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HSBC granted $79 million in tax breaks by Amherst IDA: Bank will make the Buffalo Niagara region a focal point for its data center operations(Buffalo News, The (NY) (KRT) Via Thomson Dialog NewsEdge) Nov. 18--HSBC USA will receive nearly $79 million in tax breaks -- equal to $6.6 million for each job to be created -- to expand its Amherst data center, a linchpin in the bank's plan to build a second technology facility in Niagara County. The tax breaks, unanimously approved Friday by the Amherst Industrial Development Agency, will primarily come from sales taxes that HSBC will be able to avoid paying on the $867 million that the bank expects to spend on computers and other technology equipment over the next 15 years. Twelve new jobs are expected to be created at the data center, bringing the total number of jobs there to 48 within two years. The tax breaks amount to $1.6 million for each of the jobs, which pay an average of more than $80,000, or more than twice as much as an average local job. James J. Allen, the IDA's executive director, said the project -- and the tax breaks -- believed the largest in Amherst history, were an essential factor in convincing HSBC to make the Buffalo Niagara region a focal point for its data center operations. Bank officials note that HSBC now operates in 77 countries and 48 states, including a large presence in suburban Chicago. "It could have very easily ended up in Illinois," Allen said. "This is a phenomenal feather in our cap." Beyond the handful of new jobs, bank and IDA officials said the project will create a significant number of spin-off jobs at other firms with ties to the data center. They also said the project will play a broader role in helping to secure HSBC's sizable operations here, which employ more than 5,800 people -- 178 directly tied to data center work -- and generate an annual payroll of $292 million. HSBC is planning to build a second 275,000-square-foot data center at a site that it has not disclosed in Niagara County. That $166 million project will mirror the Amherst data center and also include major technology investments in the years after the facility opens. "There is no question this is a major component in securing what is about 6,000 jobs in this community," said Randall L. Clark, an Amherst IDA board member who also serves on HSBC's regional board of directors. "This really secures their position in Western New York." But Greg LeRoy, the executive director of Good Jobs First, a Washington, D.C.-based watchdog group that monitors economic development incentives, said the size of the tax break means that local governments are giving up a significant chunk of revenue that other taxpayers will have to make up. "That's very pricey," LeRoy said. "Anytime you get above $50,000 a job, you have to question the break-even point." An audit earlier this year by state Comptroller Alan Hevesi criticized the Amherst IDA's use of $30 million in incentives -- or more than $1 million per job -- for the first phase of the HSBC data center project. But HSBC officials argue that data centers, by their nature, need significant space and equipment, but not much staff, aside from a "core group" of technology workers with varying responsibilities. They do, however, depend on a lot of outside expertise, such as from technology vendors with local offices, to support their work. Executives already have said that technology equipment companies, possibly including companies such as IBM, EMC and Hewlett-Packard, are expected to expand their field engineering offices in the Buffalo Niagara region to support the HSBC centers. "Any expansion of our Western New York operations, facilities and work force further cements this region's position as a major center in the HSBC Group," said HSBC USA Chief Operating Officer Brendan McDonagh. "So any opportunity to leverage the benefits available in order to secure this project here will maximize the potential economic spin-off impact for this region." And Allen said focusing solely on the jobs at the data center overlooks the broader implications that the expansion project has on HSBC's overall operations in the region. As part of its agreement with the state, HSBC has agreed to keep 4,000 jobs in Western New York through 2015 and another 1,500 jobs here through 2020. Clark and HSBC executives also said the incentives were needed to offset the state's uncompetitive tax and cost structure. HSBC officials also noted that the technology the bank is buying will have to be replaced and upgraded every three to five years to remain current, and must be duplicated at a backup center. "Most of the incentives we approve for businesses do nothing more than level the playing field," he said. "If we aren't willing to level the playing field . . . then good corporate citizens like HSBC will make decisions that aren't in the interests of what we want to see in our community." The bulk of the tax breaks -- $75.8 million -- will come from the bank avoiding sales tax on technology purchases over the next 15 years. The incentives also include $1.2 million in property tax savings and $1.6 million in sales tax savings linked to the construction of the 25,000-square-foot addition to HSBC's data center at 191 Park Club Lane. Even with the tax break, the expanded data center is expected to generate about $68,000 a year in additional county, town and school taxes, said Edward Stachura, the IDA's chairman. The state also has agreed to provide 11 megawatts of cheap electricity through the New York Power Authority and an $800,000 grant from Empire State Development to aid both the Amherst and Niagara County data center projects. A site in Pendleton has been cited as the leading candidate for the Niagara County center. The Niagara County Industrial Development Agency is expected to offer its own package of tax breaks for that project. The Buffalo Niagara Enterprise economic development group estimates that the projects will create 477 construction and consulting jobs that will last about two years, as well as 167 other full-time positions paying an average of $46,615 a year at other businesses linked to the data center. Ward said the Amherst data center could grow even more. "We even have plans to go beyond this expansion phase in the long run," he said. If the data center projects were built elsewhere, the BNE estimated that it would cost the region 104 jobs paying an average of almost $85,000. Clark said projects such as the HSBC data center, with big capital investments but relatively few jobs, albeit good-paying ones, will become more common in the future. e-mail: [email protected] Copyright (c) 2006, The Buffalo News, N.Y. Distributed by McClatchy-Tribune Business News. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |