Some Call It Free Enterprise—Some Call It Socialism for the Rich— Some Call It Robbery—What Would You Call It?

by Dave Duncan

             Those schemes that take money from taxpayers in order to transfer it to private hands are often very complicated. This level of complication is necessary in order to keep the public from understanding just who gets and who pays. The story below is an attempt to bring a small bit of clarity to way that IBM, EIT, Huron Real Estate LLC, Broome County Industrial Development Agency (BCIDA), along with much political help, have negatively changed the landscape for the taxpayers in Endicott, Town of Union, Broome County and NYS. 

History of Huron Real Estate Associates, LLC

In 2002, members of a privately held group EIT, a component manufacturer, controlled by the Maines and Matthews families and other locally connected people, established Huron Real Estate Associates a Limited Liability Company,(LLC). Huron purchased IBM’s 4 million square foot property in Endicott, NY for what the Press and Sun-Bulletin said was $63 million, depending on the article you read. According to the same source, the State would pay 84% of the purchase price. The State money was to maintain and create local jobs.

Another account from The Press and Sun-Bulletin put the purchase price at $65 million plus $35 million added for improvements. In an August 2012 statement from the Town of Union Assessor the original purchase price was listed as only $35 million for the land and buildings, the other $30 million was not explained. In the Recording page from the Broome County Clerk’s Office, the taxable amount of the IBM sale to Huron is $64,500,000. Equipment that is bolted to the floor is considered part of the building value for assessment purposes.

The BCIDA, through banks, sells bonds to wealthy investors who escape paying taxes on the returns. The banks involved in providing funds for the EIT project were M&T – $17.5 million, NBT – $5 million, Visions Credit Union – $5 million and Wilbur National Bank – $5 million.  

It is difficult to make the numbers add up. Was all of the private money provided through the sale of BCIDA bonds? The Broome County Executive and those legislators sitting on the BCIDA Board, should give a public explanation of the funding projects that the BCIDA is part of sponsoring.

IBM Skips Out With the Taxpayer $$

In the early 1990’s IBM wanted to rebuild its headquarters in Armonk, NY and get rid of older buildings like the ones in Endicott. NYS politicians made millions available to IBM for the Armonk project while also making taxpayer dollars available to help IBM sell off its Endicott property.

From 2002-2005 EIT received $23 million in property tax credits from the NY Empire State Development Corp. These funds were to insure that EIT maintained its 1900 jobs. Within weeks of the 2002 purchase, and just two weeks after the NYS elections, EIT laid off two hundred workers and in the period from 2002-2005, EIT employment dipped below 1500. The $23 million was never paid back to the taxpayers.  The EIT jobs were filled with workers transferred from IBM.  Also, as part of the deal, IBM was to maintain 2,000 jobs in Endicott. These job goals have not been met.  EIT employment is approximately 1400 while IBM employs about 800. Do you remember in 2002 when politicians lined up to take credit for the deals that provided jobs to 3,900 people through IBM and EIT? IBM’s worldwide profits for 2011 were $54.95 billion.

The BCIDA

The involvement of the IDA in any scheme guarantees that tax dollars will flow from the average taxpayers to wealthy developers.

After Huron purchased the IBM property, the deed was transferred to the BCIDA. The transfer allowed BCIDA to give tax benefits to Huron for the purpose of creating and maintaining jobs.  NYS Comptroller Alan Havesi issued a report that castigated IDA’s for not reclaiming tax benefits from businesses when the job targets were missed. Tax benefits provided by the BCIDA for EIT and Huron were never paid back even though the promised job goals were not reached. EIT/IDA promised to maintain 1900 jobs but that level has fallen to less than 1400. On top of the failure to maintain 1900 jobs EIT promised to create 700 more. This has not happened as layoffs continue.

The BCIDA has been in the business of obtaining massive tax breaks for local industries for more than 40 years. During that period they have never kept track of the jobs that were created.

The BCIDA is an unofficial county program. The County sponsors the IDA and the County Executive and members of the County legislature sit on the board. The IDA does not answer to the county. The IDA also apparently does not answer to the State. The State cited the Chairperson of the IDA Board for a conflict of interest in another property scheme but the County and the IDA ignored the citation. The County is too busy with welfare fraud by poor people to notice the problem created by the wealthy.

Tax Give Away or Wonder Why NYS, Broome County and the Village of Endicott are Broke?

The BCIDA provided a ten year 50 % property tax break to EIT, an elimination of the County Mortgage Recording Fee and sales tax on equipment, furniture, etc. purchased for use in the plant.

Huron received $20.2 million in Empire Zone Tax credits from 2003-2005 for the purpose of creating jobs. Huron created 17 jobs in that period. Each job cost $1.2 million. EIT received $8. 8 million in tax credits for creating 87 jobs. (You do the math)

NYS tax credits existed for the period 2002-2012. Beginning in 2012 there has been a phase out of the credit reimbursement where the State will pay 80%, then 60%, then 40%, then 20% and eventually paying nothing.

A NYS subsidy cut the EIT electric bill from $12,000 per year to $4,000. Residents of NYS are paying 75% of Huron’s electric bill.

The Federal Community Development Block Grant Small Cities fund gave EIT an additional $1 million.

Just because EIT did not maintain the jobs they agreed upon, does not mean that the public spigot was turned off. In 2009, an additional $4.8 million in Federal funds went EIT. This grant was secured by Congressman Hinchey so that EIT “could further expand their work in Broome County,” whatever that means.

IBM Lease- The Final Key That Made This Project Go

In 2002 IBM signed a ten year lease agreement with Huron for $51.5 million Huron.  In May, 2012 IBM extended this lease agreement for 3 years but the dollar terms were not disclosed. IBM leased 1.4 million square feet. The IBM lease, the space leased to EIT and all other leases have been assigned to the banks that supplied the credit to Huron, until the loans are paid off. Since the deal would not have been made without the IBM lease and the public money, it raises questions about the amount of private money put up by the investors.

Workers Lose

IBM transferred 2000 workers who made a living wage and decent benefits to EIT. EIT workers are paid much less and have less in benefits. The work creation/maintenance goals have never been reached.

IBM and EIT job goals that were “secured” by State funds were never reached.    

After ten years of profiting from cheaper labor, State, County and Federal grants and tax breaks, the owners have moved some operations to cheaper labor pastures. EIT has opened a plant in China.

Taxpayers’ Loss is the Corporation’s Gain

For ten years from 2002-2012 the taxpayers have subsidized EIT/Huron. The tax breaks were absorbed by the taxpayers from Endicott, the Town of Union, the Union Endicott School District and Broome County.  In 2012 the Huron owners demanded a reduction in assessment from $150 million to $17 million. After discussions with the Town of Union the total assessment was reduced to 27.5% of the 2011 level. As a result of this deal, the average homeowner in Endicott will be paying approximately $405 more per year in property taxes.

The More Tenants on the Huron Campus, the Less the Campus is Worth.

The number of tenants at the Huron Campus has expanded beyond EIT and IBM.  Since the opening in 2002, other major tenants including BAE and Lockheed Martin have been added. SUNY Binghamton, a law firm and insurance firm are also renting space on the campus. BAE, which had been located in Westover, but was flooded out from its’ IDA owned building in 2011, signed a five year lease, with options to extend. BAE, the largest defense contractor in the world was given, by NYS Taxpayers, $40 million in job and investment tax credits over a five year period for moving to the Huron Campus. BAE is leasing over 400,000 square feet.  With the BAE lease the Huron Campus is almost filled, Chris Pelto, Vice President of Huron stated. BAE’s worldwide profits 1n 2011 were 1.24 billion pounds or $1.94 billion.

 

I have followed many development schemes in Broome County for over 35 years. This one has more pieces of public money and layers of bureaucracy than most. People who are knowledgeable about this scheme are confused about the facts.  I am convinced that these projects are put together in this fashion so that only the developers and banks can understand them. We cannot sit back any longer and let elected officials side with the wealthy, against us. We pay the taxes. We must demand that any schemes that are meant to “save our community” through the use of public funds and tax breaks, be fully explained before they are approved.

 

                                                                 Who Owns Huron?  

The project was put together with then Governor of NY, George Pataki, local NYS Senator Thomas Libous and a number of local capitalists    The names of owners of Huron Real Estate Associates LLC.  in 2002 were:

                                                                                                                                                                                              Percentage of Ownership

Lawrence E. Davis, 320 Jensen Road, Vestal, NY                                                                                                                    3.5%

Thomas J Davis, 12 Avon Road, Binghamton, NY                                                                                                                                                                              6.0%

David Maines  101 Corporate Parkway, P.O. Box 450, Conklin, NY                                                                                                                  21.25%

William Maines  101 Corporate Parkway, P.O. Box 450 Conklin, NY                                                                                                                  21.25%

Douglas G. Matthews  320 N. Jensen Road, Vestal, NY                                                                                                                     8.0%

James F. Matthews  320 N. Jensen Road, Vestal, NY                                                                                                                     3.5%

James T. Matthews, 320 N. Jensen Road, Vestal, NY                                                                                                                                                              8.0%

Judith Matthews,  320 N. Jensen Road, Vestal, NY                                                                                                                     3.5%

John W. Matthews, 320 N. Jensen Road, Vestal, NY                                                                                                                     8.0%

Robert P. Matthews, 320 N. Jensen Road, Vestal, NY                                                                                                                                                                                  4.0%

Christopher I. Mellon, 101 Corporate Parkway, P.O. Box 450, Conklin, NY                                                                                                                     3.0%

James W. Orband 1635 Sylvia Drive, Endicott, NY                                                                                                                                    6%

Theresa Sommerfield, 320 N. Jensen Road, Vestal, NY                                                                                                                     4%

 

                                                               The Banality of Evil                                                                     Public and private players, one symbiotic organism like lichen’s algae and fungus, supporting  and nourishing each other, impervious to hot, cold, wet, dry, rocks, garbage, indignation and shame.   

 

 

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