Manufacturers in New York got a lot of the items on their wish list in the newly approved state budget.
The test will be whether the tax cuts and cost reductions will create a business climate that will lead to more jobs and investment.
The spending plan creates a 20 percent real property tax credit for manufacturers that own or lease property. It also cuts the rate on manufacturers’ corporate income tax from 5.9 percent to zero, and speeds up elimination of a utility surcharge.
“It will help unleash manufacturers’ potential to grow here in New York State and encourage out-of-state organizations and manufacturers to set up shop here,” said State Sen. Timothy M. Kennedy, D-Buffalo, who highlighted the changes Wednesday during a visit to Industrial Support Inc., or ISI, a contract manufacturer on Depot Street in Buffalo.
Kennedy said that many manufacturers own or lease large plots of land and that the property tax will provide them with about $100 million worth of relief across the state. Eliminating the corporate tax will save companies about $193 million, he said. And the gradual phaseout of the utility surcharge, known as 18-a, will save businesses and residents an estimated $600 million over three years before it is eliminated in 2017.
ISI has about 60 employees and makes a broad spectrum of products, including salad bars for restaurants and lights for the Chicago subway system. The business was in the spotlight in May 2010 when it hosted President Obama.
David P. Sullivan, ISI’s president, said the changes approved in the budget are what manufacturers need to compete. “Any costs these companies can save, they can put into hiring more people and growing our businesses,” he said.
Energy costs, for instance, are much higher in New York than in some states, such as Ohio, that ISI competes against, Sullivan said.
Richard S. Smith III, CEO of Rigidized Metals in Buffalo, said that most of his company’s customers are outside the region. “By alleviating some of the burden on manufacturers, that’s the best bang for Albany’s buck, because we’re able to import dollars that wouldn’t be here,” he said.
Western New York continues to receive a mix of news about manufacturing. The RiverBend complex planned for South Buffalo, for instance, is expected to attract new high-tech companies. But ConAgra is eliminating 425 jobs when it closes plants in Dunkirk and Fredonia in the next year.
Overall, the Buffalo Niagara region’s manufacturing job count was 50,100 in February, down by about 1 percent from the year before, according to the state Department of Labor. And the region’s 2013 average of 50,700 manufacturing jobs was down by about 25 percent from 67,700 a decade earlier.
Will the changes in the budget help reverse the long-term slide? Dottie Gallagher-Cohen, president of the Buffalo Niagara Partnership, said that it could take time to find out but that the group’s manufacturing members say these are “meaningful changes that will help them advance their business.”
“Obviously, we hope that this translates into more manufacturing jobs here in Western New York and retaining the ones that we have,” she said.
Heather C. Briccetti, president and CEO of the Business Council of New York State, said some of the changes could have an immediate impact. “Hopefully, it will encourage manufacturers to grow and expand in New York rather than looking to other states,” she said.
Kennedy, citing figures from the Business Council of New York State, said the utility surcharge costs the average small manufacturing company several thousand dollars a month, and costs larger manufacturers that use high volumes of electricity about $10,000 per month.
Briccetti said she was pleased to see that surcharge on its way out. “We’re taking away something that I think was a very large disadvantage in the tax climate,” she said.