by Hilary Niles vtdigger.org While Vermont boasts one of the lowest unemployment rates in the country, layoffs at IBM hampered Vermont’s slow-but-steady economic recovery this year. Other businesses are on the upswing, reporting they are struggling to fill open positions ‘ a good indicator of momentum, but not a selling point for companies that are nervous about growing too fast. And early repayment of a federal loan that bailed out the state’s unemployment insurance trust fund presages looming debate over the balance between the system’s payments and benefits.
The blockbuster Northeast Kingdom Economic Development Initiative is well under way. Governor Peter Shumlin celebrated success on the broadband front, though he missed his target of 100 percent access by the end of the year. Developer Jeff Davis promised not to build any more big box stores after securing permission for a new Walmart in Derby.
Perhaps the biggest surprise of the year? Burlington-based Dealer.com sold for $1 billion to a New York state company earlier this month.
IBM lays off 10 percent of workforce
IBM, one of the state’s largest employers, announced that it would lay off 10 percent of its workforce in June. The global technology company produces microchips at its Essex Junction facility.
The layoffs were not a surprise. IBM posted lower than expected earnings in the first quarter this year. The company announced in April that subsequent layoffs would be consolidated in the second quarter, rather than spread out through the year.
IBM worker Jim Clairmont.
A July 17 Reuters report said the publicly traded corporation successfully beat second-quarter earnings estimates, but failed to boost its revenue. Union officials said 2,930 jobs were cut in systems technology, global business services and software groups in a number of locations in the United States and Canada.
IBM at first refused to release any details about the layoffs in Vermont. Under pressure from the Shumlin administration, the company eventually revealed that 419 employees were issued pink slips. The Vermont Department of Labor sent a Rapid Response team to Chittenden County to help workers find new jobs.
Northeast Kingdom EB-5 projects
The sweeping Northeast Kingdom Economic Development Initiative undertaken by Jay Peak ski resort co-owners Bill Stenger and Ariel Quiros celebrated a ribbon-cutting, closed a real estate deal, bought an airplane company, designed a biotech facility, cancelled a window manufacturing plan and weathered local controversy in 2013.
At the grand opening of Jay Peak’s new Stateside Hotel and Baselodge’ on Dec. 20, Shumlin credited the public-private partnership as an important job creator for the region.
The initiative, unveiled in September 2012, includes five projects in East Burke, Newport, Coventry and Jay. Most of the projects will be financed through about $445 million raised from nearly 900 foreign investors in the federal EB-5 Immigrant Investor program. ‘ ‘ ‘ ‘
Jay Peak Resort co-owner Bill Stenger said that careful timing of their EB-5 funded construction projects creates full-time employment for the workers. Here, an empty ski slope in the background highlights Stenger’s goal to turn the ski resort into a year-round destination. Photo by Hilary Niles/VTDigger
Shumlin travelled to China with Stenger on an all-expenses-paid trip to promote the state’s EB-5 program to potential investors.
‘As governor, I’m going to do everything in my power to continue to make these projects a great success, because it’s jobs, it’s economic opportunity and it’s quality of life,’ he said.
Stenger and Quiros announced at the ribbon-cutting that they had sealed the purchase of a city block in downtown Newport, which they plan to raze and rebuild as a bookend in an expansive waterfront marina, hotel and conference center on Lake Memphremagog. Two more property transfers are pending. ‘
The light plane manufacturing firm Flight Design USA was also acquired by Quiros, broadening his investment in the planned build-out at the state-owned Newport State Airport. ‘ ‘ ‘ ‘ ‘
Neither the airport plan nor the so-called Renaissance Block projects are yet approved for EB-5 financing, though the developers intend to submit the latter for eligibility.
Designs for an EB-5 approved bio-tech firm in Newport are on tap for spring 2014. Stenger said in late December that about 85 percent of then-needed investments had been secured to establish a Vermont affiliate of the Korean firm AnC Bio.
A German window manufacturing firm, however, will locate its North American headquarters outside Vermont. ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘
Stenger announced in September that he was canceling the project. It had become clear in late planning stages that Menck’s manufacturing design and the projected sales cycle could not reliably generate sufficient jobs within two years to merit EB-5 financing. ‘ ‘
Some developments at Q Burke Mountain were delayed in 2013 while new CEO Ary Quiros implemented operational and management changes to shore up the ski area’s finances.
Significant staffing changes strained the company’s relationship with the community. That tension that was exacerbated when Quiros cut ties with the local nonprofit Kingdom Trails, prompting Stenger to step in for damage control. ‘ ‘ ‘ ‘ ‘
In all, Stenger estimates his team raised about $100 million in EB-5 investments in 2013 ‘ a figure they plan to double next year, followed by another $100 million in 2015.
Walmart goes to Derby, Mylan swaps property with state, aviation association seals deal with Quebec trade group, GMCR worker slapped with insider trading charge
While Stenger moves ahead with a high-end development in the lakeside border town of Newport, neighboring Derby is making way for Walmart.
Big-box developer Jeff Davis, who also brought the discount chain to St. Albans Town and Williston, struck a deal with environmental groups’ ‘ ‘ ‘ http://vtdigger.org/2013/11/06/developer-offers-moratorium-big-box-stores/ ‘ ‘ ‘ ‘ who have opposed his plans: He donated $200,000 to the Preservation Trust for Orleans County and announced a moratorium on big-box development outside city centers until 2020. The moratorium, however, applies neither to city centers nor other developers, and Davis admitted he had no plans in the works that the moratorium would halt.
A complex property swap and financing plan in St. Albans also made headlines in 2013: The Emergency Board agreed to borrow money from the Corrections Department to fund a state office development and lease in order to make way for the private company Mylan Technologies to expand in time to apply for federal tax credits. Some lawmakers were miffed that the swap, orchestrated by commerce secretary Lawrence Miller, was rushed through the Emergency Board without opportunity for legislative input and review. ‘ ‘
Vermont’s captive insurance industry celebrated a milestone in October with the licensing of the 1,000th Vermont-based captive insurance company. Vermont is a leading hub for the unique self-insurance mechanism, and lawmakers and administration officials pledged to maintain the state’s standing amid increased competition from other states catching on to the scheme. ‘ ‘ ‘
Vermont’s aerospace and aviation industry also reached a turning point in 2013, when business officials signed a memorandum of understanding with an industry trade group in Quebec. The Vermont Aerospace & Aviation Association, a division of the Vermont Chamber of Commerce, formalized its working relationship with Aero Montreal. VAAA representative Chris Carrigan says his goal is to help dozens of small manufacturers in Vermont join forces to establish the state as a corridor connecting global industry giants’ in Quebec and Connecticut.
A kerfluffle over a state contract for waste collection led to a lawsuit and a change in policy. The Department of Environmental Conservation pulled out of negotiations with recycler Good Point, of Middlebury, and instead signed a deal with Casella Waste Systems to administer Vermont’s successful e-waste recycling program. Legal action ensued, and Good Point was allowed back into the program to compete with Casella. Many local transfer station managers and electronics manufacturers, however, were unimpressed by the confusion and delays that marked the transition.
Casella scored another victory in the meantime, gaining approval to nearly double its capacity at its landfill in Coventry. With Florida-based Advanced Disposal’s Moretown Landfill shut down, Casella’s facility in Coventry is the state’s only active landfill remaining.
The federal Securities and Exchange Commission charged a systems administrator for Green Mountain Coffee Roasters in Waterbury with insider trading.’ Chad McGinnis, who allegedly profited with a friend in Connecticut to the tune of about $7.5 million, was promptly fired. In December, his motion to either dismiss the case or move it from Connecticut to Vermont was denied.
At the Burlington International Airport, Delta Airlines resumed service to Atlanta after nearly four years off the runways. Nonstop passenger service to Orlando also resumed with Las Vegas-based Allegiant Air.
Broadband goal just short of the mark, taxes on the cloud, gas assessed
Gov. Peter Shumlin promised to ensure that all Vermonters had access to broadband by the end of 2013. At a press conference last month, he told reporters the state would come very close to meeting that goal: Active connections are now available for 99 percent of the state, options are in the works for the remaining 1 percent, and just a handful of locations have no solution in sight.
The administration is now trying to improving Internet speeds and hopes to lower costs according to telecommunications director Jim Porter, who has pledged to update to the state’s telecommunications master plan. State law requires it be renewed every three years, but revisions have been piecemeal since 2004. ‘
Businesses say broadband buildout to support online commerce and communications is crucial. Many companies that are pursuing Internet sales are warily eyeing another state policy that has affected their profits ‘ the so-called cloud computing tax. Over the protests of the business community, the Legislature lifted a moratorium on taxes for cloud-based software services, but the tax department has yet to issue guidelines clarifying who it applies to.
While Vermont and other states are figuring out how to capture tax revenue from online business, Vermont Attorney General Bill Sorrell is doggedly pursuing ‘patent trolls’ who have come to exploit web-based commerce. He’s filed suit against MPHJ Technologies’ in the first known case that takes a patent troll to court under consumer protection laws. The state law aimed at curbing the practice is being pitched for federal adoption. ‘ ‘ ‘ ‘ ‘ ‘
Vermont’s increase to gas & diesel taxes ‘ six and three cents per gallon, respectively, over two years ‘ took effect in May. State economists Tom Kavet and Jeff Carr advised Shumlin and legislators that gas and diesel tax revenues will be volatile, but so far the new taxes are delivering revenues ahead of projections. ‘ ‘ ‘ ‘
And reforms were made to the state’s tax-increment financing program through the Vermont Economic Progress Council, after a three-way battle ‘ between state auditor Doug Hoffer, the Shumlin administration and a handful of towns. ‘ ‘ ‘ ‘
VERY’ TOP’ PHOTO: Bill Stenger of Jay Peak.