Ambivalence Helped Push our Industry Down South
Originally posted on December 13th, 1992 by James T. Mulder for syracuse.com
Steven Peltz, owner of Northeastern Electronics Co. Inc. in Elbridge, wanted to expand his factory and create some new jobs.
When he turned to New York state for help, Peltz says economic development officials acted like they couldn’t care less – a charge they deny. So Peltz started checking out sites in the South, where he got a warm welcome.
Virginia offered to fly him down at the state’s expense. Louisiana and Alabama stuffed his mailbox with information. Business and government leaders in Lenore County, N.C., rolled out the red carpet when he visited. They wined and dined Peltz and promised a grab bag of financial incentives if he’d locate the plant there.
Peltz opened the new factory a year ago in a former Sara Lee plant in Pink Hill, N.C. – 100 miles Southeast of Raleigh.
“Now there are 45 new manufacturing jobs in North Carolina that could have stayed here,” he says.
At a time when Central New York is fretting over factory job losses, it’s ironic a local manufacturer like Peltz who’s adding jobs would find more support out of state than in his own back yard.
State Economic Development Department officials say they were more than willing to help Peltz, but that he made unreasonable demands.
Business groups, however, say Peltz’s story is disturbingly familiar and helps explain why many companies are abandoning New York.
The Syracuse area has lost 26,300 factory jobs since 1966. The state has lost more than 400,000 factory jobs since 1981.
TWO MONTHS ago, Advanced Medical Products, another local manufacturer that employs 77 people, announced it is relocating from the town of Salina to South Carolina.
New York companies are easy pickings for Southern states, where taxes, regulations and wages are often much less burdensome than New York’s, said Robert Ward, research director of the Business Council, a New York business lobbying group.
New Yorkers pay more in state and local taxes than any other state except Alaska. The average New Yorker paid $3,267 in state and local taxes in 1990, according to the U.S. Census Bureau.
New York’s corporate taxes, the highest in the nation, are 98 percent more than the national average, according to the Advisory Commission on Intergovernmental Relations, a nonpartisan Congressional group. Corporate taxes in North Carolina are 18 percent above the national average, while South Carolina’s are 33 percent below the national average.
State Economic Development Department officials say they met with Peltz and explained the lengthy list of assistance programs available. The problem was, Peltz wanted the state to pick up the entire cost – about $200,000 – of extending water and sewer lines to Northeastern’s property in Elbridge, said Fernando Lagua, a staff member in the Economic Development department’s Syracuse office.
“HE WANTED a 100 percent grant for infrastructure work, something that doesn’t exist in New York,” Lagua says. The state gives partial grants for infrastructure work if the business owner shares the cost, something Peltz wouldn’t do. Peltz says his company can’t afford to spend money on infrastructure because it’s constantly investing in new manufacturing equipment.
“Each state has its own strengths and weaknesses, and he (Peltz) was out shopping around,” says Frank O’Connor, director of the Economic Development Department’s Syracuse office. “He may have been only hearing what he wanted to hear.”
Peltz disagrees. He says Southern states bent over backward to woo him, while the reaction he got from O’Connor’s office was one of non-interest.
Peltz, 36, grew up in Liverpool and started Northeastern 10 years ago. The company makes electronic cables and wiring used in computers, telephones and other products.
Three years ago, Peltz moved the company to Elbridge, into a 22,000-square-foot plant on 26 acres formerly occupied by Skan-a-Matic. Coincidentally, Skan-a-Matic, a manufacturer of bar code equipment, moved to Florida in 1988. The Elbridge plant employs 40 people.
Peltz says state officials told him they could pay for his infrastructure work if he moved the plant into an economic development zone, such as the one on Syracuse’s economically distressed Near West Side. Companies that move into such zones are eligible for an array of incentives from tax breaks to cheap electricity.
“We had just bought our facility,” Peltz says. “Why would we want to relocate again?”
Peltz says officials of Southern states – especially North Carolina – were practically tripping over themselves to accommodate Northeastern.
The Tar Heel’s hospitality paid off. The state gave Peltz’s company low-interest financing and tax breaks and agreed to pay for job training. To further sweeten the pot, local businesses chipped in $8,000 to help defray the cost of sandblasting and repainting the factory’s ceiling.
O’CONNOR SAYS New York offers generous economic incentives that have helped trigger expansions at area companies such as Marsellus Casket Co. in DeWitt, Hanford Manufacturing in Syracuse and Rubbermaid in Cortland.
“A lot of people think the grass is always greener on the other side,” O’Connor says. “But we have a good business climate in New York.”
O’Connor says SynderGeneral came to that conclusion last year when it decided to build a plant in Auburn and add hundreds of jobs. The air conditioning manufacturer had considered pulling out of Auburn and expanding its plant in Tennessee. The move would have cost Auburn 375 factory jobs. But state and local officials enticed SnyderGeneral to stay with a generous package of financial incentives. In addition to saving the 375 jobs, SnyderGeneral promised to create another 225.
James Gray, president of the Manufacturers Association of Central New York, says New York’s economic development incentives are more than adequate.
What makes New York unattractive to businesses are the high costs of taxes, workers compensation and other state-mandated programs, Gray said.
“THE STATE does have some of the most generous incentives, but what they do to you once you get here, they take it back in spades,” Gray says.
Although businesses often gripe about taxes and regulation, those two issues don’t have much influence on corporate relocation plans, said Susan Christopherson, an associate professor of city and regional planning at Cornell University.
She says the key issues are: proximity to markets, quality of labor, labor costs and quality of infrastructure (highways, bridges, etc.).
Peltz says Syracuse economic development groups should concentrate on helping small local businesses expand, not on attracting big companies from outside the area.
As his company grows, Peltz says he may have to look outside the state again to expand.
“I’m a hometown boy and would just as soon not do that,” Peltz says. “But we may not have a choice.”
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