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Just weeks before the state of Wisconsin slashed the size of its controversial public-private contract with Foxconn Technology Group by roughly 97%, an upstate New York economic development group announced a similar deal that’s also attracting some pushback.
Hydrogen fuel manufacturer Plug Power Inc.
PLUG,
will build a new “green energy technology facility” at a currently vacant site in Genesee County, with the intention of creating 68 new jobs. The company is expected to invest millions in the area, while receiving many millions in tax breaks and reduced electricity costs.
The economic development group responsible for the deal claims it will bring in roughly $4.30 for every $1 of “public benefit” given, while a local investigative news source estimates the overall costs at $4 million per job, making it the costliest subsidy in New York history.
“This is extremely expensive,” said Greg LeRoy, executive director of Washington, D.C.-based Good Jobs First, which maintains a “Subsidy Tracker” that follows taxpayer dollars flowing to corporations.
Genesee County is sandwiched between Rochester and Buffalo, and the site where the plant will sit is approximately 35 miles from Niagara Falls. In an interview with MarketWatch, LeRoy also noted the “tragedy” of giving so much of the area’s electricity to one company. “You’re limiting the benefits, which is risky because you’re creating a disincentive for companies to become more energy efficient, and you’re not distributing the benefits broadly.”
In contrast, Jim Krencik, spokesperson for the Genesee Country Economic Development Center, says the project enjoys broad community support and will bring big regional benefits, including well-paying professional jobs that may attract additional employers to the area. Krencik said some of those positions could pay roughly $70,000 annually, about $25,000 more than the area’s average salary, and include benefits.
The Rochester Institute of Technology and the University of Buffalo turn out nearly 10,000 STEM graduates every year, Krencik told MarketWatch. Historically, “upstate New York is an exporter of talent to the semiconductor industry and to precision manufacturing.”
Plug Power’s investments in the region, including spending $55 million on a power substation, will likewise attract other companies, Krencik predicts. “These are incentives, these are advantages that play into the region’s strengths.”
Plug Power did not respond to multiple requests for comment for this article.
Credits: Genesee County Chamber of Commerce, Genesee County Economic Development Center
In contrast to boondoggles like Wisconsin’s Foxconn deal, the Genesee County deal has “at least a little thought and strategy put into it,” said John Buhl, a spokesperson for the nonpartisan Tax Policy Center in Washington. In the once-Trump-heralded Wisconsin deal, the Taiwan electronics manufacturer by early 2021 had slashed its planned investment to $672 million from $10 billion and cut the number of new jobs to 1,454 from 13,000.
The Plug Power partnership taps resources from the local and state level, and the public and private sectors, Buhl noted, and it’s part of “a broader strategy to build out a green-energy area.”
Still, local “good-government” advocates, like Tom Speaker of Reinvent Albany, are skeptical. The facility where Plug Power will locate its plant, the Western New York Science & Technology Advanced Manufacturing Park, has been in the works for over a decade.
“They’ve invested millions into the site and just have not managed to lure many companies to the area,” Speaker told MarketWatch. “Our view is that these types of subsidies don’t ultimately benefit New York’s economy and that much better things could be done with the money that’s being dedicated.”
How exactly to evaluate the usefulness of public subsidies remains an open question.
“With these kinds of incentives there’s always tradeoffs,” said the Tax Policy Center’s Buhl. “Just looking at it as a pure job creation opportunity, it’s not a home run.”
Among economic development analysts, a claim of $1 back for every $1 spent is “normal, 2:1 is good, anything beyond that you’d have to question the methodology,” he added. That makes this project’s claims of a 4.3:1 ratio “a little high.”
“The goal of any incentive project is to get economic activity that wouldn’t have come otherwise, but it’s not either/or most of the time,” Buhl said. “They often have some amount of talent locally, but bring in some as well.”
LeRoy, of Good Jobs First, agrees. “Cost-benefit analysis in economic development in America is the wild, wild west.”
“The only honest comparison is public dollars in versus public dollars back. But the problem is, people give exaggerated answers back. None of those are valid. The state doesn’t tax 100% of payroll or capital spending.”
The best way to spur economic development in an area isn’t always by attracting companies, LeRoy said. It may mean fostering “a cluster of” start-ups, knowing that some will survive and some will not. Or it could involve tapping existing state programs for distribution of energy, developing stronger ties with local universities, and so on. Those are the strategies that have helped create the “Research Triangle” in Raleigh-Durham, North Carolina, the biotech ecosystem of Cambridge and Boston, Massachusetts, and others.
That’s the vision Genesee County officials seem to have for the facility where Plug Power will locate. This “is a big project, no doubt about it,” Krencik said. “We’re optimistic that these assets are very attractive.”
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