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State offers $1.2 billion to chip manufacturer Paterson says deal will create jobs

New York State, despite being plagued by a worsening budget deficit, will give a company whose majority owner is one of the world's richest oil nations $1.2 billion in grants and tax breaks to build a computer chip manufacturing facility in the Albany area.

State officials Tuesday defended the decision as an investment in the economy needed even if the state government is bleeding revenues from the nation's financial meltdown.

"I think this is an immense opportunity for New York. This is the kind of job creation we need," Gov. David A. Paterson said.

The new venture, Foundry Co., has as its major financial backer Advanced Technology Investment, wholly owned by the tiny but rich Persian Gulf state of Abu Dhabi. The new corporate entity is being created from the existing U.S. chip maker Advanced Micro Devices.

Foundry Co. has a chief mandate, according to its Web site, to "generate returns that deliver long-term benefits" to the emirate.

Another company financially involved in the effort is Mubadala Development Co., whose sole shareholder is the Middle East emirate and which is based in Abu Dhabi, the capital of the United Arab Emirates.

Plans for the chip plant have changed since they were first announced in 2006 by AMD and former Gov. George E. Pataki. Earlier this month AMD said it will split into two companies -- one to design microprocessors and the other, Foundry, to handle the costly manufacturing.

Coming a year after a failed attempt by a Dubai company to run six of the nation's biggest ports, a move blocked in Congress for national security reasons, the new chip manufacturing deal -- involving the already sensitive semiconductor industry -- will be getting a federal review, Paterson said Tuesday.

The announcement of $1.2 billion in state incentives for the Saratoga County facility comes less than a week after the governor said he is calling lawmakers back to Albany next month to trim $2 billion in spending from the 2008 state budget. On Monday, Paterson said the 2009 deficit could be more than $8 billion.

Officials in other upstate communities are fearful the state's worsening economy will force Albany to pull back on economic development efforts.

The computer chip plant has been in the works for years but became stalled recently with AMD's financial troubles. With the Abu Dhabi backing -- the nation will own 56 percent of Foundry -- the facility is now back on track and is expected to create an initial high-paying 1,500 jobs in Saratoga County.

Paterson said he once had qualms about the large subsidy -- nearly $1 million in state money per job created -- but said the project will spur a new high-tech economy not only in the Albany region but possibly elsewhere upstate. He added the company is putting up more of its money for the project, which also is now bigger than earlier plans.

The deal was announced at a Capitol ceremony that attracted a line-up of political stars, including U.S. Sens. Charles Schumer and Hillary Clinton, along with Assembly Speaker Sheldon Silver and even former Senate Majority Leader Joseph Bruno, who made the chip plant his chief legacy-building commitment before leaving office this year. (Schumer was among those who helped kill the Dubai port deal a year ago).

"I am convinced that New York, from Albany to Buffalo, can be a center of this new industry if we are smart about how we attract it and keep it," Clinton said.

The company made clear New York's funding promises must flow for the deal to happen. In announcing the deal, AMD said the Saratoga plan is "subject to the transfer of previously approved New York State incentives." They say the facility will create 1,400 jobs, and construction could begin by the middle of 2009.

Paterson did not directly answer whether he had considered restructuring the state's incentive package given that the original deal was made in 2006 before the state's finances began to tank and the new major partner in the deal is now one of the wealthiest nations on earth. Asked if the state could change the terms, he said, "I don't think we would want to change the terms. We like the terms as they are."

But some wondered why the state, given its fiscal plight, still has to fund an entity with such deep pockets backing the facility.

"I certainly think we're going to need that $1.2 billion to try to balance our budget. If this company is so well heeled -- I don't see why they need the largess of taxpayers' money to get this project going," said Mike Long, the state Conservative Party chairman. One union official said he found the timing ironic given that Paterson is looking at such massive cuts to the government. Stephen Madarasz, a spokesman for the Civil Service Employees Association, said it is hard to criticize a project expected to generate so many jobs.

"Having said that, obviously in this environment we are concerned about whatever incentive money might be going out there and whether taxpayers are truly going to get the bang for the buck," said Madarasz, whose union represents state and local government workers.

A budget watchdog said bringing manufacturing jobs back to New York is important. But Elizabeth Lynam of the Citizens Budget Commission, a business-backed group, faulted state economic development spending for traditionally lacking strategic goals and guarantees that taxpayers are being served.

"It's a big subsidy so there should be a big benefit to the state economy and they should hold AMD's feet to the fire," Lynam said.

Paterson likened the state spending to past state investments on major projects, from the Erie Canal to the Empire State Building, that were done during times of economic distress.

"We cannot continue to be dependent on Wall Street and we can't become overcome with fear, even in an economic calamity, that we don't go forward and make some disciplined yet strong moves that could help us in the future," he said. He said the project promises to build one of the nation's biggest technology centers and "it may create a new culture where people are running to New York to participate in that economic opportunity rather than away from it, which people have in the past."

e-mail: tprecious@buffnews.com

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