GlobalFoundries pegged for $2.5M state incentive

Gov. Peter Shumlin intends to give $2.5 million in state incentives to GlobalFoundries Inc., the company that plans to take over IBM’s computer chip operations in Essex Junction, according to a member of his administration.

The money is the amount left in the Vermont Enterprise Fund, a budget appropriation that Shumlin pushed to include last year. It was originally a $4.5 million pool that he said would help encourage large employers to remain or relocate in Vermont.

The fund was later reduced by almost $1 million during budget negotiations to address a shortfall in state revenue. The governor’s budget for the coming fiscal year includes another $1 million reduction of the fund, this time to help fill a budget gap in the fiscal year 2016. That brings the total down to $2.5 million, said Justin Johnson, the state’s Secretary of Administration.

“It’s essentially committed to IBM/GlobalFoundries, but the details are still being worked out,” Johnson said Monday.

The Vermont Enterprise Fund wasn’t created to benefit a single company, Johnson said. But when Shumlin announced its allocation in June, it coincided with growing concerns about International Business Machines Inc. selling or relocating its chip-making plant, which accounts for most of the company’s remaining 4,000 or so workers in Vermont.

“This conversation is really focused on what we can do there to make sure the transfer to GlobalFoundries will go smoothly,” Johnson said.

In October, GlobalFoundries announced that it would take over IBM’s chip-making operation. The company received $1.5 billion from IBM to become the big-computer company’s exclusive supplier of high-powered semiconductors for 10 years. If the deal receives still-awaited federal regulatory approval, GlobalFoundries will acquire IBM’s top nanotechnology scientists and intellectual property that would give it “one of the largest semiconductor patent portfolios in the world,” the company wrote in its announcement of the deal.

With U.S. headquarters in Santa Clara, Calif., GlobalFoundries is a division of Mubadala Development Co., an investment corporation owned by the government of Abu Dhabi in the United Arab Emirates. The crown prince of Abu Dhabi is chairman of the Mubadala board of directors, according to its website.

How the money is used and what conditions, if any, GlobalFoundries will have to meet in exchange for it are still not clear. Patricia Moulton, Vermont’s secretary of commerce and community development, is now discussing those parameters, Johnson said. Moulton did not return phone calls Monday seeking comment.

In a press conference on Tuesday, Shumlin said the money will help the state build a relationship with Global Foundries.

“I think there are some things we can do that would be helpful to GlobalFoundries to make sure we keep all the employees at IBM and expand in Vermont,” Shumlin said.

Shumlin said while GlobalFoundries has been very careful about not getting into details with about specific plans and federal approvals might not be in place until next summer, he is encouraged by conversations he’s had with the company. “This is a good deal for Vermont, it’s the right thing to do for us whenever,” the governor said.

“I was scared to death when IBM decided to get out of chip making business that we could have had a terrible outcome for those employees and our state,” Shumlin said. “I’m really heartened by conversations with GlobalFoundries about their intention and plans and capital behind them and the ability to have this be a positive outcome for Vermont.”

Vermont doesn’t have the kind of cash that a state like New York can muster for financial incentives, but state officials can use the Enterprise Fund as a gesture to offer the employer help as a “partner,” Johnson said. The goal is to encourage the company to not only maintain but also build on its highly skilled work force here.

Technology research-and-development jobs can draw other high-tech companies looking for the same quality of workers, Johnson said.

“This is more about looking to the future,” he said. “We’d like them to do their next cool, big thing here and not somewhere else.”

Johnson wasn’t sure whether the fund would continue for future economic incentives after the distribution of its current funds to GlobalFoundries.

“All we have right now is $2.5 million,” he said. “It’s not an ongoing fund in that sense.”