Alex Baloga will participate in Mazars Food and Beverage Forum on Wednesday, November 29, 2017 at the Pen Ryn Estate | Belle Voir Manor, Bensalem, Pa. The panel discussion, titled "Disruption in the Marketplace...What's Next?", will also feature Kevin Finn, Iron Hill Brewery and Restaurant, and Leo Holt, Holt Logistics Corporation.
As anticipated, the Pa. Senate and House of Representatives completed the tax and fiscal code bills (House Bill 542 and House Bill 674, respectively) this week, which are now with Governor Wolf for his consideration. The bills are two of the final necessary pieces of the state budget, and help to close out the 2017-18 fiscal year budget process. Governor Wolf now has 10 days from each bills’ date of passage by the legislature to decide whether he will sign the legislation, after which they will automatically pass into law without his signature. It is important to note that the package does not include any new taxes on PFMA members, and we were successful in defeating a number of harmful measures that were being considered, such as the Commercial Storage and Public Warehousing Tax and the Gross Receipts Tax increases on natural gas, electric, and telecommunications purchases. Additionally, language affecting Net Operating Loss (NOL) deduction caps by removing the $5 million cap and increasing the taxable income cap from 30% to 35% in 2018 and 40% every year thereafter was included in the Tax Code Bill. Those changes, however, will only go into effect should the Pa. Supreme Court deem all or part of the operation of NOL deductions as unconstitutional. We are also happy to inform members that the “Amazon Tax” on third party online vendors was included as well, and is expected to raise an additional $43.5 million in Sales and Use Taxes.
The bulk of the additional revenues needed to address the $3 billion budget deficit comes from $1.5 billion in securitized tobacco settlement funds, a $300 million transfer from various state special funds, and $250 million from the creation of an online lottery and other gaming expansions included in House Bill 271 by Representative Ortitay. That legislation was finalized on October 26 and has also been sent to the Governor’s desk for his signature.
PFMA is extremely disappointed that language increasing the commission rate on lottery sales and establishing a cashing bonus was removed from the legislation. Those provisions were strongly opposed by Governor Wolf’s Administration and the Pa. Lottery, and were removed due to their office’s fierce and sustained opposition during budget negotiations. We were successful, however, in having protections put into the bill against any detrimental affects of an online lottery through the sale of a pre-paid cards for iLottery use in brick-and-mortar retail locations, a commission on the sale of iLottery pre-paid cards, and a 0.5% bonus incentive program for lottery retailers meeting certain requirements. The details of that program, which is expected to distribute $20 million to participating retailers, still need to be ironed out, and we will provide additional information to our members for their feedback as they become available. The legislationalso created the Lottery Retail Advisory Committee, of which PFMA was named a member.
We intend on using that seat to continue advocatingfor beneficial programs and additional gaming reforms that help retailers and benefit older Pennsylvanians.
Below you will find information on the individual components of the package, including links to the full bills and summaries from the legislature on its components, as well as important news articles to provide additional details on these issues. Your voice was vital to a positive outcome, and we thank you for your advocacy on behalf of your business and industry.
Tax Code Bill Members will be happy to know that the bill did not include a severance tax on natural gas, increased Gross Receipts Taxes on natural gas, electricity, or telecommunications bills, an increase in the Personal Income Tax, or a Sales and Use Tax increase on commercial storage and public warehousing. “Amazon Tax” or Third Party Online Marketplace Vendor Tax Collections and Reporting Changes Remote sellers and marketplace facilitators with sales of $10,000 or more in the previous calendar year are now required to remit Sales and Use Taxes to the state, or comply with requirements that they notify purchasers that Sales and Use Tax may be due on the purchase and that they file a report with the Department of Revenue detailing those purchases. Net Operating Losses (NOLs) Provision The $5 million cap on NOLs is removed, and the taxable income tax is increased from 30% to 35% in 2018. Starting in 2019 that cap increases again to 40%, and will remain at that level going forward.
It is worth noting that this provision does not become effective unless the PA Supreme Court’s decision in the current pending NOL case deems all or part of the operation of the NOL deduction is unconstitutional. Revenue Maximization & Enhancement Provisions Certain provisions within the Tax code reduce the time period that a taxpayer has to file a petition against a reassessment, review, or adjustment with the Board of Appeals from 90 days to 60 days from the mailing date of the notice of assessment. Additionally, should a taxpayer wish to appeal the Board of Appeals’ decision, they only have 60 (reduced from 90) days from the mailing date of the notice to appeal to the Board of Finance Revenue.
Fiscal Code Bill As you are likely aware, the package did not include any of the liquor reform bills that PFMA worked extensively to include in the state budget. “Stop and Go” Regulatory Provisions The bill contains language providing for stricter enforcement of “stop and go” stores, including a clarification of what is considered a violation, who it applies to, and how violations are adjudicated. PFMA is opposed to the concept, and worked to keep the language out of the revenue package. On a positive note, the language included in the fiscal code is not as strict as that found in House Bill 1547 by Rep. Harris. Lottery Winnings Intercept This provision requires the Department of Revenue to determine if individuals who win lottery prizes of $2500 have any outstanding tax liabilities or court ordered obligations. In the event the person does have an outstanding balance, Revenue is authorized to intercept the winnings to cover those costs, as well as set and charge a fee to fund the programs operations. Additionally, Revenue will also look into whether the individual is collecting public assistance benefits, and if so, whether the additional income makes them ineligible to continue receiving those benefits. Pa. Malt and Brewed Beverages Industry Promotion Board Reimbursements Members of the Pa. Malt and Brewed Beverages Industry Promotion Board are authorized to receive reimbursements for reasonable expenses in the course of their duties as members from the Department of Agriculture. Enhanced Revenue Collection Account The legislation increases the amount of revenue the Department may use to cover the administration of the Enhanced Revenue Collection Account by $5 million, allowing for additional staff to be hired and trained to increase collections in the future. Tobacco Settlement Fund Securitization As mentioned, the state has authorized the Commonwealth Financing Authority to seek a sales agreement or issue bonds using a part of the payments from the Tobacco Master Settlement Agreement to raise a total of $1.5 billion in revenue to the General Fund.
House Bill 271 by state Representative Jason Ortitay (R-Washington & Allegheny was drastically amended from its original version to include a number of lottery and gaming reforms, including the creation of an online lottery (iLottery) to augment the State Lottery Fund and legalizing up to five (5) Video Game Terminals in truck stops that meet certain requirements.
iLottery Provisions The creation of an online lottery has been a priority issue for PFMA and members, which would inevitably result in a significant decline in the level of foot traffic to brick-and-mortar lottery retail locations as consumers moved from playing in-store to online lottery games. PFMA worked extensively with our members, state legislators, and other stakeholders to address this issue in the Commonwealth, and was successful at having protections for lottery retailers included in the legislation.
Those protections include the creation of prepaid cards for online lottery play to be sold by lottery retailers in-store in order to encourage online players to continue visiting brick-and-mortar locations.
Retailers would receive no less than a 6% commission on the sale of prepaid cards. This approach was a key segment of Michigan’s successful iLottery program, and preliminary reports from lottery retailers in that state indicate an increase in food traffic since implementation.
Video Gaming Terminals (VGTs) VGTs may be operated in trucks stops that meet certain requirements, including: • Must be equipped with diesel islands for fueling commercial vehicles; • Sell an average of 50,000 gallons of diesel each month in the previous year (or projected to sell that much in the coming year); • Have at least 20 parking spaces dedicated for commercial vehicles; • Have a convenience store; • Be located on a parcel of land of at least 3 acres; and • Not located on property owned by the Pennsylvania Turnpike.
Additionally, each location may only have up to five VGTs per truck stop, which are taxed at a rate of 42%. Retailers would receive 15% of revenues raised by the VGTs, with 31% going towards terminal operators. Application, initial license, and license renewal fees are also established in the bill, a breakdown of which may be found in the House Gaming Oversight Committee’s Summary of the bill. Other Lottery Provisions The legislation no longer includes an increase in the commission rate for lottery sales or a cashing bonus. Instead language was inserted into the bill creating a 0.5% bonus program to be paid to retailers that meet program requirements, and to help support increased lottery sales. Details on that program will be distributed for feedback to members as they become available. PFMA was also named as a member on the newly created Lottery Retail Advisory Committee, and will use that seat to advocate on behalf of our members.
NACS named Joe Sheetz, president and CEO of Sheetz, Inc., as its new chairman during the NACS Show in Chicago last month. He will serve a one-year term, which began during the show, October 17-20.
Sheetz succeeds two of his family members as NACS chairman: His uncle, Steve Sheetz, and his cousin, Stan Sheetz, served as NACS chairmen in 1991 and 2004, respectively.
Prior to becoming NACS chairman, Sheetz served on the NACS Executive Committee as treasurer; vice chairman, legislative; and vice chairman, research. The eight retail members of the NACS Executive Committee provide strategic direction and financial oversight to the association.
A member-driven organization, NACS is led by a 30-member Board of Directors, which includes three retailers from non-North American countries. In addition, the chairman and chairman-elect of the NACS Supplier Board also serve on the Board of Directors.
NACS named five new members to its Board of Directors, including Charlie McIlvaine, Chairman & CEO, Coen Oil Company (Canonsburg, PA).
PFMA recognized five members for their advocacy efforts this year. Our 2017 Defenders of the Food Industry are from left, Lisa Dell’Alba, Square One Markets; and Justin Evans, Giant Eagle/GetGo; awards presenters PFMA President & CEO Alex Baloga and PFMA Chairman Jeff Brown, Brown’s Super Stores; Tom Cormier, Ahold-Delhaize/Giant Food Stores; Ray Charley, Charley Family Shop ‘N Save; and Frank Puleo, C&S Wholesale Grocers.
The Pennsylvania Food Merchants Association (PFMA) honored five members during its annual Legislative Conference on October 11 in Harrisburg. These advocacy awards are presented to members who provide exceptional leadership and serve as champions for the association’s grassroots efforts.
The awardees are: Ray Charley, Charley Family SHOP ‘n SAVE, Greensburg, Pa.; Tom Cormier, Ahold-Delhaize, Carlisle, Pa.; Lisa Dell’Alba, Square One Markets, Bethlehem, Pa.; Justin Evans, Giant Eagle/GetGo, Pittsburgh; and Frank Puleo, C&S Wholesale Grocers, Robesonia, Pa.
“These PFMA members understand the importance of being involved in presenting our views to lawmakers,” said Alex Baloga, PFMA president and CEO. “They helped amplify our message through phone calls, emails, letters and social media to legislators, regulators and their staff, so that they better understand the impact proposed legislation has on businesses.”
During the past year, they have assisted on issues such as adult beverage sales, menu and GMO labeling, fuel issues, tax reform, tobacco taxes and many more.
“We can’t thank these members enough for defending the food industry and educating lawmakers about the potential effects of legislation on convenience stores, supermarkets, manufacturers and wholesalers,” Baloga said.
PFMA Chairman Jeff Brown, Brown’s Super Stores, joined Baloga in presenting the awards during the PFMA Legislative Conference at the Hilton Harrisburg.
Jim Genuardi, right, and his wife Kitty Genuardi, left, join former Pennsylvania Governor Robert P. Casey and former PFMA staff member John Kulik at a PFMA Convention.
Vincent “Jim” Genuardi, 88, who with his four brothers helped build Genuardi’s Supermarkets into a chain of more than 30 stores, passed away from complications of Parkinson’s Disease on October 12, 2017 in Gladwyne, Pa.
Genuardi was a longtime PFMA member who recognized the importance of working with government leaders and educating them on the impact proposed legislation could have on his stores. He served as chairman of FoodPAC for many years. In 1983, he organized the first FoodPAC golf outing and continued to plan and participate in the golf outings until his retirement.
PFMA President Emeritus David McCorkle remembers Genuardi as a mentor to him and a role model for professionals in the food industry and the community.
“Jim Genuardi served with distinction as the Chair of PFMA’s Political Action Committee and as a PFMA Board officer and director for a decade,” McCorkle said. “His quiet leadership flowed from his belief that the team had a better chance of accomplishing objectives if all members trusted one another and supported mutually beneficial goals. Clearly his sports background and strong sense of family guided his business and personal life.”
Genuardi served in the National Guard 111th infantry in 1953. In addition to PFMA, he was a member of many organizations, including the National Grocers Association and the Norristown Rotary Club.
He is survived by his wife Evilee (Kitty) Genuardi, Gladwyne; son David Genuardi (wife Maribeth), Fort Washington; son Jim Genuardi (wife Debbie), Gwynedd Valley; daughter Lisa Wilson (husbandNicholas), Bala Cynwyd; brothers Tom Genuardi (wife Gloria), Blue Bell; and Sal Genuardi (wife Eleanor), Newport Beach, Ca.; sister Rose Scotti, West Norriton; two stepsons, 10 grandchildren and three great grandchildren.
Panelists participating in the PFMA Agriculture Summit included from left, Emily Best, Tuscarora Growers Cooperative; Joe Watson, Produce Marketing Association; Darrin Youker, Pennsylvania Farm Bureau; Jeff Brown, Brown’s Super Stores; Brian Moyer, Penn State Extension; and Agriculture Secretary Russell Redding, who moderated the discussion.
Food retailers, agricultural leaders and farmers joined Agriculture Secretary Russell Redding for the Pennsylvania Food Merchants Association (PFMA) Agriculture Summit, October 11 in Harrisburg, to discuss bringing more locally grown products to supermarket and convenience store shelves. The event, hosted by PFMA in partnership with the Pennsylvania Department Agriculture (PDA), focused on helping farmers and retailers work through the challenges of getting the products to stores for consumers who are demanding locally-grown and locally-produced items.
Secretary Redding moderated the discussion with Emily Best, Tuscarora Organic Growers Cooperative; PFMA Chairman Jeffrey Brown, Brown’s Super Stores; Brian Moyer, Penn State Extension; Joe Watson, Produce Marketing Association; and Darrin Youker, Pennsylvania Farm Bureau.
During his welcoming remarks, Redding noted Governor Wolf’s interest in the state’s food system and sourcing products locally. “What can we grow, produce and market here in Pennsylvania,” Redding asked participants. “From farm to plate, consumers want to know who’s feeding them. We have the opportunity to provide even more Pennsylvania-grown products so retailers can offer the fresh, local food their customers prefer.”
“We are pleased to get these discussions started with agricultural leaders and farmers,” said Alex Baloga, PFMA president and CEO. “Our members want to get more local products into their stores and it is our hope that this discussion will help develop great business partnerships with local farmers and producers.”
Some retailers already work successfully with growers, but they would like to offer more local products, utilize technology to help extend the growing season and locate new partners. Growers and producers have logistical, certification, packaging and marketing challenges, and retailers have a difficult time connecting with qualified producers.
“Consumers are telling us that they value local above organic, so I think it begs for a local section, a Pennsylvania-grown section in all our fresh departments, where customers can buy a variety of locally-grown goods,” said PFMA Chairman Jeff Brown, Brown’s Super Stores, Philadelphia. “The question is how do I take all these small producers and growers and have a single program that I can commit to with merchandising, signage, and know your farmer —because it is about the person. They would like to know who is responsible for their safety and their quality. They want to know the farmer who grew that product.”
Emily Best, general manager of Tuscarora Organic Growers Cooperative, who assists nearly 50 organic fruit and vegetable growers to distribute their products, said consumer price sensitivity is becoming an issue and can make it more difficult to get buyers to purchase items that they can buy elsewhere for a cheaper price.
Joe Watson, vice president of domestic business development for the Product Marketing Association, saw great success with retailer-producer partnerships during his 32-year tenure at Rouses Markets in Thibodaux, La.
“Transparency and understanding the abilities of the producer and your needs will go far to having a long-standing, profitable relationship,” he said.
“We stand ready and willing to help our members move into new markets,” said Darrin Youker, director of state government affairs, Pennsylvania Farm Bureau, which provides advocacy for 62,000 member families. He noted that retailers already carry many Pennsylvania-grown and Pennsylvania-produced products and they should market them as local.
Brian Moyer, program associate at Penn State Extension, talked about farmers’ challenges, which include proper food safety training and infrastructure. Penn State Extension offers courses for farmers, including Growing for the Wholesale Market and General Agricultural Practices.
Audience members brought up some excellent points during the discussion. They included proper training on food safety, protecting brands, sustainability, traceability and ways to decrease food waste.
Attendees agreed to establish a work group to further discuss these challenges and to develop solutions and partnerships. They plan to meet again during the Pennsylvania Farm Show, January 6-13, 2018 in Harrisburg.
In December 2011, Jeff Brown unveiled his newly renovated ShopRite of Cheltenham with the help of national and state dignitaries. From left, Wendell Young IV, Local 1776; Sam Kass, Healthy Food Initiatives for the Obama Administration; Josh, Scott and Jeff Brown, Rep. Dwight Evans (D-203) and Philadelphia Mayor Michael Nutter.
After being active on the PFMA board of directors for many years, Jeff Brown took on the role of PFMA chairman in May.
Jeff Brown is a celebrity in inner-city Philadelphia. Attend one of his store openings and you’ll see customers waiting in line to meet him and thank him for opening a beautiful new store. He’s revered as the person who brought full-service supermarkets to Philadelphia’s former food deserts, where dollar stores and fast food were once the only options to buy food.
Brown followed his family into the supermarket business. His great grandfather operated a corner store in Philadelphia, and his father, Lenny Brown, operated 9 Shop ‘n Bag in South Jersey.
“I was eight years old when I started,” he says. “I worked weekends and summers growing up and I learned all aspects of the business.”
After graduating from high school, he attended Babson College in Wellesley, Massachusetts and completed his degree in Entrepreneurial Studies and Finance. He eventually went to work for his Dad as the chief financial officer of the Shop ‘n Bag, until he sold the business.
In 1988, Brown became the 4th generation of his family to own and operate a supermarket business when he founded Brown’s Super Stores.
“I wanted to open bigger store with more variety,” he says. “With the ShopRite banner, I was able to bring the consumers better prices and verity with ShopRite’s better buying power.”
The ShopRite banner wasn’t well-known in Philadelphia 29 years ago. The first five years, Brown operated a small business and worked to build brand recognition. As the industry consolidated, he started to see opportunities in areas of the city without a large supermarket to serve their needs.
“I noticed that the majority of underprivileged communities in Philadelphia had no large supermarkets to serve them,” he says.
Through Pennsylvania’s Fresh Food Financing Initiative, he bought some of those former stores in urban food deserts and opened full-service ShopRite supermarkets to serve those communities.
In 2009 when President Obama took office and First Lady Michelle Obama started the “Let’s Move” campaign with the goal of ending childhood obesity, Brown’s work to open stores in food deserts gained national attention. He joined the First Lady at the President’s State of the Union address in 2010.
USDA Secretary Tom Vilsack and other cabinet secretaries visited one of the Brown’s West Philadelphia stores to learn about how the Obama administration could encourage grocers nationally to follow this successful example. Through strategic conversations with the secretary, he helped shape policy to start a nationwide Fresh Food Financing Initiative, known as the Healthy Food Financing Initiative, to eliminate food deserts in America. Brown wanted to assist other entrepreneurs who were interested in investing in food deserts, so he started Uplift Solutions, a non-profit working to assist others in creating sustainable access to fresh and healthy food. To date, Uplift has assisted with projects in 40 states, which can range from securing financing and opening a new store; consulting and technical support to turning around a failing store. In addition, the non-profit offers health solutions to develop in-store clinics and hire dieticians; and workforce development, which provides training to formerly incarcerated people to work in grocery stores.
He volunteers time with many other organizations, including the Philadelphia Youth Network, the State of Pennsylvania Workforce Development Board, the Governor’s Advisory Board of Workforce and Education Innovation, and he serves as an officer on Wakefern Food Corporation’s board of directors.
“I get a charge out of making a difference and helping people make a difference,” he says.
His supermarket business has grown considerably in the past 30 years. Brown operates 11 ShopRites and two The Fresh Grocer locations in Philadelphia.
He and his wife Sandy have been married for 28 years and she’s worked with him for more than 20 years. Her role is director of branding, public relations and social media.
People often ask him how they can work together.
“For us it really works,” he says. “It’s a labor of love. It’s an all-consuming business and we’ve been able to incorporate it into our life.”
Brown credits Sandy for having the vision for the store layout. She takes the ideas and brings them to life for the company’s brand appearance. She also makes sure to monitor their digital brand.
“Sandy or I see every comment on social media and we reply personally,” Brown says. “We try to keep this as a family business.”
Their family consists of four sons, Josh, 26, works for a private equity firm in real estate; Alex, 25, works as a management consultant; Lenny, 22, is a programmer for artificial intelligence and machine learning; and Scott, 20, is pursuing a food marketing degree at Saint Joseph’s University.
The Browns hope their sons will be interested in working in the business one day.
“We have a rule that they must have three years of outside work experience before they join the company,” he says. “We want them to bring new expertise and experience.”
The future looks very bright for the Brown family.
Since accepting the gavel in May, your new chairman is already off to a busy start. He recently testified in Harrisburg about the devastating impact the Philadelphia beverage tax is having on his business. He also presided over the Legislative Conference, Agriculture Summit and board meeting, and has met with other lawmakers about issues impacting the grocery industry.
Sandy and Jeff Brown attend the PFMA Annual Conference in Hershey this past May, one of the many industry and community events they attend together.
The Square One team includes from left, Jessica Luce, Danny Rodriguez, Brenda Rosado, CFO; U.S. Congressman Charlie Dent; Jay Savercool, store manager; Lisa Dell’Alba, president; Bobby Martinez and Patricia Dimmig.
U.S. Congressman Charlie Dent (Pa.-15) got a taste of what it’s like to work at Square One Markets in Bethlehem, Pa. last month as part of NACS’ store tours. NACS’ Anna Ready, Square One President Lisa Dell’Alba and CFO Brenda Rosado relayed some of the challenges facing convenience stores during his visit.
Dell’Alba told the Congressman they own nine convenience stores located in five Pennsylvania counties.
Outside at the gas pumps Rosado explained to the Congressman that Hurricane Harvey had caused flooding affecting Texas refineries, which could impact the price and the supply of gasoline in Pennsylvania.
Ready, NACS director, government relations, discussed the EMV chip technology implemented into credit and debit cards. Visa and MasterCard delayed the liability shift for fuel dispensers until October 2020.
“Our industry is facing a $7 Billion upgrade to accept the chips at the pump,” Ready said.
The pumps currently utilize a 25-year old technology, which the industry agrees needs updated. However, the significant cost to replace it with the EMV chip technology makes it difficult for small business owners to do it all at once.
E-85 and renewable fuels are costly to provide at the pump. All fuel sold in Pennsylvania is mandated to contain 10% ethanol. Congressman Dent said he is aware of the problems with ethanol due to inadequate infrastructure to transport it and its impact on food prices.
Retailers are seeing continuous problems with skimming. Dell’Alba said that her employees have to be vigilant to ensure that their customers’ information is safe.
Rosado noted the company’s margin on gasoline is less than 10 cents per gallon. Since 70 percent of transactions are at the pump, they have to get customers inside the store where they make profits.
“It’s challenging to compete,” Dell’Alba said. “We rely on margins as a small business.”
To make those margins, Dell’Alba is always trying to come up with additional ways to bring customers into the store. As a mom herself, she said it was difficult to get fuel and take her young son out of his car seat to go into the store. She realized she couldn’t be the only customer in this predicament, so she started a curbside service, where a staff member is available three days a week to pump gas, pick up items in the store and take payments.
“It’s another way to engage the customers,” she says.
The company also added a grab and go refrigerator case stocked with homemade sandwiches, salads and soups made fresh daily by one of their talented associates. Overall, the convenience store industry is working to provide healthier food options for customers.
Ready mentioned menu labeling, which has been delayed. As written, the requirements would impact companies with 20 or more locations. However, it is very vague and the food industry worries that branded stores could be included. Ready says it needs a legislative fix to ensure they are not included.
“My store is 2,200 square feet,” Dell’Alba says. “It can’t become one giant sign.”
Ready relayed the importance of keeping the Durbin Amendment in place, explaining that retailers saw fees skyrocket before it was passed.
“The fees vary by card,” she said. “We advocate for more competition. Pin numbers are that second authentication and we advocate using a pin.”
Following the discussion, Dell’Alba presented Congressman Dent with his uniform shirt and name badge. Store associates explained how to use the register and he assisted several customers with their purchases.
PFMA would like to provide Pennsylvania lawmakers with a store tour similar to the NACS. If you would like to invite your Pennsylvania lawmakers for a store tour, please call us and we’ll work to arrange it.
Gerald Gergar provides a helping hand by pumping fuel for a customer.
NACS' Anna Ready with Square One President Lisa Dell'Alba as they prepare for Congressman Dent's visit.