Mall dispute highlights buy-local policy

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Photo credit: Newsday / Audrey C. Tiernan | Construction at the Walt Whitman Shops in Huntington Station. A local contractor complains that the mall owner, Simon Property Group, has taken local tax benefits, but is applying the buy-local agreement too loosely. The mall owner says that it is doing what is required. (July 11, 2012)

By: JAMES T. MADORE, Newsday
July 20, 2012

A dispute between a local concrete manufacturer and a shopping mall shows how difficult it can be to push businesses that receive government aid for building projects to use area contractors. 

Long Island Precast Inc., a maker of stormwater drainage systems, has alleged the Walt Whitman mall in Huntington Station failed to live up to the Suffolk County Industrial Development Agency's buy-local policy.

The IDA initiative states that recipients of tax breaks should "to the greatest extent possible" buy local goods and services and hire local people. Walt Whitman executives were told of the policy this spring, when they accepted $3 million in IDA tax incentives over 10 years to support $40 million in mall improvements.

Long Island Precast of Bellport now questions why its drainage system was spurned for the mall project in favor of an Illinois-based competitor.

Walt Whitman's owner, Simon Property Group of Indianapolis, rejected the criticism, saying it's still primarily using contractors, workers and materials from the Island. 

Questioning its merits

The disagreement has drawn attention to the merits of business development agencies having buy-local policies. The initiatives by Nassau and Suffolk counties, along with some towns, strongly suggest but stop short of requiring developers to use area resources. The idea is popular with construction workers and contractors because of the industry's high unemployment. The Long Island Contractors' Association estimates the jobless figure at 25 percent. 

However, the policies are not mandatory because of concerns a firm requirement would result in lawsuits. Judges could strike the buy-local standards as violating the U.S. government's constitutional power to regulate interstate commerce, lawyers for IDAs said. 

Suffolk's commitment

The Suffolk IDA's board, composed largely of volunteers from the business and labor communities, adopted its policy in April.

"This is the right thing to do for our economy, to ensure the dollars are spent here," said Steve Rossetti, a business broker who, as Suffolk IDA secretary, wrote its "Long Island First" policy. 

"If Long Island First isn't being followed, I would support giving it more teeth, such as making it mandatory or clawing back the incentives given to developers," he said. 

A similar initiative has been employed by the Nassau IDA for at least seven years. Last week, the Islip Town IDA passed a buy-local mandate. 

Critics of buy-local policies said they can discourage companies from locating here by fostering an anti-business reputation.

"This could serve as a disincentive to companies that are considering expansion," said economist Daphne A. Kenyon of the nonpartisan think tank Lincoln Institute of Land Policy in Cambridge, Mass. Last month, she co-wrote a report critical of property tax incentives. "These policies are complicated . . . [and] don't seem a fruitful effort," she said. 

A few government-aided building projects have caught flak when out-of-state contractors or workers were hired. 

Beer distributor Clare Rose Inc. was criticized in 2009 for employing a non-union construction company from Kentucky on a Shirley headquarters. The project got tax breaks from the Brookhaven Town IDA, which verbally encourages applicants to buy local. 

The Brookhaven IDA last year backed Long Island Precast's own, $3.25-million expansion with more than $543,000 in tax breaks over 10 years. All the work was done locally, said Michael Verruto Sr., the company's president. 

His adherence to Brookhaven's buy-local policy is one reason Verruto complained about Walt Whitman.

"Somebody gets a benefit from the taxpayers and the first thing they do is write a check to a company from out of state . . . That's total insensitivity to Long Island," he said. 

Verruto said his stormwater drainage system is superior to one chosen from StormTrap Llc. of Morris, Ill., and would save Walt Whitman $800,000 on a $2.6-million contract. 

The mall's viewpoint

Mall spokesman Kevin Ryan countered, "Based on all of the analysis, [owner Simon] has concluded the StormTrap drainage system was the most preferred." Simon has required StormTrap to produce "as much as 50 percent" of the components locally.

Ryan also said "at least 95 percent of the materials for the overall project are from Long Island contractors and all of the labor" -- estimated to total 1,500 workers -- "is from local unions." Long Island Precast's 49 employees are not unionized.

The dispute has led Suffolk leaders to mull ways of making the buy-local policy stick.

Suffolk Legis. Wayne Horsley (D-Babylon), economic development committee chairman, suggested the IDA emphasize Long Island First in its initial meetings with applicants.

Brookhaven Town Supervisor Mark Lesko, a member of the Long Island Regional Economic Development Council, said, "These companies need to understand that their projects are being subsidized by the taxpayers."

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