May 2016 Cover Story: Economic Development

Securing a stronger future for the north country

COR Development’s Mercy Health Center Redevelopment project is set to begin its first phase of construction this summer on 30,000 square feet of commercial space and 108 apartments. Overall, the project will house 168 units and a community center on the grounds of the former Mercy Hospital in Watertown. Photo by Stephen Swofford, NNY Business.

COR Development’s Mercy Health Center Redevelopment project is set to begin its first phase of construction this summer on 30,000 square feet of commercial space and 108 apartments. Overall, the project will house 168 units and a community center on the grounds of the former Mercy Hospital in Watertown. Photo by Stephen Swofford, NNY Business.

Despite workforce challenges, regional economic development continues to power positive growth across Northern New York

By Karee Magee, NNY Business

A rural and historically challenged region where economic development was often stagnant, the Great Recession dealt a significant blow to New York’s north country as its counties saw a spike in unemployment and manufacturing jobs disappear, including about 600 from Jefferson County alone.
Less than 10 years later, Northern New York has seen a resurgence of economic activity and development spurred by strategic planning efforts of the North Country Regional Economic Development Council and local industrial development agencies.

Since the regional councils were formed in 2011, the north country has been awarded $423.2 million over the five years of the initiative’s economic development competition, third highest of the state’s 10 regions.

The north country was awarded $85.1 million for 82 projects in December for the fifth round of the competition, more than $17 million of which directly effects the tri-county area of Jefferson, Lewis and St. Lawrence counties.

Development doesn’t always happen quickly in Northern New York, though, compared with more urban areas of state, especially now that construction projects at Fort Drum have come to a halt and housing development has slowed, but Howard Zemsky, president, CEO, and commissioner of Empire State Development said the north country has come a
long way and has farther to go.

“If we look back on how much we’ve accomplished and we can continue to improve at that rate, that’ll be great,” he said. “We’ve moved the economy forward dramatically.”

The region’s priority now is to develop an environment that would attract companies to settle in the north country.

Two corporate parks in progress in Jefferson County are a major component of a renewed environment for business.

“We need an area where people can be attracted and have infrastructure available when they get there,” said Donald C. Alexander, CEO of Jefferson County Economic Development.

A corporate business park at the Watertown International Airport is coming to fruition after years of planning on about 200 acres of land east of the airport that is expected to accommodate 40 businesses. Tree clearing and site preparation began in December, but construction is waiting on plans for infrastructure and access roads.

The Bradley Street Commerce Park in the town of Pamelia, just east of the intersection of Interstate 81 and Bradley Street, completed infrastructure in January and has achieved “shovel ready” status. The site offers railroad and interstate access and has space for about 20 businesses. Purcell Construction Corp., Watertown, deveoped and owns the site. Photo by Stephen Swofford, NNY Business.

The Bradley Street Commerce Park in the town of Pamelia, just east of the intersection of Interstate 81 and Bradley Street, completed infrastructure in January and has achieved “shovel ready” status. The site offers railroad and interstate access and has space for about 20 businesses. Purcell Construction Corp., Watertown, deveoped and owns the site. Photo by Stephen Swofford, NNY Business.

At the same time, a corporate park off Bradley Street in the town of Pamelia, owned by Purcell Construction Corp., completed infrastructure in January and has achieved “shovel ready” status. The site offers convenient railroad and interstate access and has space for about 20 businesses. Its first tenant, F.X. Caprara Honda, is on schedule to open this month. The new auto dealership also represents a return of a global brand that the north country hasn’t had in several years. The franchise is expected to employ about 60 people across all departments.

The Lewis County Industrial Development Agency has its own shovel-ready space in the works. Eric Virkler, IDA executive director, said officials have identified land and are in the process of purchasing acreage and developing construction plans.

Clean-up and redevelopment projects are also underway in the tri-county area.

The St. Lawrence County Industrial Development Agency is winding down the process of cleaning up the former General Motors site in Massena, while the Lewis County IDA is cleaning up and demolishing parts of the former Lyons Falls paper mill site to make it useable.

A rebirth is also being planned in Jefferson County for Fort Drum Mountain Community Homes, where the homes will be refurbished for future use.

“Every bit helps,” said Patrick Kelly, CEO of the St. Lawrence County IDA. “You have to have the right environment for projects.”

A large portion of effort, though, is going toward transportation, including a $10 million project to rehabilitate the Newton Falls Railroad, a 43-mile rail line that extends from Carthage to Newton Falls.

“The rail is key infrastructure, and there are large-scale industrial sites in the southern part of the county where rail access could be key to redeveloping these sites,” Mr. Kelly said in a Watertown Daily Times article in February.

A Maryland company, Rhinehart Railroad Construction Inc., was awarded a $6.8 million contract in February. A $9.9 million grant will cover the rehab, as well as the engineering, inspection and other related expenses.

A focus on developing infrastructure and an environment to attract companies, though, is not the only development happening in the region.

Several of the region’s legacy companies are undergoing expansions as the financial pressure from the recession has begun to lift over the past few years.

Despite recent job cuts due to decrease in demand in foreign markets, New York Air Brake is proceeding with a $3.6 million expansion that will house its new engineering test lab.
Construction began last fall at the Starbuck Avenue location on the 7,300-square-foot, two-story lab that will create 10 engineering jobs with annual average salaries of $67,000. The addition will be connected to the main plant and includes a cold-storage building. The project will also fund product testing equipment.

The workforce at North American Tapes jumped from 30 to 40 employees in the spring of 2015 after a $1.2 million expansion that added 9,600 square feet.

A Kraft-Heinz expansion in Lowville is in progress after the company received the go-ahead in March to build a 67,756-square-foot addition to the rear of its Utica Boulevard plant, a 5,923-square-foot receiving bay on the north side, and a 2,169-square-foot two-pack addition on the front. Among other products, the expanded facility will manufacture string cheese.

The expansion is expected to increase daily milk usage at the plant from one million to two million pounds, and could add up to 150 jobs.

The project is being designed by Excel Engineering Inc., Fond du Lac, Wisconsin, and GYMO Architecture, Engineering and Land Surveying, Watertown, will review site plans and oversee the project.

“Those expansions are typical of a resurgence in light manufacturing,” Mr. Alexander said.

St. Lawrence County has seen two major expansions, including Ansen Corporation, which leased a 42,000-square-foot manufacturing space at the Ogdensburg Bridge and Port Authority Commerce Park, where the electronic manufacturing supplier will assemble LED lighting for stadiums and outdoor venues.

The expansion will create at least 50 new jobs with an anticipated payroll of $1.5 million.

The DeFelsko expansion at the former A.N. Derringer Inc. building at the Ogdensburg Commerce Park will triple the company’s capacity to more than 38,000 square feet and create 50 new jobs over 10 years in its sales, marketing, accounting and shipping departments.

The region has also seen the relocation and reopening of businesses, including the purchase of Morris Northstar Hatchery by Huntsville, Ala.-based global poultry company Aviagen North America, which has increased its number of employees from 17 to 30.

Aviagen plans to invest $3 million to retrofit the hatchery and expand from exporting broiler chicks used for meat to hatching chicks for breeding. They are expected to export 100,000 of each on a weekly basis.

Eric Tessmer, seen here in a 2014 file photo, purchased the former Riverside Iron Works in Gouverneur in mid-2014. Operating as Riverside Iron, the firm manufactures custom-made and ornamental steel products. Presently employing 15, a dozen more employees may soon be added to a second shift. Photo by Jason Hunter, NNY Business.

Eric Tessmer, seen here in a 2014 file photo, purchased the former Riverside Iron Works in Gouverneur in mid-2014. Operating as Riverside Iron, the firm manufactures custom-made and ornamental steel products. Presently employing 15, a dozen more employees may soon be added to a second shift. Photo by Jason Hunter, NNY Business.

Riverside Iron in Gouverneur also reopened less than two years ago and is manufacturing custom-made and ornamental steel products. The manufacturer is set up for 15 employees, but a dozen more employees may be added to a second shift.

Health care, one of the largest employment sectors in the north country, has also seen a resurgence with the introduction of the Delivery System Reform Incentive Payment Program, which has allocated up to $6.42 billion for the transformation of public health in New York State, and the Affordable Care Act.

The program alone awarded $78 million over five years to the North Country Initiative Performing Provider System, made up of Watertown’s Samaritan Medical Center, Carthage Area Hospital, River Hospital, Alexandria Bay, Clifton-Fine Hospital, Star Lake, Claxton-Hepburn Medical Center and Ogdensburg and Massena Memorial Hospital.

A large amount of the funding will be allocated to development projects, including a $14 million three-story addition to River Hospital’s Fuller Street Building that will offer outpatient mental health services and primary care.

Samaritan Medical Center is in the planning stages of a three-story 18,000-square-foot addition on Sherman Street, adjacent to the hospital’s loading zone. The project includes a new maternity ward with operating room and the relocation of the pediatrics unit to the same floor. The addition will have a separate entrance and parking lot for these patients.

More mental health space and offices are also part of the project.

Canton-Potsdam Hospital, part of St. Lawrence Health Systems, started construction in 2015 on a $20 million facility that would house 20 medical offices and four outpatient surgical facilities on Route 11.

Lewis County General Hospital, which is part of a separate DSRIP initiative, is still in the process of getting plans approved for the construction of an assisted living facility behind the hospital and moving the Copenhagen Health Center into a portion of Copenhagen Central School.

The most significant economic development over the past few years has been the housing boom within the areas surrounding Fort Drum, including Watertown, because of a severe housing shortage that had soldiers living as far away as suburban Syracuse.

The area saw an influx of housing projects, including Washington Street Properties’ Arsenal Street Apartments and the Solar Building, Morgan Management’s Preserve at Autumn Ridge, Beaver Meadow Apartments behind Target, Creek Wood Apartments on the north side of Watertown and the historic restoration of downtown Watertown’s Woolworth Building.

The housing peak, though, has passed and housing construction has slowed now that the rental market has been built up.

A Watertown Daily Times article reported that by March 2015 the number of new rental units that were built had already more than doubled the 1,035 units that were recommended by local agencies.

“Housing has matured,” Mr. Alexander said. “Now we have enough, and maybe more than enough.”

Despite worries that the market was overbuilt, damaging property sales, though, Lance M. Evans, executive officer for the Jefferson-Lewis and St. Lawrence County boards of Realtors, said that the it is not all doom and gloom.

“Rental was needed,” he said. “It makes a good mix in the market. They’re in good shape for what they’ve got.”

Property sales have gone down, Mr. Evans said, but real estate agents are adjusting to the new market where more people want to rent, many of whom want to rent single-family homes, opening a market in property management for many agents.

“It’s shifted their focus,” he said.

The vacancy rate is now at the higher end of the average vacancy rate of 6.73 percent, average being between 5 and 7 percent, a healthier rate than the 0.23 percent vacancy rate in 2012.

The majority of people feeling pressure from the housing market, Mr. Evans said, are owners and landlords of older buildings that haven’t been well maintained.

“If the renter perceives it’s a good value for what they’re getting, they’ll stay,” he said.

Housing development has not halted, though, as ongoing projects continue to make progress.

Construction continues St. Lawrence Health Systems’ $20 million health care facility that will house 20 medical offices and four outpatient surgical facilities off Route 11, just north of Canton. The project broke ground in 2015 and is expected to bring additional health care jobs to St. Lawrence County. Photo by Jason Hunter, NNY Business.

Construction continues St. Lawrence Health Systems’ $20 million health care facility that will house 20 medical offices and four outpatient surgical facilities off Route 11, just north of Canton. The project broke ground in 2015 and is expected to bring additional health care jobs to St. Lawrence County. Photo by Jason Hunter, NNY Business.

Washington Street Properties is continuing work on its Washington Manor Apartments, which will include 28 high-end apartments with a mix of studios and two-bedroom units, and restorations are continuing on the company’s Lincoln Building on Public Square, which will feature 20-units of market-rate apartments.

The latest update on COR Development’s Mercy Health Center Redevelopment in March detailed a plan to start the first phase of construction this summer on 30,000 square feet of commercial space and 108 apartments. Overall, the project will house 168 units and a community center.

Morgan Management is still working on plans for its 359-unit townhouse complex off Route 202 after being denied tax exemptions by the Jeferson County IDA.

Workforce development

While economic development has increased over the past five years, a significant challenge remains: it has not translated into sustainable job growth.

“We took a real beating during the recession, especially with manufacturing jobs,” said Cheryl Mayforth, executive director of the Work Place One-Stop Career Center. “The sad part is that we have a difficult time replacing those manufacturers.”

In 2015 the region did not see job growth in the manufacturing sector while it saw a decrease public sector jobs, which makes up about 40 percent of employees in Jefferson County, Ms. Mayforth said.

Construction also saw a large decrease due to the tapering off of Fort Drum and housing projects.

“These are kind of taking a toll on employment,” Ms. Mayforth said. “We’re quite flat.”

Retail, service and hospitality industries are also suffering because the last significant projects in those sectors were several years ago like the hotel development between 2007 and 2009 that saw the construction of the Hilton Garden Inn, Candlewood Suites and the Days Inn in Watertown.

The three sectors that aren’t seeing a downturn are transportation, health care and tourism. Tourism, especially in the Thousand Islands region, has increased jobs since the construction of Clayton’s 1000 Islands Harbor Hotel in 2014, which spurred several new businesses in the area.

The labor force has also seen a 6.8 percent decrease from 50,000 people in the workforce in 2010 to to 46,600 in 2015.
“People have either gotten discouraged and dropped out or they have aged out,” Ms. Mayforth said.

Lack of job growth, though, isn’t the only trial that the north country faces with its workforce. The region lacks workers skilled in the jobs that are available, specifically the middle skill level careers.

“After the recession there was a big change in what employers were looking for,” Ms. Mayforth said. “Employers are looking for those hard skills and they’re finding that difficult.”

The majority of careers, she said, are available in science, technology, engineering and math-related fields and many students are not getting the correct degrees to fill those jobs. A large portion of the middle skill level jobs may not even require a four-year degree, but technical or vocational training instead.

Mr. Alexander said the key to filling this void of skilled workers is to educate students about the opportunities available instead of getting college degrees in fields with no jobs available.

“Educate to the jobs,” he said. “If you want a good income, you have to train for the jobs that are going to be available.”

Even skilled careers in plumbing and similar vocations can lead to higher salaries than recent college graduates typically earn, said Dave Zembiec, deputy CEO of Jefferson County Economic Development.

“It might be less traditional education and more workforce training, but plumbing is a very lucrative field,” he said.

Ms. Mayforth said that solving this problem also requires removing negative stigmas associated with technical training programs like BOCES that educate students in these skills.

“Today’s career in technical education is much more advanced,” she said. “All BOCES programs have industry advisory boards. They constantly meet to determine what they need to do to keep up with the industry.”

Jefferson-Lewis BOCES provides a wide range of programs that include construction, engineering technologies, health services and trade and technical education, which spans auto body repair to welding.

BOCES students leave their programs with college credit, certifications and skills.

Mr. Alexander said it’s a matter of showing students what is available and JCED has spent time speaking with educators and school counselors about presenting students with these options.

The Work Place holds a Career Jam each year for middle schoolers as a hands-on career exploration with representatives from the region’s major business sectors, including agriculture, business, construction, health care, hospitality and tourism, human services and manufacturing.
The 2016 Career Jam is set for 8:30 a.m. to 2 p.m., Thursday, May 19 at the Watertown Fairgrounds Arena & Agricultural Hall.

“Our greatest export is our kids,” Ms. Mayforth said. “That’s why we’re promoting that these are all great careers and they’re all right here. We want them to make good career choices.”

The Future of Economic Development

While economic development agencies have a lot of tools in their toolbox from tax incentives and low-cost financing, the regional IDAs’ strategic plan for future development includes a much more important tool: the north country’s resources.

“It’s increasingly about making connections between the resources you have and the companies you want may be working with,” St. Lawrence County’s Mr. Kelly said.

The region’s focus is developing the sectors that match its resources and attract the companies that need them.

Lewis County’s new economic development marketing campaign, Naturally Lewis, is aimed at encouraging industry based on these resources, which include an able workforce, reasonable labor costs, and well-maintained highways, but also a significant amount of natural resources in water, wind and timber.

Lewis County is looking toward the future with an emphasis on renewable energy production.

“There’s opportunity for more energy production with wind, wood, solar, biomass,” said Mr. Virkler. “That’s something we could do more with in Lewis County.”

Lewis County is already home to one wind farm, the Maple Ridge Wind Farm, the largest in New York, located on the Tug Hill plateau. The wind farm generates between $800,000 and $1.2 million for the town of Martinsville, depending on the year, and about $3.5 million a year for the Lowville school district.

Mr. Virkler said that two new wind projects are in development, the Roaring Brook Wind Farm in Martinsburg and the Copenhagen Wind Farm in Denmark, making Lewis County the wind capital of New York.

Mr. Alexander sees the same future in energy projects, but wind projects in Clayton, Hounsfield and Central Jefferson County face strong opposition.

“We need to trade in on our assets,” he said. “We can develop alternative energies that are needed in big cities.”
The wind projects could generate about $700 million for the county, Mr. Alexander said.

“Those three alone would change the way government makes money in our community,” he said.

Mr. Alexander said agriculture is another industry where the north country could flourish by expanding into the value-added agriculture products market.

“The real money is in value-added,” he said. “If we make a product of that and we make it here.”

Value-added goods range from creating cheese products from dairy like the Kraft-Heinz operation or Homestead Heritage Cheese to honey or other niche products.

A proposed USDA-certified meat processing plant would be a significant addition in this industry, but a location is still being sought after it hit a roadblock at the Jefferson County Corporate Park when Car-Freshner Corp. threatened to move its longtime global headquarters.

The New York Power Authority released an economic development study for St. Lawrence County in December that identified which industries would provide the county the most growth, including agriculture and agribusiness, manufacturing, rural small business and tourism.

St. Lawrence County, though, sees its largest resource in the four universities located in Canton and Potsdam, including Clarkson University, St. Lawrence University, SUNY Potsdam and SUNY Canton.

“The colleges have become increasingly interested in community and economic development,” Mr. Kelly said. “The colleges are going to be a driver because of the different disciplines.”

Clarkson University is home to the Shipley Center for Innovation, which seeks to accelerate the commercialization of Clarkson innovations, foster the exchange of ideas between the campus and industry, and to educate faculty and students for an entrepreneurial workplace, while both Potsdam and Canton have joined Start-Up New York.

Start-Up New York offers new and expanding businesses the opportunity to operate tax-free for 10 years on or near an eligible university, which also provides direct access to research labs, resources, experts in key industries and the ability to recruit a workforce directly from the university.

Since its launch in 2013, only one business has partnered with SUNY Canton — Adirondack Operations LLC — but Empire State Development’s Mr. Zemsky said economic development programs are slow-growing.

“It’s a great continuum for early-stage business,” he said. “It will prove over time to be one of the most powerful tools in our toolbox.”

Although economic development overall may seem slow in the north country, the Mr. Zemsky stressed that the region has a robust strategic plan for its future and if it continues to compete strongly against other regions in the state it will continue to see funding increases.

“I don’t think we’re ever satisfied with where we are,” he said. “That’s why we have this continual push.”

The north country was awarded an additional $50 million Upstate Revitalization Initiative grant on top of the regional council awards in December.

Another $10 million will be awarded to each region as part $100 million Downtown Revitalization Initiative announced in Gov. Andrew M. Cuomo’s 2016 State of the State Address. The Regional Economic Development Council will recommend a regional neighborhood for investment.

“The north country has some of the most significant improvements of any area in New York,” said Mr. Zemsky. “It affords a really eclectic and diverse mix of lifestyle and industry.”

Karee Magee is a magazine associate for NNY Magazines. Contact her at kmagee@wdt.net or 661-2381.