October 13, 2016

Grains of Salt (v16): Cross-town Development

Grains of Salt
You all know how much I just love crazy economic development incentives.

You know, the kind that allow companies to create one or two jobs and get millions in tax breaks?

Or that encourage companies to move across town, leaving one group of taxpayers in the lurch when the business leaves, and keeping those same taxpayers plus all of the rest of them from getting tax dollars that could have been gained had the company just moved on its own and paid sales taxes and other costs associated with renovating or building their new headquarters?

Or that give tax breaks to companies they admit they don't need? Or to build apartments because there are plenty of people who want to pay to live in little boxes in the suburbs?

Yeah, politicians and the economic development folks in my neck of the woods, in Central New York,  are notorious for this type thing - most have never met a tax break they didn't like. Which is why I really shouldn't be surprised to have found this latest plan upon our return home from vacation.

BlueRock Energy Holdings, a local company started by a guy who used to work for Niagara Mohawk (now National Grid), sells energy to commercial and residential customers in New York and, in December 2014 announced they were expanding into Pennsylvania and Connecticut. They also created a second company, one that focused on "energy efficiency consulting." All good stuff, right? Local guy, home-grown company, and a growing business - expanding from 47 to 87 employees "over the next two years" they said back in 2014.

In September of this year, they announced that they had outgrown their office space in Syracuse's Franklin Square and would moving to larger space in what's now called Barclay Damon Tower (the old Marine Midland Tower on Warren and Jefferson). They're going to have around 13,800 square feet of space in their new location, compared to around 8,600 in their old space. We also learned that the company now has 67 employees and "expects to create at least 13 more jobs over the next five years."

Do the math with me. If in December 2014 they said they'd add 40 jobs in the next two years, they should be pretty darn close to 87 people by now, right? But they say now they have only 67 and don't expect to get to 80 for another five years -- which would still be seven fewer employees than they said they'd have by the end of this year. The current projections are that they're have more than 100 employees within 10 years.

What is the point of economic development funds? They should be used to help businesses expand, add jobs, improve the overall economy of the area, right? And should go to companies that really need the help, right?

Well,  maybe not.
BlueRock has applied to the Onondaga County Industrial Development Agency for an exemption from sales taxes on the $485,000 it expects to spend on furniture and fixtures and other equipment and materials for the new office (emphasis added). The sales tax exemption, if approved, would save the company $38,800 though it would have to pay the agency $5,850 in fees.
To no one's surprise, OCIDA approved the request, unanimously, this week.

So a successful business, an awarded business, a business that supports multiple professional sports teams, is moving less than a mile driving distance, and we're paying them $32,950 to do it?

Does BlueRock really need taxpayer help purchasing office furniture and fixtures?  My guess is no. Would they be stupid not to take advantage of our overly generous economic development programs? Most folks would say yes.

I would say no -- because sometimes you're the better person, the better company, if you do what you need to do using your own resources, rather than taking resources away from others.