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Incentives to grow

GlobalFoundries seeking new tax breaks

Sales tax exemptions could total $400 million

Thursday, February 28, 2013
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Incentives to grow


Global Foundries' Fab 8 complex in the Luther Forest Technology Park is seen from the air in January.
Global Foundries' Fab 8 complex in the Luther Forest Technology Park is seen from the air in January.

— GlobalFoundries wants sales tax breaks potentially worth nearly $400 million for its new technology research center and a possible second computer chip factory at its Fab 8 campus.

The company on Thursday applied to the Saratoga County Industrial Development Agency for tax incentives on both projects.

New cost estimates released in the applications would bring GlobalFoundries’ total investment at Fab 8 to around $24 billion by 2020.

The IDA’s financial inducements are necessary to get the projects — a estimated combined investment by GlobalFoundries of $16.5 billion — built in New York, said Kevin McAuliffe, an attorney for the company.

“Understand, the rest of the world offers incentives readily,” he said, citing how infrastructure and workforce are arranged through government in Asia. “Without these incentives, I don’t think either of these things would be happening in New York.”

The IDA set public hearings for 8 a.m. Monday, March 18, at Stillwater Town Hall and 9:30 a.m. that same day at Malta Town Hall. The GlobalFoundries site in the Luther Forest Technology Campus straddles the line between the towns.

The vote to accept the two applications was 5-1, with Charles Hanehan of Saratoga voting against accepting them. Hanehan, a dairy farmer, has consistently opposed granting IDA tax breaks to GlobalFoundries.

“I’m on the board to represent the agricultural perspective,” he said. “This project is not seen as a benefit for agriculture, because of the competition for land. A huge amount of new people coming in is not good for agriculture. Farms will get smaller.”

Other IDA board members, however, noted that the jobs being created at GlobalFoundries are high-quality, with an average annual salary of $87,000. Plus, they noted, thousands of construction jobs would be created.

“These are great job opportunities. These are not McDonald’s and Wendy’s,” said board Vice Chairman Richard Dunn of Saratoga Springs.

GlobalFoundries Fab 8.1, which is now in operation with 2,000 employees, has received an estimated $140 million in IDA-sponsored exemptions from state and county sales taxes. About three-quarters of that total is expected to overlap with an existing state program that gives sales tax exemptions on manufacturing equipment, but only retroactively. The same is true of the two new applications.

GlobalFoundries, a Malpitas, Calif.-based worldwide company with other fabrication plants in Singapore and Dresden, Germany, plans to break ground on the $2.1 billion technology development center this spring. When it’s done in two years, the center will employ between 600 and 1,000 people.

On that project, GlobalFoundries is asking the IDA to approve a sales tax exemption worth $13.2 million on the building and $121 million on manufacturing tools.

That application was anticipated, but IDA officials were mildly surprised to learn the company is also applying for benefits on the second manufacturing plant, known as Fab 8.2. The company is pursuing municipal zoning approvals from Malta and Stillwater, but has made no commitment to proceed.

“The [corporate] board has asked us to get in place all the approvals so we can go back to the board and say, everything is in place in New York,” McAuliffe said.

A decision at the corporate level by later this year is possible, but not certain.

“Our board may decide to take the 8.2 project under consideration this year, which is why we need to line up the PDD amendments and the IDA exemptions now, but we don’t yet know when that will happen,” said company spokesman Travis Bullard. “This would obviously be a huge investment, and any decisions on additional facilities are driven by a variety of complex factors, including market demand and global business conditions.”

The total spending at Fab 8.2 could total $14.7 billion, according to the IDA application. Employment by 2019 could reach 1,800.

The $14.7 billion figure, which is nearly $5 billion higher than previous published cost projections, is only an estimate, Bullard said.

“There are many variables that will affect the final budget — like the development of 450 mm process technology for example — but that’s our estimate at this time,” he said Thursday.

For Fab 8.2, the sales tax exemption is estimated to be worth $72 million on construction materials and $177 million on manufacturing equipment.

GlobalFoundries is not seeking IDA-sponsored property tax exemptions on the new projects. The property assessments on both will be set using a formula established last year in a tax case settlement between GlobalFoundries, the towns of Malta and Stillwater, and the Ballston Spa and Stillwater central school districts.

 
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