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GM gets $8 million in tax breaks from ECIDA Incentives to help land new engine line for Tonawanda plant

General Motors Corp. was granted nearly $8 million in tax breaks on Monday by the Erie County Industrial Development Agency to bolster the Town of Tonawanda engine plant's bid to land a $300 million upgrade that includes a new line of diesel engines.

The incentives include more than $1.8 million in sales tax breaks, along with an estimated $6 million in savings over the next 26 years by changing GM's payment in lieu of taxes agreement for the engine plant to reduce the company's obligations.

"This is one of those deals where we're in a position where we have to do it," said Erie County Executive Joel A. Giambra. "This is a deal that's going to help preserve about $300 million in payroll in Erie County."

The Tonawanda engine plant is competing against other GM facilities for a new diesel engine line as part of a project that also would modernize the factory's existing V-6 and 4-cylinder engine lines.

GM has not yet said where it will build the new line of diesel engines. GM officials have indicated that the Tonawanda plant is competing against at least one other site in North America.

The tax breaks will help the Tonawanda plant's chances of landing the new engine line and make the facility's costs more competitive, said Jo Nasoff-Finton, the agency's deputy director.

"GM is pleased that the Erie County Industrial Development Agency recognized the importance of our investment in Powertrain's Tonawanda Engine Plant," spokeswoman Doris Powers Toney said.

Powers Toney refused to discuss the potential new engine, saying that GM is keeping the project under wraps to avoid tipping off competitors.

GM also is seeking other economic incentives from the state, she said. The project would help retain 1,450 jobs at the engine plant.

GM currently employs 1,900 people at the engine plant on River Road, about 1,620 of them hourly workers. Even if the Tonawanda engine plants succeeds in winning the new diesel line, IDA officials expect employment at the GM plant to decline over the next three years as the auto maker restructures and cuts costs.

The plant's current major engines, all introduced within the last 10 years, are the "Ecotec" 2.2 liter four-cylinder; a V-6 for passenger cars, and inline 4- and 5-cylinder motors for trucks. The site also makes a V-8 that's available on some full-size trucks and SUVs.

"This is the poster child for investment-driven projects," said Andrew J. Rudnick, an IDA board member and the president of the Buffalo Niagara Partnership. "What will maintain the jobs here is the investment that GM has put into this facility up until now, along with the investment that GM would make under this project."

The incentives approved Monday would give GM more than $1.8 million in sales tax savings on an estimated $21 million that the company would spend on some of the materials used in the project.

GM also would save about $6 million through 2032 under modifications of the PILOT agreement that has been in effect since 2002. Under that agreement, GM has been making payments to the Town of Tonawanda and the Kenmore-Town of Tonawanda School District that are just 20 percent of the site's regular taxes. That percentage had been scheduled to increase to 30 percent for five years beginning in 2008 and would peak at 70 percent for the final 10 years of the agreement beginning in 2022.

Under the terms of the revised PILOT approved on Monday, the GM payments would drop to nothing from 2008 to 2012 and then gradually rise to a peak of 40 percent during the final five years of the agreement from 2028 to 2032.

News business reporter Fred O. Williams contributed to this report.

e-mail: drobinson@buffnews.com

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