The Essex IBM facility, pictured above, may close if the company sells its semi-conductor business, as is rumored in the financial press. (Photo courtesy of GBIC)

The Essex IBM facility, pictured above, may close if the company sells its semi-conductor business, as is rumored in the financial press. (Photo courtesy of GBIC)

IBM, the largest single private employer in Vermont, is putting its semi-conductor business up for sale, according to reports in the financial press. Frank Cioffi, president of the Greater Burlington Industrial Corporation, however, is hopeful if the Essex facility sells, it will remain open under new ownership.

The potential impact on the regional economy should IBM close would be enormous.

IBM employs roughly 4,000 people in Essex with an estimated payroll of $150 million to $200 million. Those employees reside in 190 towns, particularly in Chittenden, Franklin, Grand Isle and Lamoille counties.

GBIC estimates the company supports another 8,000 jobs indirectly and adds $1 billion annually to Vermont’s economy.

“[IBM employees] eat in our restaurants. They go to our movies. They buy cars here. They buy houses,” said realtor Ernie Pomerleau, a member of the GBIC board.

IBM pays more than $2.5 million in property taxes alone; corporate tax payments are not public information. The company’s employees also pay income, property, meals, gas and sales taxes.

Examining the economic impact of IBM, “has shown us the economic value of holding on to what you have,” Cioffi said.

IBM is a major user of electricity, gas, water and wastewater treatment. The Essex facility uses as much power in a year as the City of Burlington, Cioffi said. The company takes raw power directly from producers such as Hydro Quebec and upgrades it for industrial use.

Large services users like IBM can help reduce others’ rates. For example, IBM also uses 34 percent of the water filtered by the Chittenden Water District, keeping rates down 40 percent, GBIC estimates.

IBM has its own wastewater treatment facility, which GBIC estimates is worth $200 million. The facility can treat 4.4 million gallons of industrial wastewater daily.

The Essex facility is known for its energy efficiency, and IBM has used it as a model for other businesses like
Vermont Technical College and the Howard Center; the latter saved $400,000 annually as a result, according to Cioffi.

IBM has loaned its staff’s technical expertise to numerous local organizations including the Solar Research Test Center, hospitals, colleges, the Vermont Air Guard and Cabot Cheese.

Exporting goods, importing $$

IBM, explained Cioffi, is the kind of company that provides the economic base for a region, not simply because of its size, but because of the type of work it does.

IBM brings money into Vermont and exports goods. The money IBM brings into the region, in turn, supports other businesses.

Seventy percent of Vermont’s international exports are from IBM, amounting to more than $2.8 billion in 2012.

The Essex facility makes microchips used in cell phones, tablets and other electronic devices. IBM has a second microchip facility in Fishkill, N.Y. and a research center at the State University of New York-Albany. A sale of the Vermont facility would likely include those facilities as well, Cioffi said.

Research and development staff at the Essex facility have helped make Vermont fourth in the number of patents per capita.

Each research and development position creates 13 additional jobs at the facility as the improvements they make are turned into new products, Cioffi said.

Although the equipment in IBM-Essex is a couple of generations old, that only limits chip production, not their design sophistication, according to Cioffi.

That, combined with the value of the employees themselves, the facility’s energy efficiency and other assets, has Cioffi hopeful that any potential buyer would keep the facility open.

Nevertheless, he is pleased Gov. Peter Shumlin is seeking to create a $4.5 million Enterprise Incentive Fund for companies to open facilities in Vermont, expand existing facilities or simply remain in the state.

The future

New York State attracted a $4.2 billion chip fabrication facility to Saratoga County with $1.8 billion in incentives, Cioffi said. That facility is owned by GlobalFoundries, one of the companies considering a purchase of IBM’s semi-conductor business.

New York offered GlobalFoundries a whole range of incentives from property tax abatement and tax credits to training programs to partnerships with higher education facilities. “We cannot match dollar for dollar with the State of New York,” Cioffi said.

But the proposed Enterprise Incentive Fund would be another tool for the governor to use when trying to attract or keep businesses in the state, Cioffi said.

Vermont currently has the Vermont Employment Growth Incentive program, aimed at new or expanding employers and based on the company expanding its payroll.

The state also needs programs aimed at retaining existing employers, especially in manufacturing where employment is generally not expanding, suggested Cioffi.

He would also like to see the state create incentives for research and development, precisely because those positions create other jobs.

Incentives for businesses should be understood as investments, in Pomerleau’s view. “Some people in the legislature might call it corporate welfare,” he said. “I call it an investment.”