Westchester County has agreed to amend a 2011 sales tax deal with Avon Products in the hope of preserving jobs in Rye for a few years, as the beauty products company restructures globally and tries to reverse declining revenues.
The Westchester County Industrial Development Agency shortened the term of the 2011 agreement and reduced the number of jobs the company must retain to qualify for a tax exemption.
Avon expects to be a “presence in Westchester for the foreseeable future,” James Scully, chief financial officer and chief operations officer, told the IDA on Dec. 8. He defined “foreseeable” as three to five years. “But beyond that it is difficult for us to know what will happen,” he said.
Avon has closed its office in Manhattan and moved about 100 senior people to Rye and 80 to a research and development facility in Suffern, where the company built its first factory in 1897.
Last December, after three years of declining revenues and profits and an $8 billion drop in market capitalization, Avon sold its North American business to Cerberus Capital Management.
It announced a three-year turnaround plan. Headquarters would be moved to London, costs would be cut by $350 million, and the quarterly common stock dividend would be suspended.
“We”™ve struggled for a period of time and it”™s gotten worse since 2012 to 2015,” Scully told the IDA board.
Most of Avon”™s profits come from emerging markets overseas, and a strong dollar has resulted in $1 billion in foreign currency losses.
Last year Avon recorded $6.1 billion in revenue. The future looked brighter in 2011, when Avon had more than $10 billion in annual revenue.
That year, Avon asked the IDA for sales tax exemptions worth an estimated $16.6 million over five years at the Rye facility.
The facility at 601 Midland Ave., next to the Rye train station, has been in operation since the late 1950s. It houses the global data center, financial services and accounting, a distribution center and general corporate offices.
By 2011, the two-story, 173,315-square-foot building was in serious need of interior renovations, if it were “to remain a viable location for Avon in the long term,” the company said in its 2011 IDA application.
Avon asked for a 15-year tax abatement on $17.7 million in renovations and $44.8 million a year in software investments. It pledged to retain 668 jobs.
The alternative was to move operations to Connecticut or Atlanta.
“Without this abatement,” the company said, “Avon will face a financial imperative to relocate their facility to another state where tax abatements are substantial.”
Avon got the abatement.
Since then, renovation plans that had grown to a $20 million to $30 million project have been dropped.
Avon has invested only $5 million in Rye, for ongoing repairs and maintenance and to relocate the Manhattan staff.
Attorney Seth Mandelbaum, of McCullough, Goldberger & Staudt in White Plains, asked the IDA to cut five years off the length of the 2011 agreement, ending the deal in 2021 instead of 2026.
He asked to cut the number of jobs that must be retained to keep the tax abatement, to between 450 and 500. If jobs fall below that threshold, he asked that repayment of tax benefits be prorated from 100 percent in the first year to 20 percent in the fifth year.
The alternative, observed IDA Vice Chairman Kevin Plunkett, is to get into a “recapture battle” to enforce the 2011 agreement and “discourage Avon from even considering Westchester.
“And they”™ve been good corporate citizens since 1956. So the options are clear to me.”
The board adopted Avon”™s request unanimously.
