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Saratoga County IDA agrees to tax breaks for Global Foundries

Tuesday, March 19, 2013
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— GlobalFoundries will receive about $387 million in sales tax exemptions as incentives to locate a technology research center and a second computer chip factory at its Fab 8 site in Luther Forest.

The Saratoga County Industrial Development Agency on Monday approved tax exemptions for both projects, which between them are expected to involve a $16.8 billion investment by GlobalFoundries.

The company plans to break ground on its $2.1 billion Technology Development Center this spring, while it hasn’t yet made a commitment to follow through on the $14.7 billion Fab 8.2 plant.

Between them, it is estimated 3,000 new permanent jobs would be created, on top of the 2,000 jobs now in place at GlobalFoundries’ first plant.

The vote on granting exemptions for both projects was 5-1, with IDA board member Charles Hanahan opposing both of them.

Hanahan has a consistent record of opposing tax breaks for GlobalFoundries, which also received millions in tax breaks for the first chip factory that began operations last year.

“I’m just not sufficiently convinced this will make a difference whether the project goes forward or not,” he said.

GlobalFoundries spokesman Travis Bullard said tax breaks like these — and the $1.3 billion the state offered to first lure the chip manufacturer to the state in 2006 — are essential.

“These are always important,” he said after the vote. “We compete in a global industry, and our competition gets the same kinds of incentives where they operate. These incentives are critically important.”

The IDA, whose mission is to promote job creation in the county, routinely offers sales tax exemptions as incentives for economic development projects ranging from warehouses to valve manufacturers, though the dollar figures involved with GlobalFoundries are unprecedented.

The agreements approved consist of a sales tax break worth an estimated $134 million on building materials and manufacturing equipment at the Technology Development Center, and an estimated $252 million for Fab 8.2.

The totals are large because the exemption covers the sales tax on the expensive chip manufacturing equipment, “tools” that can cost as much as $100 million each.

The IDA may be duplicating a state program that offers sales tax exemptions on manufacturing equipment, but the state doesn’t consider exemptions until equipment is installed and operating, said Kevin McAuliffe, a lawyer for the computer chipmaker.

“We have had preliminary meetings with the Department of Taxation and Finance. We have not had a detailed audit. That is years down the road,” McAuliffe told the IDA.

The IDA in 2010 granted sales tax exemptions worth about $140 million for building materials and equipment at Fab 8.1. It also helped arrange a payment-in-lieu-of-taxes agreement for how the company’s property taxes are calculated. The giant chipmaker is investing an estimated $6.9 billion at Fab 8.1, with tool installation expected to continue into 2016.

“The record for 8.1 is very satisfactory to this board,” said IDA Chairman Raymond F. Callanan. “We’re glad to be participating in 8.2.”

The Technology Development Center, which will break ground this spring and be finished in 2014, will employ about 1,000 construction workers per day at peak, and about 1,000 permanent employees. Equipping the center is expected to take into 2020.

The second fab, if the company’s board approves it, would mean about 2,500 construction jobs per day, and about 2,000 more permanent jobs.

“You’re looking at 4,000 or 5,000 employees working over there. All of them out shopping, out buying houses. … GlobalFoundries is a tremendous success story,” Callanan said.

Todd Shimkus, president of the Saratoga County Chamber of Commerce, said the broader economic benefits make offering sales tax exemptions to the company worthwhile.

Manufacturing payroll in the county is up 60 percent since 2010, he said, and that’s in large part due to GlobalFoundries, where the average salary is $87,000. Those jobs mean more income tax revenue for the state, he said, and more sales tax revenue for the state and county as people purchase and furnish houses.

“We’re pulling ahead of the rest of the nation with the investments this board has helped provide,” Shimkus told the IDA at a public hearing held in Stillwater before the vote.

GlobalFoundries’ 222-acre property in the Luther Forest Technology Campus straddles the Malta-Stillwater town line, and Fab 8.2 would be located partially in Stillwater.

Both towns continue a review of zoning changes GlobalFoundries is requesting for Fab 8.2. If the company goes forward, it will take eight years from groundbreaking to full operation, McAuliffe said.

 
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