Samsung turned down subsidies worth $1.9B
Think the $950 million the state doled out to build and equip a factory for Tesla in South Buffalo was a lot of money?
State and local officials offered Samsung twice as much to build a semiconductor plant in rural Genesee County.
The $1.9 billion subsidy package would have been the second-largest deal in state history if the company had accepted it. It ranks high nationally, as well.
“It would be right in the top dozen of all time in U.S. history,” according to Greg LeRoy, executive director of Good Jobs First, a national subsidy watchdog group.
Still, New York’s deal was not attractive enough to sway Samsung, which announced in November that it will build its new microchip plant in Taylor, Texas. The factory will employ 1,800 and begin operation in the second half of 2024.
Investigative Post obtained New York’s offer letter to Samsung under the state Freedom of Information Law. The offer, made last February, included sales and property tax abatements, corporate tax refunds, a cash grant and discounts on the purchase of electricity and the land where the plant would have been located.
“We are committed to attracting and supporting Samsung’s growth in the state of New York and making New York home to the most advanced semiconductor manufacturing in the world,” wrote Eric Gertler, president and CEO of the Empire State Development Corp.
State and local officials wanted Samsung to build a 6-million-square-foot plant in an industrial park about 10 miles north of Batavia. The Genesee County Economic Development Center has spent more than $30 million in mostly Buffalo Billion funds over the past decade to develop the site, called the Science and Technology Advanced Manufacturing Park, or STAMP, for short. But the site remained vacant at the time of the offer to Samsung.
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Samsung is the world’s second-largest microchip manufacturer. Amid a global shortage of microchips used in cars, cell phones and other products with electronic components, the company announced plans in 2020 to build a plant in the United States, sparking a competition that included Genesee County, suburban Phoenix and two sites in and around Austin, Texas.
U.S. Sen. Charles Schumer, D-New York, led a contingent of advocates who hoped to convince Samsung to build the plant at STAMP. Last January, he spoke to executives from the company, encouraging them to consider Western New York for the project. He also touted the approval of a $52 billion federal incentive package aimed at boosting domestic semiconductor production.
The Genesee County location faced challenges, however.
Samsung already had a plant in Austin, where officials were quick to put a $1 billion subsidy offer on the table.
STAMP, on the other hand, is in a remote location, lacking utility infrastructure and distant from population centers such as Buffalo, 35 miles to the southwest, and Rochester, 53 miles to the east.
STAMP’s location flunked the state’s Smart Growth test when it was proposed because it failed to meet seven of ten criteria. In its 2013 analysis, the good government group Empire State Future labeled the site a “poster child for location inefficiency.”
Perhaps to compensate, officials here put together a richer incentive package than the competitors in Texas.
- Property tax breaks of $695.7 million over 30 years.
- Sales tax abatements of $289.6 million, also over 30 years, on the purchase of construction material, equipment and supplies.
- Corporate state tax refunds of up to $400 million under the Excelsior program, which provides credits based on a number of factors, including new employment.
- The sale of discounted electricity generated by the New York Power Authority worth $360 million over 10 years.
- A discount of $116 million on the 1,000 acres Samsung would purchase at STAMP.
- A grant of $25 million that the company would put towards the $200 million cost of putting sewer, water, natural gas and power services in place.
The winning incentive package from Taylor, Texas, included $954 million in city, county and school district property tax breaks, a $27 million state grant and commitments for public infrastructure improvements totaling $260 million. The package is the largest in state history.
New York is no stranger to costly subsidy deals.
“New York state has this tragic history of too many megadeals,” LeRoy said.
In 2017, Investigative Post reported that New York doled out more money than any state in the nation to support megadeals, or subsidy packages worth at least $50 million, dating to the year 2000. The collective value of those deals was $11.8 billion.
The largest subsidy deal in New York state history involves an aluminum plant in Massena operated by Alcoa. In 2007 the company received a commitment of discounted electricity from the state Power Authority worth $5.6 billion.
Two other deals topped $1 billion. One, worth $1.86 billion, went towards the construction of a computer chip factory near Albany. IBM received $1.1 billion for projects in the Hudson Valley and the New York City region.
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Locally, the deal that brought Tesla to town represents the largest subsidy deal. Another costly deal involved $478 million used to build and expand a data center in Lockport, originally operated by Yahoo, and now Verizon.
The state’s offer letter to Samsung references a commitment by the company to create jobs, invest in STAMP and spend money on research and development over a 10-year term. The specific numbers were redacted by the agency, however, which said the figures constituted “trade secrets” that, if disclosed, would “cause substantial injury” to Samsung’s “competitive position.”
Pamm Lent, a spokesperson for Empire State Development, and Jim Krencik, a spokesperson for the Genesee County Center for Economic Development, both refused to answer questions from Investigative Post.
The package offered to Samsung is “very consistent with New York’s history of … putting lots of eggs in a few corporate baskets,” said LeRoy, of Good Jobs First.
He noted that the Samsung package worked out to more than $1 million per job.
“At that price, there’s just no way New York taxpayers ever break even,” LeRoy said.
“There’s no way that the average worker in a microchip fabrication plant is going to pay a million dollars more in state and local taxes than in public services they and their family consume. It’s not going to happen.”
While officials here in Western New York didn’t land the Samsung factory, they managed to finally secure a tenant for the Genesee County industrial park. This fall, Plug Power broke ground on a facility to produce hydrogen fuel. The $270 million package will bring 68 jobs to STAMP.
That works out to subsidies worth $4 million per job — the largest ever in Western New York.