New York invests in a loser
NEW YORK INVESTS IN A LOSER
By Bob Confer
Prior to leaving office in the summer of 2008, the former Senator Joe Bruno, long the head of the state senate, wanted to leave a legacy of sorts, something that would plant an indelible mark on New York. Not wanting it to be the FBI investigation that forced his retirement, he capped off his career by negotiating a mammoth economic development project.
Bruno was the key broker of a deal that will bring microchip manufacture AMD – specifically its subsidiary known as The Foundry - to Malta, a town of 13,000 strong located in Saratoga County. AMD’s new plant will be a $4.6 billion investment, one that will employ nearly 1,500 people when it’s up and running. Given that these forecasts hold true, this sounds like great news for Upstate.
It’s not. As the old adage says, it’s too good to be true.
You see, Bruno, Governor Paterson and their cronies at Empire State Development gave away the bank to bring AMD to our fair state. Besting the offer proposed by Dresden, Germany by some $100 million, the state won AMD’s love by giving the company a $1.3 billion incentive package, which works out to a benefit of $887,000 per job. It’s a combination of tax breaks, rebates and grants, the latter of which accounts for $650 million alone.
That’s $650 million of cold, hard cash – our cash! - literally being given away. And, it’s cash that we don’t have. With Wall Street in the dumps, New York is facing a budget gap of $15 billion, a deficit that has forced the Governor’s hand in introducing some of the most ludicrous taxes that have come down the pipeline in years. The contrast is appalling: As we regular folk struggle to run our small businesses, maintain our jobs, or keep our homes in the mother of all recessions, the state finds it necessary to drain even more of our already-pillaged income while giving money to a multinational corporation which, unlike our residents, has absolutely no allegiance to the Empire State.
Regardless of budget surplus or budget deficit, there is no company on Earth deserving of a deal as sweet as AMD’s. Under what tenets of capitalism and free markets does a government contribution of any size, let alone $650 million, make any logical sense? It doesn’t.
It’s even more illogical when you analyze AMD’s past, present, and future. AMD is a train-wreck that makes the $650 million look like the one of the worst investments of the past twelve months. With the stock market the way it is, that’s saying something.
AMD has become a poor performer and, unlike its competition (the biggest of which is Intel) who have seen revenues and profits drop because of the recession, AMD’s woes started long before the recession and they continue to this day. In third quarter of 2007 AMD accounted for 23% of the global PC and server chip market. One year later, it accounted for 17% while Intel’s market share grew to 82%. This coincided with a loss of $67 million in the third quarter of 2008 which is peanuts compared to the $396 million they lost in the third quarter of 2007! Things have become so bad that Moody’s Investor Services has announced AMD’s outlook as “negative”. Moody’s is confident the company will be cash-flow negative in 2009.
No investor in his right mind would ever go out on a limb to invest in such a bleak company. Yet, New York’s bureaucrats continue to do so. Amazingly, they weren’t disheartened by the monetary losses. And, they weren’t turned off by the telling job losses. Jobs were supposed to be the ultimate payback to our investment. There’s no way that AMD can be trusted to produce 1,500 jobs in Malta when globally they cut 2,100 jobs - 13% of their employment - in 2008. Most of these firing occurred in the early ‘08, before the market blow-up and while Bruno was still ironing out the deal.
To most observers this giveaway was pretty much set in stone when on December 16 the Public Authorities Control Board voted for the last of the minor technicalities, identifying The Foundry as a part of AMD. But, concerned taxpayers shouldn’t throw in the towel just yet. There’s still time to cancel the package because shovels won’t hit the dirt until midyear. We need to put constant pressure on Governor Paterson and our legislators, demanding they accept the mantle of leadership – which we gave them – and take a stand against this rotten deal. If they don’t, and throw away our millions, then they all are no better than corrupt investor Bernard Madoff…and just as criminal.