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Revisiting Empire Zones

by: MattK D1

Mon Apr 02, 2007 at 22:33:19 PM EDT


(Good stuff - promoted by NYBri)

I came across an article posted a couple of weeks ago, shortly after DragonFlyEye's TAP diary on Empire Zones. In this article, the Binghamton Press & Sun Bulletin notes, regarding the two companies that received the top two largest amounts of Empire Zone tax benefits in Broome and Tioga counties from 2003 to 2005:
Huron Real Estate Associates in Endicott received $20.2 million in Empire Zone tax breaks... Yet the company created 17 jobs during the period, equating to about $1.2 million for each new hire. Endicott Interconnect Technologies  (note:Huron's tenants at the old IBM site where they are both housed--MK) received $8.8 million in tax credits and created 83 jobs.
MattK D1 :: Revisiting Empire Zones
Got that? $1.2 million per realtor, for a total of 17 new real estate professionals. I have seen elsewhere some Zone apologists argue that some tax breaks go into equipment that somehow will later magically transform the area's economy. From what I've seen, most realtors are kitted out with a phone, a desk, a bad jacket, and a late model Lincoln or Olds.

Anyway, it gets worse. In March 2006, Huron laid off 21 workers. This translates a net loss of three jobs, or nearly $7 million per person fired.

Oh, did I mention it gets worse? In August 2006, two maintenance workers who were not properly trained or informed by Huron about the heating system they were working on got killed when the pipes they were working on exploded.

But here's some good news! Apparently the 10,000 gallons of anti-freeze that escaped through a broken pipe in a cooling system on the campus in January 2006 has degraded. Actually, about half of that was contained. It's the other half that seeped into the ground or washed down the storm sewer and into the river that degraded. So aside from anything living that may have gotten poisoned as the thousands of gallons of ethylene glycol (refrigerant that can damage the heart, nerves and kidneys) made its fairly quick transformation to formaldehyde, then on to harmless elements, everything's cool. And besides, the whole place is atop a 300-acre plume of subterranean chemicals left by previous tenants, IBM. So what's a few thousand gallons of anti-freeze, here or there?

So, to sum up, $20.2 million in this area buys you three fired realtors, two dead maintenance workers, and ten thousand gallons of spilled anti-freeze on top of a toxic waste site.

We should be doing better than this.

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ok, bad breaks
well meaning but inept
dangerous

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Real estate sales in Endicott?!? (4.00 / 1)
OK, this is a very good one. 

What is the most amazing about it is that anybody could have possibly thought that they could add jobs in REAL ESTATE SALES in Endicott.  I mean, I am real sorry about the situation, and I even have relatives who live there (although up the hill, away from plume), but the fact that the place is on a huge toxic waste plume with fumes that come up through the basements, AND floods has pretty much made it impossible to sell the local real estate. I'm thinking that they had to have been hooked up with a predatory-lending outfit, and the primary product was the loans, not the real estate sales...  Either that, or they were just an existing real estate company re-incorporating to call the same old real estate agents "new jobs."  There is a technical term for that: "shirt changers."  Whole new industry/occupation spawned by the Empire Zone laws.  That's development, alright...


I wonder (0.00 / 0)
As far as I can tell, Huron's sole property is that campus. Its Web site is here.

One interesting thing is that Jay Simonis, who is listed as VP for Huron here is listed as Manager for Endicott here.

Ok, so I just discovered that Endicott Interconnect is IBM's former chip manufacturing unit that was spun off in 2002.

So is Endicott Interconnect double dipping here? Is this just a gimme to former IBM to keep them from leaving town? Because they are threatening it, in regards to the potential loss of the electric subsidy.

One of them, Jay Simonis of Endicott Interconnect, said his firm might look outside the state when it considers expanding if it loses its subsidy on electric bills.

"We are winning new business, and it's going to require investment in new equipment," Simonis said. "We're making decisions now to stay in Endicott or move to a place with cheaper electricity."

A state-subsidy program cuts the annual electric bill of Endicott Interconnect, which manufactures electro-mechanical equipment, from about $12 million a year to $8 million, he said. The firm, which has about 2,000 workers, is the largest manufacturing employer in Broome County.

I'm thinking that is what this is all about.


[ Parent ]
Reduced electric rates part of Empire Zone package (4.00 / 1)
The lower electric rates are a part of the EZ "suite of incentives"-- although, I think they are in a separate law from some of the other incentives, and I don't know the intricacies.  You do seem to be on to something-- perhaps the lower electric rates are available to the property-holder as an EZ business, and then other benefits are available to Endicott Interconnect as an EZ business renting from Huron? 

But, I think a double-dip sounds lots more rational than starting a new business trying to sell houses in Endicott-- which will be even harder to sell if Endicott Interconnect leaves town.... so, I guess you would not be looking to the locals to do any whistle-blowing...


[ Parent ]
Ok.... (4.00 / 2)
It's a massive expenditure of public funds and breaks to try and keep however many jobs Endicott Interconnect has in town.

I found a thorough summary at On the QT. (Good article, but good luck reading past the yellow background. Yuck!)

Main points from the article:

By 1980 IBM employed some 14,000 people in the Endicott area. In 2005 they employed 1600.

IBM was outsourcing more production processes and the Endicott complex was up for sale. A California firm with facilities near Endicott was said to be interested. But so were a group of investors including two prominent families with political connections, Maines and Matthews.

Also on board for the purchase and as legal council was attorney James Orband, of Hinman, Howard and Kattell. Another attorney at the firm is Chief of Staff for Libous (my Senator).

Apparently Libous, Pataki, and the chairman of Empire State Development were grooming Endicott Interconnect to be IBM's heir.

IBM said they would keep employing half their force, or 2,000 in Endicott. EI said they would keep the other 2,000. Empire State Development "expressed their belief that another, unidentified company who was interested in buying would eliminate local jobs within 12-18 months."

When EIT's deal with IBM was announced in July 2002, Governor Pataki said "All 4000 jobs will be protected and remain in Endicott for at least the next 10 years.". (Two thousand jobs at IBM, 2000 at EIT.)

In November of 2002, immediately after becoming official heir to IBM and two weeks after election day, EIT started cutting jobs. Two hundred people, ten percent of the workforce, were fired...EIT execs claimed a depression in the marketplace was behind the firings. A depression apparently invisible four months earlier.

In February 2004, an Empire State Development Corporation (ESDC) compliance report showed EIT falling short of projected employment levels by 15%. Exactly the percentage still considered compliance. Two more group firings followed in April and May. Totaling roughly 140. In November, another 85 employees were let go.

But wait! Also in February 2004, EI announced a new initiative, SureScan, a company to produce luggage security scanners, that would create 700 jobs. The phoenix is beginning to rise, right?

Wrong. Two years later, WSTM reported

It's been more than two years since Governor Pataki announced Endicott Interconnect Technologies would create 700 jobs in the Binghamton area to develop the SureScan device.

The unit was shipped to a Transportation Security Agency lab last January to be reviewed in preparation for certification, a step Senator Charles Schumer hailed as a "milestone."

But the device has now been withdrawn from the certification process, according to Endicott Interconnect vice president James Sullivan.

Sullivan today told Binghamton radio station WNBF that some "operational issues" need to be addressed before the device is resubmitted.

He anticipated that after 6 to 12 months, SureScan would be back up and swinging, but checking their Web site today, hmmm... no press releases since May 2006, and that about acquiring some IP.

I know little about community development and enterprise zones, but EI just reeks of being a turkey.



Good work! (0.00 / 0)
That is putting together some pieces for me-- I was working in Broome County in 2003-04, and had some of that story, but not all.  There are two ways to learn more in these "economic development" stories-- one, follow the money, and two, ask "what is the product?"  You did a great job on that..... and, now I know:  the product is called "SureScam."  They make government subsidy deposits at the bank, I guess.

[ Parent ]
more Empire Zone stories (0.00 / 1)
Thanks for sharing this story.

One of my friends just wrote her thesis on Empire Zones and it's full of similar stories (she goes to grad school at Columbia for urban planning). I'm working on convincing her to post it at TAP.


Fiscal Policy Institute? (0.00 / 0)
Thanks for mentioning that, Steve.  Fiscal Policy Institute is also really interested in this kind of thing-- and, I am, too.  If the thesis is available electronically somewhere (library?  PDF from the author?) a link would be MUCH appreciated.  Please do tell her that we pretty much need to know what she has found out immediately...

[ Parent ]
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