IDA Delays Vote Again on Major Project Based on Complaints Over Labor Policy

NEW WINDSOR—The developer of a major warehouse distribution project in the Town of Newburgh will have to wait until next month to possibly secure millions of dollars in incentives for its $40-million facility that will include anchor tenant AmerisourceBergen.

The Orange County Industrial Development Agency delayed two votes on granting incentives to the major distribution facility project after representatives from the Hudson Valley Building & Construction Trades Council that contended work already underway on the $40-million development was being undertaken by mostly out-of-state workers.

Although the 565,000-square-foot project being developed by Matrix Development Group of Cranbury, NJ had not secured an estimated more than $10 million in incentives via sales and mortgage tax exemptions and a local Payment in Lieu of Taxes agreement with the Orange County IDA, votes to grant the incentives were postponed at a regularly scheduled session on April 14th and at a special meeting on April 21 due to issues surrounding the hiring of local labor. The IDA plans to once again discuss and possibly vote on the incentive package for Matrix at its regular May 12th meeting. The Orange County IDA policy requires applicants to use 85% local labor (residents of Orange, Ulster, Sullivan, Dutchess, Putnam, Rockland and Westchester counties) for their approved projects.

A large tenant at the development to be built in the Town of Newburgh is pharmaceutical giant AmerisourceBergen, which announced plans to build a major distribution facility there in June 2015. The company at that time also announced plans to build distribution facilities in Olive Branch, MS and Shakopee, MN.

Empire State Development has provided AmerisourceBergen with up to $1 million in performance-based Excelsior Jobs Program Tax Credits. AmerisourceBergen has agreed to hire 121 new employees in the next two years and maintain those staffing levels through at least 2025 in connection with those state incentives.

The IDA session on April 14th pitted some IDA members and staff, including its chairman Robert Armistead, who were in favor of granting Matrix the incentives, against several other IDA members, including Stephen Brescia, who sided with members of the Hudson Valley Building & Construction Trades Council in attendance who charged that site clearing on the project was being undertaken by out-of-state workers. Armistead, who is president of Armistead Mechanical Inc., a union shop contractor with offices in Waldwick, NJ and Newburgh, NY, said that from all appearances most of the 12 projects since the local labor provision was passed two years ago have been using local labor. He added that Matrix did not have to comply with the IDA’s 85% local labor hiring mandate until it was granted the benefits. The IDA, based on prior complaints from the trades council, is looking into hiring a firm to monitor compliance with the policy that requires the developer to hire 85% local labor in a seven-county area of the Hudson Valley.

Todd Diorio, president of the Hudson Valley Building & Construction Trades Council and business manager of Laborers Local No. 17 in Newburgh, countered that most of the projects approved by the IDA since the 85% local labor policy was put into effect are not in compliance. “We are kidding ourselves,” he told the IDA Board members. “They are not using local labor and a lot of the companies aren’t. And even right now there are nine Pennsylvania license plates and two New York State license plates that drove into that site today to work. Why don’t we face reality, it’s not really happening.”

The contentious meeting, which lasted more than an hour, ended with the IDA tabling the vote because the measure did not have the required votes to approve. During the debate prior to the vote to table the measure, IDA Executive Director James Petro pressed the IDA Board to approve the incentives. After the vote, Petro charged, “This board today was manipulated by an outside force.”

The IDA Board subsequently held a special meeting on April 21 at the Orange County Accelerator in New Windsor to vote on the Matrix incentives. However, at the outset of the session the position of IDA members, including Chairman Armistead, noticeably changed after hearing from Executive Director Petro details of his several site visits to the project site where Pennsylvania-based general contractor Blue Rock Construction was not forthcoming with worker identification and residency information.

Petro related that Matrix had earlier signed an agreement to comply with the IDA’s local labor policy and after getting the go-ahead from IDA counsel, he visited the job site several times. He said the logs provided were incomplete and did not include street addresses and photo IDs. At a later visit, Petro said that a representative of Blue Rock told him that upon advice from his company’s counsel he would not provide any photo identification of the workers onsite.

After Petro’s presentation, Chairman Armistead stressed to two Matrix executives in attendance at the April 21st session—senior partner and vice president Don Epstein and senior partner and president and CEO Joseph Taylor—that the IDA requires those firms that receive benefits to adhere to the local labor policy.

Armistead said that based on recent events, “It doesn’t give us a warm and fuzzy feeling about where this job is going.”

After discussion, both IDA and Matrix officials said the issues center on poor communication between its general contractor and the IDA. Matrix’s Epstein said that the company has also launched its own investigation into the matter, but noted that the site clearing is only about 5% of the total project and that it plans to adhere to the IDA’s 85% local labor policy. Matrix said that in the past the firm has hired both union and non-union labor on its projects.

Epstein said that AmerisourceBergen, which will be leasing approximately 312,000 square feet and bringing in $29 million worth of its own equipment to the property, has asked Matrix to expedite approvals and begin construction on the project, When asked after the IDA meeting the timetable AmerisourceBergen desires for the building, Epstein responded that the Valley Forge, PA pharmaceutical firm, wants to have the building completed so that it can begin installation of its equipment by the end of this year.

Diorio and other members of the Hudson Valley Building & Construction Trades Council met with Matrix officials after the April 21st session to discuss the project and the issues surrounding the hiring of local labor.

When contacted the next day by Real Estate In-Depth, Diorio said, “We are going to try and work in the right direction to ensure that local union labor is used on the job as well as local labor. They are trying to skirt around the issue a little bit, but I think they are willing to work with the building trades to make this work. To me this is a no-brainer, they are going to get more than $10 million in tax breaks, if they have to spend a little more to keep local labor on the job at this point it is what it is.”

He added that because there has been little enforcement of the local labor policy since its passage on April 24, 2014, the building trades would be looking to convince the IDA to strengthen the policy, which he said is vague in terms of how a company complies with the policy. The building trades, prior to the local labor provision passage in 2014, had sought to require developers sign a Project Labor Agreement for incentives and or institute a prevailing wage requirement, as is required by the Rockland County IDA.

Photo Caption: Orange County IDA Chairman Robert Armistead discusses the agency’s local labor requirements with Matrix Development Group Vice President and Senior Partner Don Epstein (top right at conference table).

John Jordan
Editor, Real Estate In-Depth