Mar 20
2023
Moog seeking 14th tax subsidy from IDA
- Share on
Moog Inc., one of Western New York’s largest employers, is a highly profitable company, netting $155 million last year alone. That’s partly due to the billions in federal defense contracts it’s landed over the past decade.
Yet time and time again — 13 times since 1973 — Moog has gone before the Erie County Industrial Development Agency seeking — and receiving — millions in tax breaks. It’s received nearly $10 million in subsidies since 2006.
The company is headed back to the IDA on Wednesday asking for a 14th round of subsidies. Moog’s request for $2.9 million in sales and property tax breaks raises thorny questions about whether subsidies for profitable companies are justified.
Update: IDA approves latest subsidy request from Moog
Moog’s current request before the IDA includes a $2 million sales tax break and a $901,000 property tax cut, in exchange for a $76.8 million investment from the company.
The IDA has an incentive to approve the request: It would collect $450,000 to $500,000 in fees.
Moog representatives told the IDA two weeks ago that it needed the incentives to build a new Advanced Integrated Manufacturing Center, where it expects to perform subcontract work on Future Long-Range Assault Aircraft, the successor to the Black Hawk helicopter.
The project would retain 180 jobs, but create no new positions.
Follow us on Facebook, Twitter, Instagram & YouTube
Moog didn’t argue that it needs the IDA’s assistance because it couldn’t afford to build the new factory without it, which is a common case companies make to IDAs. Rather, company representatives argued that if the IDA didn’t subsidize its project, it could take that part of its business to Utah. Or perhaps down South, where it’s studied sites for expansion.
“The lieutenant governor [of Utah] had reached out and offered additional incentives to be able to physically locate and grow there as well,” Connie Buynacek, a Moog vice president, said at a March 9 meeting.
Buynacek later added in a brief interview: “We’re intending to do the expansion. This allows us to do it in Western New York.”
To some watchdogs, Moog demanding IDA subsidies is “double or triple dipping.”
“I don’t think Uncle Sam should be paying companies to impoverish states and counties and cities and school districts,” said Greg LeRoy, executive director of Good Jobs First, which monitors and analyzes government subsidies to corporations. “I think it’s perverse.”
Breaking down Moog’s subsidies
Moog’s work for government agencies — including the Navy, Army, Air Force, NASA and U.S. Special Operations Command — has been lucrative. The company also boasts longstanding relationships with larger defense contractors like Lockheed Martin, Raytheon and Boeing.
In 2022, Moog said that 70 percent of its business came from “aerospace and defense,” with 52 percent stemming from federal contracts. The rest of its work is for private aerospace companies and other industrial customers.
In the last decade, Moog has won nearly $4.5 billion in defense and aerospace contracts. And it’s won subcontracts worth $2.2 billion in the last five years.
Moog employs 14,000 in offices and factories in more than a dozen countries around the globe. The company is headquartered in Elma, which is home to more than 4,200 employees.
Despite federal defense spending and subsequent contracts remaining “relatively stable” in recent years, Moog has repeatedly approached the Erie County IDA for subsidies. They’ve come at a cost to local governments and schools.
Moog has received tax breaks on five projects since 2006. The tax breaks have cost the county, Town of Elma, and Iroquois Central School District a combined $9.9 million. In exchange, they’ve received $3.3 million in payments-in-lieu-of-taxes, according to IDA data.
If approved, the new subsidy package would save Moog $2.9 million and provide the county, town and school district $225,230 over 10 years.
In addition, Empire State Development has awarded Moog $23.5 million in tax breaks in recent years, with one award in 2017 and another in 2021. The company so far created 200 jobs tied to $8.5 million in Excelsior tax credits, according to ESD spokesperson Laura Magee. It has yet to create another 500 jobs that would entitle it to an additional $15 million in tax credits.
Moog also is receiving discounted hydropower from the New York Power Authority. Its current allotment of 558 kilowatts saves the company an estimated $73,000 a year. The company has yet to use 4 megawatts of discounted power it has been allocated that would save an estimated $520,000 annually.
Buynacek, the Moog representative who appeared before the IDA, argued that the company uses the incentives it receives to expand its business in Western New York and that “we’re putting back much more than what we’re asking for.”
Others, however, question the company’s need for incentives.
Are subsidies necessary?
Nothing in state law appears to prevent an IDA from granting subsidies to a company that can afford a project without them. Yet IDA applications ask a company if its project is feasible without the tax incentives. Most answer “no.” Moog answered similarly.
That leads some experts to argue that tax breaks should only be granted when the finances of a project actually require them.
In Moog’s case, the company and IDA officials said the proposed incentive package is based not on financial need, but the desire to keep the company from building the attack helicopter plant elsewhere.
“It’s not that they can’t afford it, it’s not always a question of affordability,” said Brenda McDuffie, chair of the IDA’s board. “It’s a question of in return for what you’re doing … how does this benefit and contribute to the larger community? And I don’t think there’s any question on that with this project or any of the other projects we’ve induced.”
A Moog representative refused a request for an in-depth interview for this story. So did IDA Executive Director John Cappellino.
Donate to support our nonprofit newsroom
Watchdogs question Moog’s claim that it might build the helicopter factory elsewhere if the IDA doesn’t grant the tax breaks.
“They’re holding something over your head with the threat of dropping it,” said Jeff Pearlman, executive director of the Authorities Budget Office, which has oversight powers over IDAs.
“I don’t think it’s a crime … but it’s definitely disingenuous. It’s definitely unethical.”
Federal officials have discouraged companies receiving federal dollars from pitting one state against another for its business, said LeRoy of Good Jobs First. That happened as recently as 2021, when Oshkosh Defense won a federal contract expected to benefit Wisconsin, only for the company to announce it would take the work to South Carolina.
“We can’t allow federal dollars to be used to whipsaw states against each other,” LeRoy said.
He added that under the CHIPS and Science Act, the Commerce Department has sent signals that states and localities should not provide companies tax subsidies, but rather invest in workforce development and other programs.
LeRoy noted that Moog bid on the helicopter contract knowing it was able to afford to perform the work and questioned why the company now needs incentives.
So the question is why? Why does the company get away with saying it needs a different cost structure than the one that [it had] when it won the bid?” LeRoy said.
“It sounds to me like the company is a serial grubber, a tax break grubber here. And that at some point, the IDA has to say, ‘Enough is enough.’ ”
