1 million in low-interest loans from the state to avoid bankruptcy. Asked if more money was forthcoming, Rendell said "there is a limit to what you can do."
Fast Eddie's limit for Tastykake assistance is the definition of a fat kid diet. Eat all the candy when no one's looking, then refuse the lonely brown M&M found under the stove. Tasty Baking is sinking despite a brand-new $78 million plant at the former Philadelphia Navy Yard. The new plant received $32 million in taxpayer-financed, low-interest loans, a $1 million outright grant, and a city tax abatement through 2018. Pennsylvania also quickly agreed to be flexible with repayment of the already favorable loans.
Topping off the state largess is $15 million marked for redevelopment of the old Tastykake factory from Redevelopment Assistance Capital Program money, the off-budget fund for pet projects that issued $600 million in new debt this year in a state with a looming $5 billion budget shortfall.The old factory was sold for $6 million. $9 million profits do tend to get real estate sold and ambitious development projects approved.
State cash pumped in like so much cream filling couldn't solve Tastykake's main problem: It's just not competitive anymore. CEO Charles Pizzi (head of the Philly Chamber of Commerce for 13 years) cited the recent A&P bankruptcy as a factor in Tasty's troubles; you haven't thought about A&P since reading that Updike story freshman year. Tastykake's status as a declining regional favorite also stems from products with a shorter shelf life than competitors and failed attempts at capturing a share of the "better for you" snack food market (I'll take my cupcakes with sugar, thanks). The frosting on all this? The expensive new factory hasn't produced its projected cost savings because the computerized lines run too fast, burning up batches of Krimpets and KandyKakes.
Tastykake's meltdown is only one instance in which the Navy Yard project has underperformed after eating up hundreds of millions in state funding.
More from Reason on corporate welfare here.