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CERTIFIED MAIL
IiETLTRN RECEIPTREQUESTED
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Empire State Development Corporation
03 Thin' Avenue New York, New York 10017-816i' Tel 212 803 3100
FOR CONSIDERATION
March 24, 2005
TO: The Directors
FROM: Charles A. Gargano
SUBJECT: Ithaca (Tompkins County) - Emerson Power Transmission Capital -
Empire State Economic Development Fund - General Development
Financing (Capital Grant)
REQUEST FOR: Findings and Determinations Pursuant to Sections 16-m and 10 (g) of the
Act; Authorization to Adopt the Proposed General Project Plan;
Authorization to Make a Grant and to Take Related Actions
General Project Plan
I. Project Summary
Grantee: Emerson Power Transmission Corp.
Contact: Mark Weidman, Vice President, Finance
620 South Aurora Street
Ithaca, NY 14850
Phone: (607) 274-6007
Fax: (607) 274-6195
Project Location: same
NYS Empire Zone
(or equivalent): N/A
Proposed Project: Relocation of Liverpool operations to existing Ithaca facility, which
includes Ithaca facility improvements and purchase of machinery and
equipment.
Project Completion: June 2003
Number of Employees at Project Location:
Initial employment at time of ESD Incentive Offer: 430
Current employment level. 435
Minimum employment on January 1, 2010: 430
ESD* Investment: A grant of up to S,750,000, to be used for a portion of the cost associated
with facility improvements.
Anticipated
Appropriation
Source:
ESD Project No.:
Project Team
* The New York State Urban Development Corporation doing business as the
Empire State Development Corporation ("ESD" or the "Corporation")
Empire State Economic Development Fund
P497
Origination
Project Management
Legal
Affirmative Action
Finance
Environmental
II. Project Cost and Financing Sources
Robert Sweet
Steven Fischer
Richard Dorado
Denise Ross
Peddy Ligonde
Soo Kang
Financing Uses
Amount
Facility Improvements
1,023,102
Equipment Acquisition
53,529,01 1
Equipment Relocation
1,383,968
Training
825,120
Working Capital
236,401
Total Project Costs
$6,997,602
Financing Sources
Amount
ESD-Grant
$750,000
10.7%
Tompkins County Workforce
Development Board
123,807
1.8%
New York State Electric and Gas
25,000
0.3%
Company Equity
6,098,795
87.2%
Total Project Financing
6 997,602
100.0%
III. Project Description
A. Background
Emerson Power Transmission Corp. ("Emerson" or the "Company") is a wholly -owned
subsidiary of Emerson Electric Co., a S 16 billion publicly traded manufacturer of a wide range of
products for the industrial, commercial and consumer markets. The Company was formed in 1987
and manufactures high quality industrial components under seven branded product lines. From its
1 1 manufacturing facilities throughout the world, Emerson produces belt drives, clutches, motorized
pulleys, Bearings, bearings, and other parts that make up equipment used in a w ide range of
capacities from oil fields to paper mills. It is a leading producer in the majority of its markets, and
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some of its major customers include Caterpillar Incoporated, Valmont Industries, Trane Company,
and Solar Turbines.
In 2001, Emerson Electric Co. experienced a severe downturn in many of its key markets
and began to take strong initiatives to increase efficiencies companywide. As a result, its Liverpool,
New York location, which produces roller bearing products, came under critical scrutiny. Emerson
considered moving the operation to its Valparaiso, Indiana facility but was induced to stay in New
York by a March 2002 offer of a $I million capital grant from ESD. ESD's offer induced the
Company to retain 567 jobs in New York State-- 13 7 from its Liverpool operation and 430 from its
Ithaca operation, which also came under greater scrutiny as Emerson Electric Co. closely analyzed
its hundreds of facilities worldwide. ESD's March 2002 offer gave Emerson the option of
consolidating facilities in Ithaca and, in the second half of 2002, Emerson decided to take this route
and relocated the Liverpool operations to its underutilized Ithaca facility.
In February 2004, Emerson informed ESD that its employee headcount had been reduced
to 435 as a result of continued declines in business and greater productivity resulting from closing
its Liverpool operation. ESD elected to reduce the grant amount to $750,000 in return for Emerson
guaranteeing the retention of the original 430 Ithaca Jobs. Because Ithaca is an older facility with
higher workers' compensation costs than Emerson's other North American facility, the $750,000
grant allowed the Ithaca facility to remain competitive among existing Company facilities.
B. The Project
In June 2002, Emerson began relocating the Liverpool operations to the Ithaca facility. As
part of the consolidation of facilities, Emerson embarked on improvements such as painting the
facility, enhancing the electrical system, upgrading telecommunications systems, adding piping, and
installing coolant trenches. In addition, over S2.7 million in machinery and equipment was
purchased, including a new crane system and manufacturing equipment. By June 2003, facility
improvements and equipment purchases had been completed and all equipment from the Liverpool
operation had been relocated. Following the consolidation, Emerson initiated employee training for
new hires. As a result, Emerson has significantly increased labor productivity and efficiency at its
Ithaca operation.
�'. Financial Terms and Conditions
The Company shall pay a commitment fee of 1 % of the S750,000 (S7,500) upon execution
of the grant disbursement agreement. In addition, at the time of disbursement, the
Company will reimburse ESD for all out-of-pocket expenses incurred in connection with
the project.
The Company will demonstrate no materially adverse change in its financial condition
prior to disbursement.
3. The Company or the Company's shareholders will contribute at least 10% in equity to the
Project.
4 Prior to disbursement, the Company must employ at least the initial number of Full-time
Permanent Employees set forth below. A Full-time Permanent Employee shall mean (a) a
frill -time, permanent, private -sector employee on the Grantee's payroll, who has worked at
the Project Location for a minimum of thirty-five hours per week for not less than four
consecutive weeks and who is entitled to receive the usual and customary fringe benefits
extended by Grantee to other employees with comparable rank and duties; or (b) two part-
time, permanent, private -sector employees on Grantee's payroll, who have worked at the
Project Location for a combined minimum of thirty-five hours per week for not less than
four consecutive weeks and who are entitled to receive the usual and customary fringe
benefits extended by Grantee to other employees with comparable rank and duties.
Up to S750,000 will be disbursed to Grantee upon evidence that the Grantee has retained
430 permanent full-time employees and has expended S2.7 million on the project, with at
least S1 million spent on facility improvements at the Project Location, as evidenced by
such documentation as ESDC may reasonably require, and verification of participation of
other financing sources, assuming that all project approvals have been completed and finds
are available.
6. ESD may reallocate the project funds to another form of assistance, at an amount no greater
than S750,000, for this project if ESD determines that the reallocation of the assistance
would better serve the needs of the Company and the State of New York. In no event shall
the total amount of any assistance to be so reallocated exceed the total amount of assistance
approved by the Directors.
6. In consideration for the making of the Grant, Grantee will achieve the Employment Goals
set forth in column C of the table below. If the number (for the preceding calendar year) of
Grantee's Full-time Permanent Employees, as defined above, as of each reporting date set
forth in column A of the table below, is less than the total of the Initial Number of Full-
time Permanent Employees plus eighty-five percent (85%) of the number of Total New
Jobs as set forth in column B, then upon demand by ESD, Grantee shall be obligated to
repay to ESD a percentage of the disbursed Grant Amount, as set forth in column D. The
Grantee's number of Full-time Permanent Employees shall be deemed to be the greater of
the number as of the last payroll date in the month of December for such year or the
average employment for the 12 month period computed by quarter.
I Initial Number of Full-time Permanent Employees 1 430 1
A
B
C
D
Date
Total New Jobs
Employment Goals
Percentage of disbursed
Grant Amount to be
repaid
February 1, 2006
0
430
100%
February 1, 2007
0
430
S /o
February 1, 2008
0
430
600
February 1. 2009
0
430
40`0
February 1, 2010
1 0 1
430 1
20`0
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IV. Statutory Basis
The proposed project would promote the economic health of New York State by facilitating
the creation or retention of lobs or would increase activity within a municipality or region of
the state or would enhance or help to maintain the economic viability of family farms.
As a result of this project, the Company will maintain its employment level of 430, which
were at -risk of relocation/elimination because of steep declines in business at Emerson
Electric Co. and resulting cost cutting initiatives.
2. The proposed project would be unlikely to take place in New York State without the
requested assistance.
Without ESD assistance, Emerson would have considered relocating the Liverpool
positions to a Company facility outside of New York State.
The project is reasonably likely to accomplish its stated objectives and the likely benefits
of the project exceed costs.
Evaluated over a seven-year period, the following are anticipated project impacts (dollar
values are present value):
• Fiscal benefits to NYS government from the project are estimated at Sl 1,904,475;
• Fiscal cost to NYS government is estimated at S775,462;
• Project cost to NYS government per direct job is S2,214;
• Project cost to NYS government per job (direct plus indirect ) is estimated at S962;
• Ratio of project fiscal benefits to costs to NYS government is 15.35:1;
• Fiscal benefits to all governments (state and local) are estimated at S26,224,990;
• Fiscal cost to all governments is S1,297,617;
• All government cost per direct job is S3,705;
• All government cost per total job is S1,609;
• The fiscal benefit to cost ratio for all governments is 20.21:1;
• Economic benefits (fiscal plus total net resident disposable income from project
employment) are estimated at S 166,025,123, or S205,901 per job (direct and
indirect),
• The economic benefit to cost ratio is 127.95:1;
• Project construction cost is S 1,023,102 which is expected to generate 8 direct job
years and 8 indirect job years of employment;
• For every permanent direct job generated by this project, an additional 1.32 indirect
jobs are anticipated in the state's economy;
• The payback period for NYS costs is I year.
( See Project Summary Benefit -Cost Evaluation attached for detail and definitions.)
4. The project is undertaken in accordance with the enabling legislation.
The project is undertaken in accordance with the memorandum of understandin- executed
in accordance with the enabling legislation.
The requirements of Section 10(.g) of the Act are satisfied.
No residential relocation is required because there are no families or individuals residing
on the site.
V. Environmental Review
ESDC staff has determined that the project constitutes a Type II action as defined by the
New York State Environmental Quality Review Act ("SEQRA") and the implementing regulations
for the New York State Department of Environmental Conservation. No further environmental
review is required in connection with the project.
V 1. Affirmative Action
ESD's Nor. -Discrimination and Affirmative Action policy will apply. Emerson Power
Transmission Corp. is encouraged to include minorities and women in any job opportunities created
by the project and to solicit and utilize Minority and Women -owned Business Enterprises for any
contractual opportunities generated in connection with the project.
VII. ESD Financial Assistance Subject to Availability of Funds and Additional Approval
The provision of ESD financial assistance is contingent upon the availability of funds and
the approval of the State Division of the Budget.
VIII. Additional Submissions to Directors
Resolutions
New York State Map
Project Finance Memorandum
Cost -Benefit Analysis