“Our Erie Canal Moment”
“Will Redefine Upstate NY’s Role in the Global Economy for Generations to Come”
“Usher the state into another Industrial Revolution”
Governor Hochul’s press release last week concerning Micron’s plan to build a series of semiconductor manufacturing plants — or chip “fabs” — outside Syracuse is full of visionary quotes from state and local officials who predict the project will transform the state’s future.
To be sure, the plans are grand. Micron says it intends to invest $20 billion by 2030 in a single “Mega-fab” and up to $100 billion in total over the next 20 years, including in additional fabs at the same site. This it says would be, “the largest private investment in New York State history.” The first facility would employ 3,000 individuals and 9,000 would eventually be employed on the site — all working in an industry being rapidly built out due to the current global chip shortage and a new federal law pledging tens of billions of subsidies to ensure more chips are made in America.
But Hochul utterly misses the point in claiming that the Micron project will fulfill her promise to make New York “the most business-friendly state” in the nation.
Hardly. The disclosed deal terms under which Micron agreed to build its fab Upstate rather show just how un-business friendly New York has become. Why else would the state offer an arm and a leg to convince the Boise, Idaho-based company to build here instead of more business-friendly sites it considered, including one outside Austin, Texas?
For starters, the company will get $5.5 billion via an initiative that Hochul signed into law on August 11th. The “Green CHIPS” program set aside a whopping $10 billion in tax credits for semiconductor manufacturing projects that agree to mitigate greenhouse gas emissions, pay “prevailing wage” on construction work and obey other mandates. Up to $500 million in credits can be doled out annually under Green CHIPs, with individual projects eligible for assistance for up to twenty years. Micron seems due, then, to get tax credits averaging more than $250 million annually for two decades.
Manufacturers, however, are already exempt from state business income tax. And Green CHIPS tax credits are fully refundable. So, the state treasury could be stroking taxpayer-financed checks each year to Micron and its employees.
The state pays under Green CHIPs 7.5 percent of employee salaries at recipient firms, totaling up to $15,000 of the first $200,000 of each individual’s paycheck (totals to be adjusted upward annually for inflation). New Yorkers, with a median household income of about $70,000, in other words, will be juicing the six-figure paychecks of Micron executives.
And the state’s notoriously high barriers to business entry will be lowered for Micron.
Take New York’s high and rising energy costs, set to soar unpredictably higher to attain the clean energy metrics in the state’s ambitious climate law. As a Green CHIPS firm, Micron is required to draw its energy from renewable sources – but it’s also eligible for discounted utility rates for up to twenty years. The mandate’s cost, then, could be borne by taxpayers, not Micron.
The nosebleed property taxes that in the Syracuse area are among the nation’s highest, measured as a percent of property values? Micron will get special dispensation under a 49-year payment in lieu of taxes (PILOT) agreement with the Onondaga County Industrial Development Authority (IDA). The IDA is also providing state and local sales tax relief on construction materials. And Onondaga County is giving Micron tens of millions in unrelated grants.
The state is also pledged to spend $200 million in road and infrastructure improvements and $100 million in community benefits funds. So, total state and local public subsidies —the ones disclosed to date — look to total north of $6 billion, or at least $667,000 per job, assuming Micron hits the 9,000-employee target.
Of course, it’s the creation of spin-off jobs among suppliers and related industries along with economic multiplier effects that deal boosters are counting on to make the juice worth the taxpayer squeeze.
A private study estimates the project will yield 41,000 non-Micron jobs, raise state GDP by $9.6 billion annually, and increase annual revenue flowing into state and local government coffers by a combined $1.38 billion, according to the Governor’s release.
The release gives the conclusions. It does not provide the study.
Taxpayers should get to see the math behind the reputed payoff. Does it include additional subsidies? What other assumptions are made? The Empire Center submitted a FOIL request to the Governor’s office last week to secure a copy of the study so that we can make it publicly available.
Other states and localities are engaging in the bidding war to attract chip investment, piggybacking on the recently enacted $52 billion federal CHIPS and Science Act that’s subsidizing firms to build fabs on U.S. soil. Hochul knows this and seems to have spared no effort (or expense) in fighting to win the inter-state competition to attract Micron.
Thats ironic, since the Governor has been content to ride the bench as the state ranks as the biggest loser in the ongoing competition among states to attract and retain individuals and businesses — based in part on how far their dollar will stretch, and how much of it a government will take.
Instead of creating a more tax and business-friendly playing field, New York is again staking all of its chips on a single big bet. It’ll be years before we know the actual payoff (Micron won’t even break ground on a chip fab until 2024). But a single, politically arranged deal is unlikely to change the state’s economic trajectory. That will happen only when the state’s politicians decide that “doing business” here means something other than negotiating with them.