According to a recent Buffalo News article the New York Power Authority is working on a deal with Yahoo!, the Internet giant, to bring them into WNY. The speculated deal would include giving Yahoo! power discounts totaling $101.2 million over the next 15 years. The plant Yahoo! is planning to build would create 125 jobs, which means that New York Power Authority would be spending $809,940 over the course of the contract for every job created.
A couple of quotes from the article about the potential deal:
- Referring to the amount being spent on each new job, “‘It’s exceptionally high, even for high-tech,’ said Greg LeRoy, a national expert on economic development subsidy programs.”
- “‘There are a few other deals we’ve seen over the years in that neighborhood, but it’s stratospheric. It doesn’t have much company,’ said LeRoy, executive director of Good Jobs First, a nonprofit research and advocacy group based in Washington, D.C.”
- “‘On a number basis,’ said Power Authority President Richard Kessel, ‘this doesn’t look like the greatest deal in the world, but we can’t look at the numbers alone.’”
Power Authority President Richard Kessel is correct; we can’t just look at the numbers. We also have to look at what kinds of jobs these are and where they will be located. As far as location, Yahoo! is looking at building its plant in rural areas like Cambria, Lockport or Pembroke. What kinds of jobs will these be? An interviewee in the article described these jobs as “high-tech”. This means they are sure to require at least a bachelor’s degree or some training.
A quick look at the NFTA’s website shows no public transportation to Cambria or Pembroke from Buffalo and no morning bus runs to Lockport from Buffalo. There also does not appear to be any scholarship or training programs for interested but unqualified workers associated with the deal. There will basically be no way for a low-income individual living in Buffalo to get a job at this potential plant if they do not have all the required qualifications and even if they do have the right qualifications, there will be no way for them to get to the job if they do not own a car, which is impossible for most low-income people.
If the deal goes through, this publicly subsidized plant will not create living wage jobs for the 1/3 of Buffalo that lives in poverty. This is not to say that communities like Cambria, Lockport, and Pembroke don’t need these jobs but could that $101.2 million do more good for more people in our community if it were given to a company that agreed to locate close to the areas that need the jobs most? To companies that will train some of the city’s thousands of unemployed workers?
If the city, county, or state ever hopes to end poverty and homelessness in Buffalo, it must make poverty its most important focus. In deals like the one being hashed out with Yahoo!, our administrators and elected officials must ask themselves if huge deals like these will create good jobs close to the communities that need the jobs most. Looking at the Poverty Challenge Budget it becomes clear that one of the major things that keeps people in poverty is their low-income. Many of the jobs that are available in the city are service sector jobs that pay very little, are often part-time, and offer few if any benefits. If the majority of jobs in a community pay poverty-level wages, then the majority of people in that community will stay in poverty.
Another aspect of the Poverty Challenge Budget that is sure to keep people in poverty is transportation. Using private transportation (or owning a car) will automatically blow your budget and put you into debt. But most of the decent paying jobs are outside the city, in places where there is little or no viable public transportation. The job that may help you get out of poverty is then out of reach becasue you can’t afford the transportation to get there and you have to settle for the minimum wage jobs in your neighborhood (which are harder than ever to find becasue of the current recession).
You could go down the list of items and expenses in the Poverty Challenge Budget starting with the low-income (due to the lack of jobs or the existence of only low paying jobs in your community), the high cost of rent/utilities, the cost of transportation, the cost of cell phones (very necessary for prospective employers to call you back) and see all the expenses that keep 1/3 of Buffalo in poverty. If our public officials ignore the poverty level budget and don’t address the need for living wage jobs, affordable rent, affordable transportation, etc. then thousands of people in Buffalo will continue to be impoverished.
The Yahoo! deal is another decision being made by public officials that does not have ending poverty as a primary concern or even as any concern at all. Deals that will create the kinds of jobs that will allow people to get out of poverty must be the ones we consider first if we have any desire to end poverty in Buffalo. The $101.2 million deal with Yahoo! is a deal that is being created without any concern for the thousands of impoverished people in our community.
BEHIND THE HEADLINES
Power deal would save Yahoo! $101.2 million
Subsidy package is one of the richest ever offered by the New York Power Authority.
The deal state officials are offering Yahoo! to entice it to build a data center in Western New York would provide about $810,000 in power discounts over the lifetime of the subsidy for every $50,000 job created, a Buffalo News analysis has found.
The discount would save Yahoo! an estimated $53,996 per job per year over the 15-year life of its proposed contract with the New York Power Authority. The average subsidy for companies given new power allocations in recent years is less than a quarter of that—$12,446.
The offer, which Yahoo! officials are considering, represents one of the richest subsidy packages ever offered by the Power Authority.
The Internet giant would build a $150 million server farm that would employ 125 people in exchange for deeply discounted hydropower generated at the Niagara Power Project in Lewiston. The discounts would save Yahoo! an estimated $101.2 million over the 15 years, according to News calculations that use the authority’s cost assumptions.
That works out to $809,940 per job.
“It’s exceptionly high, even for high-tech,” said Greg LeRoy, a national expert on economic development subsidy programs.
“There are a few other deals we’ve seen over the years in that neighborhood, but it’s stratospheric. It doesn’t have much company,” said LeRoy, executive director of Good Jobs First, a nonprofit research and advocacy group based in Washington, D.C.
“On a number basis,” said Power Authority President Richard Kessel, “this doesn’t look like the greatest deal in the world, but we can’t look at the numbers alone.
“Numbers matter less than jobs. We’ve just got to create jobs in Western New York,” he said.
Kessel also echoed comments made by Gov. David A. Paterson on Tuesday when he announced the state’s offer, that corralling Yahoo! could help attract other technology companies.
“It could be a magnet for other high-tech businesses,” he said.
Data centers usually don’t act as a catalyst to other high-tech development, however, said Rob Atkinson, president of the Information Technology Innovation Foundation, a technology policy think tank in Washington, D. C. “They tend to be relative stand-alone entities,” he said. “They don’t generally have a lot of spinoff.”
Server farms require a lot of electricity, and Yahoo! would save money by purchasing power from the Power Authority for less than one-quarter the market rate. This discounted hydroelectricity is coveted by energy-intensive industries, and currently about 125 companies receive power. The News estimated the discounts saved companies some $180 million in 2006.
A News investigation two years ago found the Power Authority’s discount power program is one of the richest subsidy programs in the nation. In the extreme, companies that have been shedding jobs for years are getting discounts that save them up to $150,000 per job per year. A study commissioned by the authority concluded in 2001 that the allocations have been largely ineffective in promoting job growth and helping the region attract new business.
Since The News investigation, the authority has come under pressure to leverage more economic development for its cheap power. Working with a local advisory board that includes economic development, government and utility officials, the Power Authority has made 61 allocations of discounted power since January 2006.
A News analysis of those allocations shows the authority is offering Yahoo! more generous terms than it has other businesses it has made deals with during that period.
The average discount for every job created is $12,446 per year, The News calculated. The Yahoo! deal works out to a discount of $53,996 per job per year.
No other deal comes close. The next costliest deal averaged $32,733 per job per year.
The Yahoo! deal fares better in a second comparison. On average, each kilowatt of power allocated leveraged $10,288 in private investment. The Yahoo! deal works out to $10,000 per kilowatt, just a tad lower.
The Yahoo! allocation of 15 megawatts is the second-largest made by the authority since 2006. The largest went to Globe Metals, which received 40 megawatts to reopen a plant in Niagara Falls to produce metallurgical-grade silicon and refine it for use in the manufacture of solar panels.
The Globe deal averages $26,186 per job per year. Also, tax credits granted to Globe will allow the company to avoid paying much, if not all, of its state corporate taxes in at least the short term.
State officials rationalized that deal, in part, by an agreement with Globe to set aside 25 percent of its production for sale to solar-panel manufacturers it hopes to attract to the state.
There are no such mandates to seed technology firms in the Yahoo! proposal.
Authority officials said, however, that construction of the server farm will require the development of a network of high-tech infrastructure, including fiber-optic lines, that they hope will attract other technology firms.
But sites under consideration are in rural areas—Cambria, Lockport and Pembroke— miles from urban areas looking for an influx of good-paying jobs to buttress a declining job base and combat poverty that makes Buffalo the third-poorest major city in the nation. Niagara Falls also suffers from a high poverty rate.
“High-tech is normally associated with urban places—Austin, Texas, Portland, Ore., and Silicone Valley,” said LeRoy, of Good Jobs First, which has studied subsidized job creation in the area.
He said the prospective locations of the Yahoo! facility here raise “the issue of what does this do for the parts of the region that have lost the most jobs? You want to relace jobs in the places where most of them have been lost.”
The Power Authority’s Kessel said the state did not try to influence Yahoo! on picking a specific site in Western New York, saying, “That’s a decision companies need to make themselves.”
He stressed that it’s important to try to promote business development outside of traditional manufacturing and that landing Yahoo! would result in a “huge psychological shot in the arm.”
Getting Yahoo! to set up shop here would “send a message. I don’t think you can quantify the immeasurable benefits,” Kessel said.
The Yahoo! deal was announced by Paterson just a month after the Power Authority he controls through appointees to its governing board came under sharp criticism from both Democrats and Republicans for its unwillingness to approve several other large allocations.
A News analysis of those proposed deals shows two of the three cited would have been even costlier than the Yahoo! arrangement.
A proposal, which was never formalized, to give Google 40 megawatts to build a data center in Medina would have involved discounts averaging $89,994 per job per year. Google decided in 2007 to build in North Carolina. Authority officials said Wednesday Google never provided all the information requested.
A proposal to allocate 35 megawatts to Steel Development Co. to build a recycling and manufacturing plant in the Town of Shelby in Orleans County would have worked out to $60,502 per job per year. The company abandoned its plans.
The other deal, in 2005, involved an inquiry from Wacker Chemical for 50 megawatts, which would have resulted in annual discounts averaging $28,810 per job. The authority offered Wacker 37 megawatts, all the available power at the time, but Wacker opted not to pursue the project.