A continent away from Silicon Valley, Governor Andrew Cuomo is promoting New York’s Tech Valley as an engine of the upstate economy, luring billions of dollars of investment to help pad financially strapped local budgets.
Cuomo last month announced a $1.7 billion plan to bring atom-sized computer-chip research -- known as nanotechnology -- to Oneida County, 240 miles (386 kilometers) northwest of New York City. The move builds on a model of semiconductor development that drew chip-maker GlobalFoundries Inc. to the Albany area, helping turn Saratoga County into the heart of the region’s economy, according to Standard & Poor’s.
The Democratic governor has made upstate jobs a priority as he heads into an election year with New York poised for its highest credit grade since 1972. Nanotech may bolster a swath of central New York where the unemployment rate more than doubled from 2000 to 2012, according to Moody’s Investors Service and state labor data. Investors have responded to Cuomo’s efforts, demanding the least amount of extra yield for New York debt in two decades, data compiled by Bloomberg show.
“Anytime you can facilitate a successful expansion of a business in a place that has been starving for economic growth, it’s a positive for the state,” said Howard Cure, director of municipal research in New York at Evercore Wealth Management LLC, which manages about $4.7 billion.
The upstate region north of suburban Rockland and Westchester counties was once an economic powerhouse with a manufacturing core fueled by the Erie Canal. The 363-mile waterway connected Manhattan to the Midwest when it opened in 1825. The boom extended into last century, when companies began leaving for lower taxes and energy costs. Utica, the Oneida County seat whose metro area will host the new research center, shrank to 62,000 residents in 2010 from about 100,000 in the 1940s, U.S. Census data show.
An employment influx would be welcome after the county cut 250 jobs from 2008 to 2012 as it faced rising pension and health-care obligations and falling tax revenue, S&P said in March. In fiscal 2011, it logged its first budget surplus since fiscal 2007, S&P said.
“This addition of 1,000 jobs to an area that has seen population decline and higher-than-average unemployment is a credit positive to the region,” Rob Weber, a Moody’s analyst, said from New York.
The Utica-Rome area averaged 8.4 percent unemployment this year through August, compared with 7.9 percent statewide, state data show.
Last month’s announcement helped drum up interest in Oneida debt. General-obligation bonds maturing in March 2022 traded Oct. 23 at an average yield of 2.87 percent, or 1.98 percentage points more than benchmark munis, Bloomberg data show. The spread was 25 percent less than the previous trade Oct. 9, the day before Cuomo announced the chip plan. Before last month, they hadn’t traded since 2011.
Similar county bonds due in March 2018 traded Oct. 16 with a gap of 0.72 percentage point, down 21 percent from Oct. 8.
Bringing jobs to the area would be a boon for Cuomo in next year’s election. The 55-year-old won his first term in 2010 with almost 63 percent of the vote. In Oneida County, that fell to 52 percent. He lost the eight-county area surrounding Buffalo in western New York, the base of his Republican opponent, Carl Paladino.
“Jobs in upstate New York is one of the top priorities on a very short-list for the state’s agenda,” Cuomo said on public radio Nov. 6.
That was the day after Cuomo won voter support to bring Las Vegas-style casinos to New York, starting with four sites north of Manhattan’s suburbs. In June, he pushed through the legislature a panel to help localities restructure financially. Since August 2012, he has used summits in Albany on yogurt, tourism and alcohol to boost those industries upstate.
Cuomo has already earned investors’ confidence, winning three consecutive on-time budgets for the first time since 1984 and trimming more than $13 billion in deficits. The extra yield buyers demand on the state’s 10-year debt instead of benchmark securities is less than 0.1 percentage point, the slimmest gap in at least 20 years, Bloomberg data show.
At the center of the upstate economic plan, though, is the goal of expanding Tech Valley, which stretches from International Business Machines Corp. (IBM:US)’s headquarters in Armonk, about 40 miles north of Manhattan, through Saratoga County. That’s where Milpitas, California-based GlobalFoundries started building its chip plant in 2009.
The latest investment includes $1.5 billion from six companies and $200 million from New York as part of Cuomo’s Nano Utica initiative.
Cuomo also is implementing zones around state university campuses where employees of firms new to the state won’t pay income tax for at least five years. The program, which Cuomo says will cost $323 million over three years, builds on how research at the state’s College of Nanoscale Science and Engineering in Albany helped attract GlobalFoundries, Cuomo says.
“The investment in nano has been terrific for New York,” Thomas DiNapoli, the state comptroller, said at a Nov. 1 meeting with Bloomberg editors in New York. “Having the opportunity for increasing the synergies between the business community and higher education is a good strategy.”
The GlobalFoundries facility has already brought more than 2,000 jobs to Saratoga County and provided $8.5 million to the Ballston Spa School District, the county’s largest taxing entity, said Dennis Brobston, president of the Saratoga Economic Development Corporation.
Saratoga has the lowest tax rate and the second-lowest unemployment rate among New York’s 62 counties, according to Brobston and state data.
“The question is, how fast can you motivate it statewide,” Brobston said by phone. “We’re still dealing with a high tax burden in the state, and that’s a puzzle that needs to be worked out.”
Elsewhere in the municipal market, issuers nationwide are offering $6.3 billion in long-term debt this week with benchmark yields at the highest in almost a month.
The interest rate on AAA 10-year munis is 2.82 percent, compared with 2.69 percent on similar-maturity Treasuries.
The ratio of the yields, a gauge of relative value, is about 105 percent. It compares with an average of 94 percent since 2001. The higher the number, the cheaper munis are compared with federal securities.
Following is a pending sale:
Rhode Island’s Economic Development Corp. is set to issue about $33 million in airport revenue bonds next week. It’s the agency’s first offer since a U.S. Securities and Exchange Commission investigation of a $75 million deal for former baseball pitcher Curt Schilling’s defunct video-game maker. Standard & Poor’s marks the airport financing BBB+, its third-lowest investment grade.
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