Micron’s mammoth property tax break examined: Is it a good deal for schools?

Syracuse, N.Y. — Micron Technology turned a profit of $8.5 billion in the fiscal year that ended in August.

The North Syracuse school district cut 38 positions to balance its budget for the school year that started in September.

Yet after Micron opens a massive chipmaking plant in the district in the next few years, a deal with Onondaga County will allow the wildly successful company to pay pennies on the dollar to the schools that could help educate its future workers.

The school district, which gets the biggest share of local property taxes, was locked out of the secret negotiations between Micron and the Onondaga County Industrial Development Agency on a tax deal that will last 49 years.

That’s just how the cutthroat world of economic development works, County Executive Ryan McMahon says: To land a company like Micron, with its promise of thousands of jobs and billions of dollars in investment, you need to dangle sweeter tax deals than Texas and Arizona and Michigan do.

“If people are going to try to argue that Micron would have picked Onondaga County at full property tax assessment with no incentives,” McMahon said this week, “they’re either misinformed or they’re lying.”

Micron has already been promised up to $23 billion in taxpayer subsidies, mostly in grants and tax credits from the federal government.

County officials say the property tax deal, called a payment in lieu of taxes, or PILOT, will save Micron an additional $284 million. That includes payments to the county, town of Clay and the school district, which will get the bulk of the money.

Micron’s local property tax payments for 49 years will be $84.5 million under the agreement, which was reached in 2022.

The payments will average $1.3 million each year. That’s how much Micron’s chief executive officer, Sanjay Mehrotra, earns in two weeks.

The county’s calculations mask the true size of the tax break Micron is getting, which is likely much larger. That’s because the county values the land where Micron plans to build at $32 million, the amount OCIDA paid landowners, often under the specter of eminent domain.

That’s far less than the site could be worth once Micron spends $50 billion to construct and equip two chipmaking plants.

The discount Micron will receive on property taxes could then be far greater than the formula the county is using. It would be like paying taxes on the vacant lot you bought and not on the mansion you built there.

It’s hard to estimate the tax bill on a gigantic complex that hasn’t been built yet. Just down the Thruway, in Saratoga County, there’s a similar chip plant that offers a guideline. The plant, built by GlobalFoundries in 2009, was initially valued at $650 million.

If Onondaga County used the same formula for Micron that Saratoga County used for a fab owned by chipmaker GlobalFoundries, Micron’s two fabs would be valued at $3.5 billion by the end of the project. That would make Micron’s development worth 100 times more than the county’s figure of $32 million.

Under a payment agreement reached with the Saratoga County Industrial Development Agency, GlobalFoundries has paid schools and local governments more than $100 million over the past 14 years.

That’s more than Micron will pay in 49 years.

Onondaga County officials point out that the North Syracuse school district doesn’t get a penny now from the land where Micron plans to build because all that land is tax-exempt. That’s true, but only because OCIDA itself pulled the land off the tax rolls. Over the past 20 years, the agency has bought up nearly 1,400 acres with the expressed intent of luring a big manufacturer.

It worked. Syracuse won a contest that dozens of places across the U.S. bid on.

The prize is huge. Micron could transform the Central New York economy with 4,500 jobs by 2035. Development of the first two fabs could generate thousands of spinoff jobs from suppliers and give Central New York the kind of growth it hasn’t seen in decades. Micron says it could eventually build four fabs, for a total employment of 9,000 people.

OCIDA will hold a public hearing at 6 p.m. today on the property and sales tax breaks it plans to grant Micron. The hearing will be in the Clay Town Hall.

No seat at the table

New York’s generous offer lured Micron to Upstate New York, winning a high-stakes competition with communities in other states. New York had lots of water, power and land. But it also has among the nation’s highest property taxes. And as New York wooed Micron, everything – even local school taxes – was on the table, McMahon says.

“We knew that property taxes in general in New York state are higher than all the other states we’re competing against,” he said. “The goal is to win the project.”

While school district officials say they wish Micron was paying more, they say they’re all in favor of Micron coming.

“I want to be very clear on this: As a district, we’re extremely excited about Micron moving here and we think it’s a tremendous opportunity for our kids and our community,” said Don Keegan, the district’s associate superintendent for business.

Still, Keegan wishes Micron’s payments were larger. And he said the district, which relies on property taxes for half its budget, was excluded from the discussions.

“Trust me, we were not part of the negotiations at all,” he said.

Being in the dark is common in PILOT agreements, and it’s a source of frustration for school districts statewide, said Brian Fessler, chief advocacy officer at the New York State School Boards Association.

“They don’t have a seat at the table. They don’t have a vote. They don’t have a veto,” Fessler said. “They’re generally treated like John Q. Public, that they can attend a public hearing and speak just like you or I can as a private citizen.”

McMahon said the negotiations with Micron needed to be confidential, and that school districts have no say over tax breaks the county decides to grant.

“They don’t have jurisdiction over the county of Onondaga,” he said.

Big breaks for big rewards

In addition to the $284 million property tax reduction, OCIDA also plans to exempt Micron from paying about $1.7 billion in state and local sales taxes on construction materials.

These local tax breaks are the smallest chunk of a tax incentive package that adds up to about $25 billion for Micron.

In exchange, the company will spend $51.5 billion to build two fabrication plants, or fabs, in Clay and create 4,500 jobs.

Put another way, American taxpayers are covering about half of the bill to build Micron’s first two factories. Micron says it could build up to four fabs, but the third and fourth aren’t part of any negotiations now.

Given the billions in breaks Micron is already getting, local activists say the PILOT payments aren’t enough.

“We’re giving them so much other public money, how come they’re not paying full taxes when it seems to be a drop in the bucket compared to everything else?” asked John Przepiora, president of Greening USA.

Micron did not directly respond to questions about its payments or tax breaks. Instead, a company spokeswoman touted Micron’s voluntary programs in the North Syracuse school district, including chip camps, teacher training and curriculum development.

“Micron is committed to supporting schools where we operate and where our team members and their families work and live,” the company said in an email.

Micron, which now produces most of its chips in Asia, said it can’t make a profit in the U.S without the tax breaks it’s being offered in Clay.

“Micron would be unable to proceed ... without the tax incentives from the state of New York and financial assistance from the Onondaga County Industrial Development Agency in the form of sales and real property tax exemptions,” the company wrote in its application for the county subsidies.

The school property tax break would be less than 1% of the total subsidies Micron could receive.

Another tax deal, another era

Micron will end up paying far less to local governments than GlobalFoundries has at a much smaller chip plant in Saratoga County.

The GlobalFoundries plant was built in 2009 for $4.5 billion. It has a 500,000-square-foot cleanroom, where silicon wafers are turned into memory chips.

Micron will spend five times as much to build the first two plants, which will have a combined 1.2 million square feet of cleanroom.

GlobalFoundries has already made payments of more than $100 million over the past 14 years to schools and local governments, according to online records of the Saratoga County Industrial Development Agency and the Ballston Spa school district.

By contrast, Micron would pay $84.5 million over 49 years in Onondaga County.

Much of the GlobalFoundries money goes to the Ballston Spa school district, which has about half the enrollment of North Syracuse.

McMahon said Micron’s deal was made in a different era than the GlobalFoundries deal. In 2022, the Biden administration passed the CHIPS and Science Act, which offered billions to chipmakers to bring production back from Asia to the U.S.

The nationwide competition for a limited number of chip factories was intense. States offered enormous incentive packages to land companies like Samsung, Micron, Intel and the world’s largest chipmaker, Taiwan Semiconductor Manufacturing Co.

To compete, New York passed the Green CHIPS Act. Micron could get about $2.5 billion from that fund for the first two factories in Clay. New York also offered Micron discounts on electricity and water, which chip plants consume in enormous quantities.

North Syracuse schools impact

While Micron’s roughly $1.3 million annual payments appear to be a windfall, the district says it comes with complicated budgetary strings.

Each year, school districts in New York can only increase local tax collections, called the levy, by a small amount. That’s usually around 2%.

North Syracuse’s current levy is $108 million. Next year, it can only grow a small amount, unless voters overwhelmingly approve the extra taxes.

Any payment from Micron would go toward that levy, which can’t just balloon to any level. Micron’s first payment would be $773,143, less than 1% of the current levy.

Still, the extra money could help in another way. The bigger Micron’s share of the levy, the less other taxpayers in the district would pay.

At the end of the day, Keegan said, Micron’s PILOT payments won’t help the district meet the demands of any Micron-fueled growth.

“The bottom line is the school district’s revenues will not increase at all,” Keegan said.

Micron estimates the school-aged population of Clay and Cicero will grow by nearly 1,500 students over the next 20 years, which includes North Syracuse and Liverpool schools.

This year, the North Syracuse district cut 38 positions and withdrew millions from its savings account to close a budget deficit.

McMahon said the school district will have plenty of money as more homes and businesses spring up in the district. Landowners will pay property taxes that will offset the cost of additional students.

“The government’s making the money on the economic activity, the sales tax and the property tax growth in the whole community,” McMahon said.