It is a tricky area in which New York's economic development apparatus is operating, as it considers a gigantic subsidy for an employer of huge consequence in an economically weak part of the state. Caution and even skepticism are in order.
The question is how much cut-rate electricity to award to Alcoa Aluminum as it negotiates to extend incentives at its two North Country plants. A proposal under discussion would grant the company electricity at about one quarter the market rate for 30 years, or six times as long as the typical five-year contract. Altogether, the package would be worth around $5.6 billion, equal to about $148,000 per job per year.
Even by New York standards, it's a staggering amount.
Such incentives are as common as paper clips, but they are rife with problems, one of which is that they become self-perpetuating. That is especially true in states like New York, where the cost of doing business is disproportionately high.
The pressure for incentives is unrelenting, given the ability of companies to pull up stakes and move to a region of more reasonable costs. That raises the expense for taxpayers who, in New York, are already at the end of their ropes.
Still, incentives are the coin of the realm in economic development, with low-cost electricity especially important in manufacturing industries where power consumption is high and jobs tend to pay well. Western New York is well acquainted with such incentives, with the New York Power Authority providing discounts worth about the same annual amount per job, though for far fewer years at a time.
Complicating the distribution of cheap electricity is how it is awarded. Once a company wins an allotment, can it claim it indefinitely? The resource is finite, meaning that if some industries get it, others that might have greater growth potential will not.
Also, what should a company be required to deliver to the state in exchange for such considerations? A report in this newspaper on negotiations with Alcoa revealed that while the company may invest up to $600 million at its plants in Massena, it doesn't want to guarantee that it will keep more than 900 jobs at the facilities, which now employ 1,250 workers.
This is truly a balancing act and while the best long-term solution is for Albany to lower the cost of doing business in New York, Alcoa clearly has a legitimate claim to low-cost electricity. Some allocation certainly is appropriate.
But a package this generous demands solid commitments by Alcoa, as well. Daniel Gundersen, New York's new upstate economic development chief, needs to come at this negotiation understanding the importance of these jobs to the North County, but also understanding that taxpayers deserve a fair shake in the deal, too. He needs to be tough.