GlobalFoundries offers infrastructure funding idea
IDA: Payment-in-lieu-of-taxes agreement guaranteed
MALTA & STILLWATER The Luther Forest Technology Campus may get promoted as a world-class site for technology companies, but some of the basic infrastructure there was never finished.
Computer chip maker GlobalFoundries now wants to take on some of that work but is looking for government help to do it.
The company will be coming before the Saratoga County Industrial Development Agency on Monday with a proposal requesting agency assistance in securing $70 million in bonds to complete tech park infrastructure.
The proposed arrangement is called tax increment financing, and in other instances it has allowed companies to pay for infrastructure rather than paying local property taxes.
But in this case, there will be guarantees it will not affect the company’s established payment-in-lieu-of-taxes agreement to Saratoga County, two towns, or the Ballston Spa and Stillwater school districts, according to an IDA official and GlobalFoundries’ attorney.
“Those are totally separate, and there will be no commingling of the money,” said IDA CEO Larry Benton. “All the tax jurisdictions have been notified, and they do not have to worry about their money.”
GlobalFoundries’ payments in lieu of taxes to local government are about $13 million, Benton said.
GlobalFoundries is asking the IDA to be the conduit for the bonds under the state’s tax increment financing law. The money would be used to pay for roads, additional water storage, electrical substation work, and a larger natural gas supply line.
The advantage for GlobalFoundries of using tax increment financing and going through the IDA, which is the legal owner of the land GlobalFoundries built on, is that the bond payments will be eligible for reimbursement by the state through the state’s Empire Zone incentive program, Benton said.
The work was originally going to be done years ago with money from the state or other entities, but some of it was never completed.
“There were a lot of things that were never finished, regardless of the reason,” Benton said. “This looks like a legal solution to a really serious problem that has to be addressed.”
State agencies have spent more than $100 million since 2004 to start the tech park, including buying 1,414 acres of mostly forested land then building roads, water and sewer lines, and other infrastructure.
But nearly all the major players in state government when funding promises were made a decade ago — including Gov. George Pataki and state Senate majority leader Joseph L. Bruno — are now out of office.
The nonprofit Luther Forest Technology Campus Economic Development Corp., meanwhile, ran into severe financial difficulties after being unable to attract more businesses, and stopped investing in additional infrastructure. In January, it cut its full-time employees.
GlobalFoundries is undertaking one of the largest private investments in recent U.S. history at the park, but it is the only tenant.
GlobalFoundries was a spin-off from Advanced Micro Devices, which agreed to come to the park in 2006, before it had been developed, and bought 223 acres. Work on Fab 8 began in 2009.
The $6.9 billion plant went into production last year, and now has about 2,000 employees, with plans for more. Work started this spring on a $2 billion research center, and advanced planning is under way for a second manufacturing plant that could bring total Fab 8 employment to more than 6,500.
The first plant, however, is still being expanded to its final capacity, and the company says it needs the missing infrastructure completed.
“The infrastructure improvements are essential to the full-scale operation of Fab 8.1,” GlobalFoundries attorney Kevin R. McAuliffe wrote in a May 8 letter to the IDA.
The proposed bond issue would reimburse the company for $18.4 million it has already spent on roads and an electrical substation, while the remaining $51.6 million would be new spending.
“[GlobalFoundries] now needs to construct additional improvements including roads, a water storage facility, and a larger natural gas supply line in order for Fab 8.1 to be fully functional,” McAuliffe wrote.
He is scheduled to make a presentation to the IDA board Monday in Ballston Spa. If the application is accepted, the IDA will schedule public hearings on the proposal, to be held in both Malta and Stillwater.
Benton said Empire State Development would also have to sign off on the arrangement before it could take effect.
The state’s Empire Zone program expired in 2010, but remains in effect for companies like GlobalFoundries that were approved while the program was in effect. Among other provisions, Empire Zones allowed companies to get state tax credits for their local property taxes; this arrangement would allow the infrastructure bonds to get the same treatment.
“In effect, the state will be helping pay for these improvements through this process,” Benton said.