ECONOMIC DEVELOPMENT POWER
January 25, 2011
Videoconference – 9:42a.m.
New York Power Authority Offices:
123 Main Street, 16th Floor, White Plains, NY
501 7th Avenue, 9th Floor, New York, NY
Empire State Development Corporation, 95 Perry Street, Suite 500, Buffalo, NY
City of Oswego Community Development, 20 West Oneida Street, 3rd Floor, Oswego, NY
1. Approval of the Minutes of the Meeting of December 13, 2010.
2. Temporary Assignment and Transfer of Economic Development Power
3. Proposed EDPAB Policy
4. Other Business
5. Next Meeting
A regular meeting of the Economic Development Power Allocation Board was held via videoconference at the following participating locations:
1) New York Power Authority, 123 Main Street, White Plains, NY
2) New York Power Authority, 501 7th Avenue, 9th Floor, New York, NY
3) Empire State Development Corporation, 95 Perry Street, Suite 500, Buffalo, NY
4) City of Oswego Community Development, 20 West Oneida Street, 3rd Floor, Oswego, NY
The following Members of the Board were present at the following locations:
Kenneth Schoetz, Chairman (Buffalo, NY)
Eugene L. Nicandri, Member, (White Plains, NY)
Robert B. Catell, Member, (New York, NY)
Mary Vanouse, Member, (Oswego, NY)
Also in attendance were:
James F. Pasquale Senior Vice President - Marketing & Economic Development, NYPA
Karen Delince Corporate Secretary, NYPA
Vincent Esposito Assistant General Counsel, Legislative & Regulatory Affairs
Michael Huvane Vice President - Marketing, NYPA
Timothy Muldoon Manager – Business Power Allocations & Compliance, NYPA
Dennis Eccleston Vice President Information Technology/Chief Information Officer – Information Technology, NYPA
Lorna Johnson Assistant Secretary, NYPA
Sheila Baughman Senior Secretary, NYPA
1. Adoption of Minutes
The Minutes of the Regular Meeting of December 13, 2010 were unanimously adopted.
2. Temporary Assignment and Transfer of Economic Development Power
The Members of the Economic Development Power Allocation Board (“EDPAB”) are requested to approve and recommend to the New York Power Authority Board of Trustees (“Power Authority”) a temporary assignment and transfer of 3,150 kW of unutilized Economic Development Power to Wenner Bread Products Inc.
EDPAB is charged with, among many things, evaluating applications for and recommending allocations and transfers of Economic Development Power (“EDP”). EDP applications are evaluated under criteria that include, but need not be limited to, those set forth in Public Authorities Law Section 184, which sets forth general eligibility requirements. Among the factors to be considered when evaluating a request for an allocation of EDP for business expansion purposes are the number of jobs created as a result of the allocation; the business’ long-term commitment to the region as evidenced by the current and/or planned capital investment in the business’ facilities in the region; and the security and stability of employment.
An EDP allocation may also be approved for the purpose of job retention when an applicant, on behalf of a business, demonstrates that the business plans to relocate out of state resulting in the loss of a substantial number of jobs, as well as demonstrating its commitment to new investments, among other considerations. The Town of Islip Industrial Development Agency has submitted a job retention EDP application on behalf of Wenner Bread Products Inc. (“Wenner”), a substantial Long Island employer with 450 employees at their facilities in Bayport and Ronkonkama, NY.
The value of a new allocation of EDP is limited due to the current sourcing of EDP through electricity market purchases. However, Authority staff has identified an existing EDP customer that is not currently using its full allocation. Upon the recommendation of EDPAB, on August 29, 1989 the Power Authority approved an allocation of 12,000 kilowatts (“kW”) of EDP to Computer Associates International, Inc., now known as CA, Inc. (“CA”). CA, also located on Long Island, has indicated that they are willing to assist Wenner by agreeing to a temporary assignment and transfer of a portion of their EDP allocation that they are not currently using.
Wenner Bread Products, Inc., a family-owned company since its inception in 1956, currently employs 450 persons at its bakery facilities located in Bayport and Ronkonkama, NY. The company competes nationally in the frozen dough and bread products market, distributing its products all over the country through major grocery operators including Winn-Dixie and Walmart.
Although preferring to remain on Long Island, Wenner is seriously considering relocating its facilities to the south due to significant competitive cost pressures as a New York State manufacturer. Aside from the cost of wheat, which increased significantly last year, the high cost of electricity is a major production cost component. Electricity purchases comprise 7.2% of the company’s total cost of production. The company manufactures lower margin products in a highly competitive market, and they are further constrained in their ability to pass cost increases to their large, national company customer-base, such as Walmart.
Several years ago, to proactively manage the company’s future, Wenner began to aggressively explore ways of reducing costs. The company commissioned a study to design and build a new plant in Davidson County, North Carolina. The final design was submitted with the application. During the process they also received incentive offers totaling millions of dollars from various economic development entities to relocate their business to North Carolina.
As an alternative to relocation out of state, the company is looking at consolidating bakery operations into one plant in its leased property in Ronkonkama. If Wenner decided to consolidate into one plant, it would invest $2 million in new energy efficient manufacturing equipment including high-efficiency refrigeration and spiral freezers. The company would spend an additional $500,000 in construction costs in renovating 72,000 square feet of currently available space in the Ronkonkama facility. Wenner estimates an additional $750,000 in relocation and moving expenses for total project cost of $3.25 million. The consolidated and modernized plant would provide cost and manufacturing efficiencies that, along with a lower-cost power allocation, make the plan economically viable.
CA is currently not using all of its EDP allocation, and has agreed, contingent upon approval, to a temporary assignment and transfer of 3,150 kW in order to assist Wenner. The temporary assignment and transfer, if approved, would run from February 1, 2011 through May 15, 2011, the expiration date of the allocation’s associated Energy Cost Savings Benefits (“ECSB”) rate discount. The power and energy associated with the transferred amount would be provided at the same Authority tariff rate applicable to CA’s EDP allocation. If ECSB were to be extended beyond May 15, 2011, the assignment and transfer could be extended to a new ECSB expiration date upon mutual agreement.
A temporary transfer of 3,150 kW of unutilized EDP will help Wenner decide to move forward with consolidation plans in New York State instead of relocating the company and its 450 jobs to North Carolina. Acknowledging that this transfer would be a short-term solution to a decision that requires a long-term investment, the company is hopeful that a new statewide economic development power program is created. Wenner believes that if the company is able to participate in a new, longer term program offering, it would be able to grow the business and create 50 new jobs in addition to the 450 jobs that would be retained in New York State with this temporary assignment and transfer.
It is recommended that the Economic Development Power Allocation Board approve and recommend to the Power Authority the temporary assignment and transfer of 3,150 kW of unutilized Economic Development Power to Wenner Bread Products, Inc. as detailed in Exhibit “A” and as provided for in this memorandum.
It is recommended that EDPAB approve the transfers as detailed above.
In response to a question from Chairman Kenneth Schoetz, Mr. James Pasquale said that although the Authority has, in the past, transferred economic development power allocations among businesses who were in existing programs, this is the first time the Authority is transferring an allocation from one of its customers to a company that is not in any of its programs. He explained that the Authority was able to do this because CA, Inc. (formerly known as Computer Associates) was not utilizing its full allocation. He added that if CA did not have unutilized economic development power, the Authority would not be able to negotiate this transfer, which underscores the need for a new power program.
In response to further question from Chairman Schoetz, Mr. Pasquale said that May 15th is the end of the current program; therefore, by law, the Authority could not transfer the allocation past that date.
In response to a question from Trustee Eugene Nicandri, Mr. Pasquale said that the Authority would not be serving Wenner Bread Products, Inc.’s (“Wenner”) entire electricity load and that this transfer would result in a savings of approximately $80,000 monthly for the company.
Ms. Mary Vanouse opined that transferring power from a business not meeting its goals to one that would have to move out of the state because of the cost of doing business is good way of using unused power; it also gives the Authority an opportunity, in the future, to transfer unused power to businesses that need it. Mr. Robert Catell agreed with Ms. Vanouse adding that although it is unfortunate that CA is not able to use all its allocation, the fact that the Authority is able to transfer the unused allocation to Wenner, a very important employer on Long Island, is a great opportunity.
Chairman Schoetz added as far as new legislation is concerned, the Board would like to be able to have the flexibility to approve this type of temporary transfer in the future. Mr. Pasquale pointed out that this action is authorized under the Economic Development Law.
The following resolution was unanimously adopted by members of the Board present.
WHEREAS, the Town of Islip Industrial Development Agency has submitted a business retention Economic Development Power application on behalf of Wenner Bread Products Inc.; and
WHEREAS, a currently unutilized portion of the Economic Development Power allocation to CA, Inc. is available for temporary use;
NOW THEREFORE BE IT RESOLVED, That the Board hereby approves and recommends to the Power Authority Board the temporary assignment and transfer of 3,150 kW of unutilized Economic Development Power to Wenner Bread Products Inc.; and be it further
RESOLVED, That the temporary assignment and transfer shall have a term through and including May 15, 2011, provided however, that such term could be extended if the Energy Cost Savings Benefits program expiration date is extended beyond May 15, 2011 and upon mutual agreement between the Power Authority, Wenner Bread Products Inc. and CA, Inc.
Company: Wenner Bread Products, Inc.
Location: Bayport, New York
Submitting Agency: Town of Islip Industrial Development Agency
Business Activity: Manufacturer of frozen dough and baked bread products
Project Description: Project involves consolidating bakery facilities into one plant by upgrading and renovating vacant space at Wenner’s leased Ronkonkama facility, installing $2 million worth of equipment including new refrigeration and spiral freezers, and relocating all facility operations to Ronkonkama.
Existing Allocations: None
Power Request: 4,300 kW
Power Recommended: 3,150 kW (Temporary assignment and transfer from unutilized portion of existing allocation)
Job Commitment: 450 Jobs
Job Retention/Power Ratio: 143 Jobs/MW
Capital Investment: $3.25 million
Other Assistance: ESDC grant; support from the Town of Islip
Summary: Wenner Bread Products, Inc. is seriously considering relocating its facilities south due to significant competitive cost pressures as a New York State manufacturer. As an alternative to relocation, the company is looking at consolidating bakery operations into one facility. Wenner would invest $3.25 million in new manufacturing equipment, construction, and relocation costs. A temporary assignment and transfer of 3,150 kW of currently unutilized EDP will help Wenner decide to move forward with consolidation plans in New York State. The temporary transfer would save the company an estimated $68,500 through May 15, 2011. If Wenner receives the temporary allocation, it will commit to investing in New York instead of relocating the company and its 450 jobs to North Carolina.
3. Proposed EDPAB Policy
Ms. Karen Delince said that staff, with the assistance of a consultant, Scott Fein, drafted the proposed policy outlining the Board’s functions and responsibilities. Following discussions on the proposed policy, it was agreed that it be tabled for further consideration at the next Board meeting.
4. Other Business
No other business to report.
5. Next Meeting
The next meeting of the Board is to be determined.