More than a dozen years ago, it took a $100 million package of tax breaks, spread over 14 years, to lure insurance giant Geico to open a customer service center in Amherst, with the promise of bringing 2,500 jobs to the region.
On Tuesday, Geico – having met and surpassed its hiring target more than three years ago – said it would bring 600 more jobs to a new office down the street from its sprawling CrossPoint Business Park, potentially boosting its local work force to nearly 3,400 people.
The cost to taxpayers: $4 million in state grants, pegged to the nation’s No. 2 auto insurer meeting its job creation targets.
Tony Nicely, Geico’s chairman and CEO, said expanding in Amherst made financial sense, even with an incentive package that worked out to $6,667 per job – a relatively modest subsidy by today’s standards.
“We really didn’t consider other locations, because we didn’t have the space or we weren’t outfitted to grow,” Nicely said.
Beyond that, Geico has been pleased with the quality of the region’s workforce as it has grown from a temporary office with 75 employees in 2004 to a customer service giant with 2,760 workers that has nearly run out of room at its 256,728-square-foot office at 300 CrossPoint Parkway.
To meet its needs for more space – and more parking – Geico will lease a renovated 86,000-square-foot office building at 150 CrossPoint Parkway starting in October to accommodate a growing volume of customer service calls from the insurer’s clients in New England, New York and New Jersey.
The expansion will cost about $15 million and will cement Geico’s position as one of the region’s biggest private sector employers. Geico hopes to begin moving workers into the new office before the end of the year, said Pionne Corbin, Geico’s regional vice president in Buffalo.
“We dreamed, back in 2003 and 2004 of getting to maybe 2,500,” Nicely said.
But Geico’s growth since then has steadily outpaced its projections, topping the 2,500-worker mark in 2013, just nine years after its temporary Amherst office opened. In 2009, after considering sites elsewhere, Geico expanded the scope of the work done at the Amherst office by bringing more than 300 jobs for a new operations center for other types of insurance sold by Geico, including homeowners coverage.
Nicely said the region’s workers are a big reason for that.
The company likes being able to pick from the more than 30,000 students who graduate each year from the region’s colleges.
The workforce has proven to be dependable and, even with unemployment dropping below 5 percent this summer, Nicely said the company has been able to fill its jobs, which start off at $31,000 a year for entry level positions and $42,000 for college graduates who join Geico’s management development program.
Gov. Andrew M. Cuomo, who came to Geico’s Amherst center for the mid-day announcement, said Geico’s expansion is a shot in the arm for a Buffalo Niagara economy that is attracting new private investment from Canalside to Niagara Falls, in addition to the state’s Buffalo Billion economic development plan.
“These are jobs they could add anywhere in the United States,” Cuomo said. “They are staying here and investing here because of the work force and the quality of the employee they have here.”
That, Cuomo said, was more important than the $4 million in incentives that the state was offering Geico.
“It was helpful, but I don’t believe it was a determining factor,” he said.
Geico, which like The Buffalo News is owned by Warren Buffett’s Berkshire Hathaway, bought its CrossPoint office building and more than 22 acres around it in April from its former landlord, Uniland Development, for $23 million. The adjoining land, however, was largely unsuitable for development, Nicely said.
But it found a suitable site just down the street, in a building now occupied by Expert Global Solutions, which will be moving to another Uniland office park in Amherst, said Uniland spokeswoman Jill Pawlik.
Geico began discussing the expansion project with state officials about a year ago, said Howard Zemsky, the Buffalo developer who serves as president of Empire State Development.
The $4 million state grant hinges on Geico creating 600 new jobs within six years, Zemsky said. The insurer gets the money only if it meets certain job creation targets, with $2 million released to Geico once it adds 300 jobs, with additional $1 million payments once it reaches 450 new jobs and the 600 job mark.
“It’s pay for performance,” Zemsky said. “It’s a good deal for the state.”
Cuomo said Geico likely could have received tens of millions in incentives from other states in exchange for the 600 new jobs it is bringing to Buffalo. He said critics, including state Comptroller Thomas DiNapoli, who argue that New York is too generous with tax breaks to private companies that yield too few jobs are “dead wrong.”
“You will not attract jobs. You will not keep jobs unless you work with the private sector and incentivize them,” Cuomo said.
“Every state now competes for private sector jobs,” he said. “There’s almost a bidding war among states.”