it may build at site of woodstock festival
Chip maker mulls second plant in New York
Published: Aug. 4, 2012 at 10:51 PM
SAUGERTIES, N.Y., Aug. 4 (UPI) -- GlobalFoundries Inc. proposed building a second computer chip plant in New York state -- this one on the Woodstock '94 festival site, an agency chief said.
"They've spoken with us twice, and they're considering giving us a proposal" to convert the 850-acre Winston Farm property in Saugerties, N.Y., 100 miles north of New York City, into a "high-tech development," Ulster County Industrial Development Agency Chairman David O'Halloran told the Daily Freeman of Kingston, N.Y.
GlobalFoundries of Milpitas, Calif., did not immediately respond to United Press International phone and e-mail inquiries about its interest in the property and related questions.
The company -- created by the divestiture of the manufacturing side of the Advanced Micro Devices Inc. semiconductor company in 2009 -- operates a nearly completed a $6.9 billion plant on 222 acres 70 miles north of Saugerties in Malta near Saratoga Springs.
GlobalFoundries said last month it would invest $2.3 billion in additional equipment to increase production at the Malta plant, known as Fab 8, which employs more than 1,300 people.
The investment is fueled by increased customer demand, Vice President and plant General Manager Eric Choh told The (Albany, N.Y.) Business Review.
GlobalFoundries -- whose biggest investor is an arm of the government of Abu Dhabi in the United Arab Emirates -- has more than 150 customers, including AMD and IBM Corp.
"I think there is renewed interest as GlobalFoundries continues to grow up by Saratoga," O'Halloran told the Freeman, adding the Saugerties property was in high demand for chip making because the soil's clay base -- made famous in the abundant mud of Woodstock '94 -- minimizes manufacturing vibrations.
"It's in the top one or two cited locations for chip manufacturing in the United States," said O'Halloran, whose agency offers taxable and tax-exempt bonding for business expansion and relocation.
Woodstock '94 -- commemorating the 25th anniversary of the 1969 Woodstock Music & Art Fair, known informally as the Woodstock Festival or just Woodstock -- attracted an estimated 350,000 people and such music superstars as Aerosmith, Crosby, Stills & Nash, Sheryl Crow, Bob Dylan, Metallica, Red Hot Chili Peppers and Santana.
Woodstock promoter Michael Lang said last month he wanted to build a performing arts center for up to 30,000 people on the same property.
O'Halloran told the Freeman he was unsure if the center and chip-making plant could both operate on the property.
Read more: http://www.upi.com/Science_News/Technology/2012/08/04/Chip-maker-mulls-second-plant-in-New-York/UPI-88141344135101/#ixzz23LXAmyi8
it got a lot of government incentive to build
All expenses paid: GlobalFoundries sent bills, state gave cash
By LARRY RULISON and SARAH HINMAN RYAN Staff Writers
Updated 5:39 p.m., Monday, October 10, 2011
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Times Union staff photo by Cindy Schultz -- Hector Ruiz, CEO and chairman of Advanced Micro Devices Inc. (AMD), center, speaks during a news conference on Friday, June 23, 2006, at CESTM in Albany, N.Y. AMD will build a computer chip fab plant in Luther Forest in Stillwater. (WITH STORY) (day 1) Photo: CINDY SCHULTZ / ALBANY TIMES UNION
Times Union staff photo by Cindy Schultz -- Hector Ruiz, CEO and chairman of Advanced Micro Devices Inc. (AMD), center, speaks during a news conference on Friday, June 23, 2006, at CESTM in Albany, N.Y. AMD will build a computer chip fab plant in Luther Forest in Stillwater. (WITH STORY) (day 1)
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Editor's note: GlobalFoundries: All expenses paid is a report based on the Times Union's ongoing review of documents relating to the construction of the chip fabrication plant in Saratoga County. More articles in this series will be published in coming months. Visit our special report page for a video on following the money, PDFs of invoices, past GlobalFoundries coverage and a multimedia look inside the investigation.
MALTA -- Corporate apartments with luxury amenities. Flat-screen TVs. Supermarket gift cards. T-shirts and catered meals to celebrate special occasions. Lunch meetings for business groups. Bottled water and coffee.
Those are some of the expenses that New York taxpayers bankrolled for GlobalFoundries as part of a $1.4 billion subsidy promised the company five years ago to build a computer chip factory in Saratoga County -- including $665 million in cash.
Although most of the taxpayer dollars have gone for tangible expenses -- construction materials, engineering services, security and labor costs -- a Times Union investigation has found tens of thousands of dollars in expenses not normally associated with a publicly funded project.
Getting access to the information required suing Empire State Development Corp., the state's economic development arm, for what amounted to 14,000 paper copies of invoices and other documents that GlobalFoundries submitted to the state.
The Times Union's research team is compiling an electronic database to unravel and catalogue reimbursements. To date, the company has made seven requests to the state, for a total of $590 million. None was denied. And the company has spent $1 billion more as it builds a $4.6 billion plant that will start processing its first chips for customers in 2013.
Buried in the bills were $2,691 for t-shirts from Ralph's Sporting Goods, $2,198 for Price Chopper gift cards and $5,120 for flat-panel TVs from Sam's Club, among other expenditures paid with public dollars.
This massive transfer of taxpayer cash to a private company, and the paper trail that documents it, may provide the public its only glimpse into the biggest economic development project in state history.
The deal came together at a time when the state was riding high. Wall Street was still king, and the global financial collapse was more than two years away.
But as the worst economic conditions in a generation are squeezing a middle class that hopes to benefit from the GlobalFoundries project, the spending is being questioned at the highest levels of state government. The Times Union, studying invoices paid by the state, began sharing its findings with economic development officials weeks ago. They reacted with surprise.
Such a mega deal likely won't be offered again, according to the top economic development official in Gov. Andrew Cuomo's administration -- not even to land a second fab at Luther Forest Technology Campus in Malta, where GlobalFoundries owns 223 acres.
"We don't see massive subsidies as good economic development policy or a good investment of taxpayer money," said Ken Adams, who became president of ESDC in April under Cuomo. "We're no longer fronting money. There's a lot of lessons we learned from past experience."
The GlobalFoundries incentive package -- which is one of the three most generous in U.S. history -- was approved by former Gov. George Pataki in June of 2006 and was promoted by former Senate Majority Leader Joseph L. Bruno, R-Brunswick, whose district included Luther Forest.
Under Pataki, New York spent billions of dollars in incentives to bolster the state's semiconductor industry. IBM Corp., which built a $2.5 billion chip fab in East Fishkill with state money, was a major beneficiary of these policies, along with the University at Albany's College of Nanoscale Science and Engineering, which leveraged hundreds of millions of dollars in state funding to lure computer chip consortium Sematech from Austin to Albany. All of this set the stage for GlobalFoundries -- then a part of Advanced Micro Devices Inc. -- to choose Luther Forest over several competing sites worldwide.
GlobalFoundries, which is closely aligned with IBM in research and manufacturing, likely wouldn't have come here without the presence of Sematech and the NanoCollege, where IBM also has a large presence.
"You can't operate a business in a vacuum, especially one like ours that requires such investment," said GlobalFoundries spokesman Travis Bullard. "This industry is unique in that we partner with our competition to do a lot of research. Having (the college) and Sematech here is a huge part of why we chose this location."
Neither Pataki nor Bruno, both of whom have since left office, responded to requests for comment for this article. Neither did Assembly Speaker Sheldon Silver, who is considered the major benefactor to the NanoCollege but ultimately had to sign off on the GlobalFoundries deal as well.
Sen. Roy McDonald, who now holds Bruno's seat, was in the Assembly but was not active in the AMD talks, said spokesman Michael Veitch.
"With that being said, he does believe that this is a valuable investment in our local community and will mean job and career opportunities for local people in the future," Veitch said.
Assembly Majority Leader Ron Canestrari, D-Cohoes, was involved in the negotiations. The economic climate has dramatically worsened since then, he said, so it's easy to look back and imagine things should have been different.
"I believe it was a good deal. I believe that not to have done it would have been irresponsible because this is an investment in our area and it serves as a catalyst to others," Canestrari said. "When you make a deal, you make a deal. Yes, it was expensive. But the benefits are also at a very good level."
Canestrari is referring to the 1,800 jobs expected at Fab 8 as production starts and engineers are hired for a second administration building. Thousands of other jobs have been predicted as businesses move here to serve the factory and its workers. This so-called multiplier effect has already begun in Malta, which is rapidly growing with commercial development and an influx of fab supply companies. GlobalFoundries already had 900 people at the site, which was a logging forest two years ago.
But the subsidies given to GlobalFoundries are so generous compared to other deals made across the globe -- roughly $700 million in tax breaks and $665 million in cash -- that the Cuomo administration now says that mistakes may have been made. It's mainly the use of cash as an incentive that has become a concern.
"We would not have done the GlobalFoundries deal under those terms," said Adams. "But it's past. It's done. It's still a transformational project, and ESDC is committed to working with GlobalFoundries and making it a huge success."
Bullard, the GlobalFoundries spokesman, says it's natural that the new administration would have its own views on economic development. But many projects this expensive likely would not have survived four governors, especially during such economic turmoil, he said, without strong political support.
"The bottom line is all of them through the course of this have supported it fundamentally in solidifying this region as a new Silicon Valley."
GlobalFoundries gets paid as long as invoices it submits relate to preparing the land and building the factory, work done by general contractor M+W Group and its subcontractors. Part of the grant, $150 million, is earmarked for research and development spending on cutting-edge manufacturing equipment.
GlobalFoundries has also followed strict IRS guidelines for expenses because ESDC used Build America Bonds that give the state a federal subsidy on roughly $200 million in interest payments.
Under these rules, TVs, meals, T-shirts, gift cards and corporate apartments are considered capital expenses that are "necessary for the successful development of the project," Bullard said.
For example, gift cards and TVs were used as incentive awards for M+W's safety program. Each week that safety goals were met at the site, a drawing was held to award a flat-screen TV to one of the workers, said Art Kaplan, project manager for M+W. Apartments had to be rented for design and construction experts flown in from around the world during the start-up phase. T-shirts were purchased for a "topping off" ceremony when the last piece of steel was placed on the central utilities building. And bottled water was needed because running water was not available during initial stages of construction, Bullard said, and lunch meetings kept the local business commuity involved.
Adams, the ESDC chief, says he will look at whether it was proper for the state to reimburse such expenses.
"If it becomes a concern, we're going to get that money back," Adams said.
ESDC isn't the only one following the money. In the spring of 2010 the comptroller's office also wanted to take a look.
Mark Johnson, a spokesman for state Comptroller Thomas DiNapoli, said that in April 2010 a $58 million transfer of state money to ESDC to pay GlobalFoundries was audited. DiNapoli's office wanted to verify that a temporary cement plant, a chemical storage unit and other structures billed for were completed.
"The site was visited on April 28, 2010, and the work was verified," Johnson said, adding that "future requests for payments" would also be subject to audit. To date, GlobalFoundries has been reimbursed $590 million.
As part of its own review of the Fab 8 invoices, the Times Union is building a database of companies that won contracts and how much they were paid. As expected, some of the region's largest businesses are involved, including Jersen Construction Group of Watervliet, Delaney Group of Mayfield, T. Lemme Mechanical in Albany and MLB Construction Services of Malta.
Attempts to interview officials at these companies were unsuccessful because they had signed non-disclosure agreements.
"We do not wish to violate this contract," said Andrew Clemente, one of the family owners of Bonded Concrete, a Watervliet company that has earned millions from Fab 8. GlobalFoundries said disclosing certain financial and technical details could harm its competitive position in the marketplace with both vendors and competitors.
Bullard said that despite Fab 8's price, which could eventually soar to $7 billion if additional manufacturing capacity is added, "We compete on price with our competition. Everything we do has to be cost-conscious. Everything we do is as bare bones as possible."
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*Put it on the tab*
Below are some of the expenses submitted to the state by GlobalFoundries that the company says are typical for such a large-scale project and are allowed under terms of the state's $665 million cash grant. Shown below are a sampling of invoices.
1. Center for Economic Development meeting luncheon$507
2. T-shirts from Ralph's Sporting Goods$2,691
3. Price Chopper gift cards$2,198
4. Flat-panel TVs from Sam's Club$5,120*
5. Gift cards to The Foundry (on-site restaurant) $5,730
6. Rent for The Landings of Halfmoon$1,470
7. Rent for Steeplechase at Malta apartment$1,815
8. Membership dues to the American Society of Safety Engineers$210
9. Bottled water and coffee from Crystal Rock (over 14 months) $20,000
* Total amount from separate invoices
*A primer on borrowing*
Watch a video animation of "How the money works" at timesunion.com/globalfoundries
-New York didn't have the cash on hand to pay $665 million it promised GlobalFoundries to build a computer chip factory.
-So the state turned to Wall Street and asked for money from investment banks. The banks sell bonds, which are basically IOUs, to the public. The bonds promise interest payments on top of repayment of the original loan. The money raised goes back to the state, minus fees paid to the banks.
-The money from the sale of the bonds is put into a special account, which New York uses to pay GlobalFoundries. GlobalFoundries must submit receipts to show how the money is spent. This has happened every few months since January 2010.
-So far, New York has paid out $600 million.
-But the money put into that account isn't the state's money, because it is borrowed. Eventually the state has to repay the bondholders.
-So New York promises to repay the people who bought the bonds --- as well as interest -- using the money from state income taxes. In the case of GlobalFoundries, $25 million of its income tax collections every year will go to pay the bondholders.
-The $665 million given to GlobalFoundries will end up costing roughly $1 billion in the end.
To learn more about how the project was done, watch a video and read about it at timesunion.com/globalfoundries.
The foundation of this report is the Times Union's still unfinished database of GlobalFoundries invoices, which, with more than nine months of work, was assembled from 7,000 paper documents.
Assisting were Ethan Sprissler, a doctoral candidate in the University at Albany's informatics department, and students advised by UAlbany Journalism Professor Rosemary Armao: Samantha Bunn, Chris DePastene and Tim Plimpton, as well as Melissa Gradowitz, Audra Jornov, Desiree LaBombard, Nicole Monsees, Kristin Schaubeck and Christopher Vetter. Leah Buletti (University of Rochester), Michael Campana (University at Albany) and Justin Veldhuis (Elon University) also contributed. Times Union intern Yi-Ke Peng contributed a web animation.
Read more: http://www.timesunion.com/local/article/All-expenses-paid-GlobalFoundries-sent-bills-2209878.php#ixzz23LXiRcCo