by Gordie Little
If small businesses are the engines that run the north country’s economy, then economic development groups like the Jefferson County Industrial Development Agency provide the fuel that keeps those businesses humming along.
“We definitely couldn’t put the train on the tracks without them,” said Jeff Pierce when asked about the effect the JCIDA has had on his business. He’s the Vice President of Morris’s NorthStar Hatchery, which employs 25 people in the Jefferson County Corporate Park. An operation that hatches baby chicks primarily for transport to Canada, Morris opened in 2008 thanks in part to a low interest loan from the JCIDA. Pierce said the company wanted to find a location close to the Canadian border and considered sites in other parts of the country. “They made Jefferson County so appealing to us. We were just so readily accepted that we never even looked at the other areas,” Pierce said.
So, exactly what is the JCIDA? Donald Alexander, Chief Executive Officer of the JCIDA, describes it this way: “The IDA is a vehicle that was created by New York state law many years ago to stimulate economic development in local communities. It was set up essentially to grant incentive devices to companies willing to expand in their communities. They would collect a fee for those incentive devices. That fee would be put back into a revolving loan program and then those funds would be re-lent for loans for other companies to develop.”
The IDA provides low interest loans and incentives for development “all geared toward trying to stimulate jobs and economic growth in the community,” said Alexander. The agency also offers sales tax incentives, mortgage recording tax incentives and PILOTS (payment in lieu of taxes), “which are probably the most important vehicle,” he said.
“PILOTs essentially are an agreement with a company to give them a tax incentive break over a certain period of time, typically about 15 years in a manufacturing setting, and for those tax breaks they would agree to pay taxing jurisdictions…a payment rather than the tax,” said Alexander. “It gives the business or industry that is in the process of expanding or thinking about expansion two things: one, it gives them some tax break. It says, ‘Okay, if you’re going to do something to improve our community, we’re willing to give you a tax break.’ And almost as important, it tells them exactly what their taxes are going to be, what they’re going to have to pay over the 15-year life of the typical PILOT. So, there isn’t the question about what will the tax rate be in three years down the road or five years down the road for planning purposes. They know exactly what that is. It’sa device that has been used very effectively around the state.”
Ask area business leaders about the IDA and you will hear words like “professional”, “caring” and “classy”.
“We are in this town because of the IDA,” said Lisa Weber, CEO of Timeless Frames and Timeless Décor in the county’s corporate park. Timeless Frames manufactures picture frames; Timeless Décor custom frames art for retail stores. When Weber bought the company in 1999, it had seven employees. It now has just over 200 workers. Originally from the Midwest, Weber considered purchasing the assets and moving the business closer to home. “The IDA put forward a package of lowcost loans and different incentives from the empire zone and that’s the whole reason that we stayed here,” said Weber.
In order to be approved for tax incentives, a business must convince the IDA staff, loan committee and board of directors that the help the IDA gives would net sufficient return to the community. “You would have to come and say, ‘Look, I’m going to commit to employing 30 people over the life of this project. I’m going to make a capital investment in the community of $3 or $4 million. I’m going to provide some other advantage. I’m going to bring a service to the community which we don’t have here,’” said Alexander.
George Anderson, President of Current Applications in Watertown, did some convincing when he approached the IDA and other economic developers about starting his business. The company is a custom electric motor manufacturer that opened its doors in 2000. “We were a startup company with no track record and they took a chance. It’s just what economic development should be,” said Anderson. The company started with four owners and now employs approximately 30 people. “We wouldn’t even be in existence without the IDA,” said Anderson. “They were invaluable to our startup and our growth. It’s something that this community has that I don’t think a lot of people understand what they do.”
Alexander agrees that many people have no idea what the IDA does and mistakenly believe that taxpayer money is used to fund economic development projects. (The money originally came from a variety of sources including federal and state government programs.) Alexander says the members of the IDA board are deeply committed to their work and put in untold hours going over loan applications and meeting with clients.
“Typically, most of what we do is a quiet kind of work, behind the scenes, working deals, trying to get companies to expand,” said Alexander. “I have seen strong evidence that what we do is critical. Things don’t happen unless we step in or Watertown Local Development Corporation or some other economic development vehicle doesn’t step in and help. We try to assist wherever we can. It’s not just creating new jobs, which of course is a very critical part of what we do, but there’s also the retention of existing jobs.”
The IDA, WLDC and Development Authority of the North Country worked together to retain jobs at one of Watertown’s oldest businesses, Knowlton Technologies, which employs approximately 100 people. Prior to the company’s 200th anniversary, three managers purchased Knowlton from the retiring owner. “We wouldn’t have been able to execute the management buyout that we did in April of last year, which could have resulted in jobs really leaving the area,” said Rick Rudmann, President and CEO of Knowlton Technologies. “Our very existence depends on organizations like that.”
Business owners say New York state presents challenges with its high taxes and energy costs. Without economic development organizations like the IDA, Alexander says the area’s economic picture would look much less attractive.
“Significant numbers of development dollars have occurred we believe because the IDA was here and in a position to offer some of the incentives that are out there. It ranges from Great Lakes Cheese and their $80 million - $75 million expansion in Adams, to Roth Industries, to the Morris Hatchery,” said Alexander. “Big and small, we kind of get them all. We just lent some money to Jessica’s PetSpa. It’s a small business. We have development ongoing right now that will be, if indeed it ever actually happens, will be over a billion dollars worth of capital investment in the county.”
The IDA is currently working with Upstate NY Power Corp. on the Galloo Island Wind Farm, a $703 million project. “We’re developing what’s called a UTEP, or a uniform tax-exempt policy, which covers wind farms,” said Alexander. “The UTEPs are basically an internal to the PILOT agreement. It’s the financial formula for how that incentive is to be introduced to that company.”
Alexander says the formula was set up with two components: the first gives the taxing jurisdictions a certain amount of payment in lieu of tax based on the permegawatt value of the wind farm.
“We have a second component, which is very unique and not being done anywhere else at least as far as we can see – and that is tied with the cost of energy,” said Alexander. “It’s kind of an incomebased PILOT to the community. The reason for that is that we’re making an assumption because these are 20-year PILOTs. That’s a long time. Sometime during the course of that 20 years, the price of energy is probably going to go up. If the price of energy goes up, the income to the project goes up. Therefore we think that local taxing jurisdictions should share in that increased performance on the part of that development. We don’t want to penalize the development if that doesn’t happen because any developer can only afford so much for taxes and insurances. If we don’t provide the right number of tax dollars, these projects don’t happen. On the other hand, if they do well, we want to take advantage of that. We don’t want to leave any money on the table. We will go to all the taxing jurisdictions and say, ‘Here is what we’ve developed. We think it’s a meaningful plan to develop tax dollars for the community. Do you agree?’ If they agree, then they work out the distribution aspect of that. We simply develop the pot of money.”
Thanks to the IDA and the services it provides, hundreds if not thousands of jobs have been created or retained in Jefferson County.
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