Why I am Considering Selling Plainville Turkey Farm:

Why Entrepreneurs, Catalysts to Jobs, Higher Wages, & Economic Growth,
Flee Upstate NY; and Solutions to This Problem

September 30, 2004

     Drop a frog into boiling water, and I am told it jumps out. Place a frog into comfortable water, raise the temperature slowly, and it boils to death. The data on Upstate NY, which I will detail shortly, is clear: Our standards of living are declining relative to other US residents. We are slowly boiling to death.

     So why is a Central New York entrepreneur known for his turkey business using frog analogies? That’s simple: You know all the turkey jokes and what New York State government is doing to Upstate New York is no laughing matter.

     Upstate NY per capita income is 11% below the national average, while our state and local per capita tax burden is 48% above the national average. Our dysfunctional state leadership makes operating a manufacturing business, which competes with out-of-state businesses a constant swim upstream. And our elected representatives in Albany have turned the potentially fresh water of representative democracy into the kind of muck only frogs would find attractive.

Natural Laws

     As water flows downhill, capital and young talent will flow to where it earns the greatest return. Unfortunately for those of us who live in Upstate NY in 2004 under current Albany leadership, this means capital, young talent, high paying jobs, and the tax base flows out of Upstate NY to other states.

     Similarly, people, in need and able to choose, live where the benefits are the greatest. Again unfortunately for those of us who live in Upstate NY in 2004, those not working – the unemployed, injured, chronically sick, and retired will comprise an ever larger proportion of the population.

     In such an environment, businesses in other states will continue to gradually put businesses in this state out of business and the Upstate economy will loose relative to other states.

     A region or business must benchmark its performance against competing regions. The leadership in Albany does not do this. Our leaders go merrily along, securing their political career by serving special interests, taking special interest money, and using their power to control our representatives and the elective process.


Plainville Farms

     Employer workers’ compensation, health insurance, energy, and property tax costs are significantly more than in all other states. My best estimate is that they are at least $600,000 more each year for our business than they would be in other states.

     Being the sixth generation to operate our farm and faced with the prospect of saddling my children with a lifetime of swimming upstream, I decided to consider selling our business when contacted by an interested party. After researching the sale and prior to making a final decision, I decided I should first work to improve the state leadership and communicate the reasons for considering a sale to our team members and community.

     Plainville Turkey Farm grew its sales 15% last year and did in excess of $20 million in sales. By many accounts the company produces the finest turkey products in the world and has numerous chains waiting for its product. Plainville employs 165 people and invests some $1 million in new plant and equipment each year. Plainville Farms has spawned three other businesses that do another $20 million in sales and employ another 230 people. Over the years, Plainville has given hundreds of thousands of dollars to NYS educational institutions and charities.

     Yet, because Plainville Farms is in New York State, our costs are much higher than for our competitors. The extra $600,000 spent each year as a result of being in NYS could be used to better compensate Plainville team members and/or expand the business and employ more people. In researching a sale, we learned that many businesses which would normally be interested in us were not, because of the NYS location. We found that if our business was located in any of 40 other states it would sell for approximately 30% more than it would in NYS.

     The findings from a recent Metro Development Agency study indicated that Central New York had everything it needed to grow economically except entrepreneurs and investment capital. This was no surprise to me, but a tremendous revelation to many government leaders. The amazing irony, since the study, is rather than change the policies that drive entrepreneurs from Upstate NY, Albany is funding programs to train entrepreneurs. While some NYS trained entrepreneurs will undoubtedly stay in NYS, many will flee upon realizing Upstate NY’s business conditions relative to other states. Most likely, Upstate NY tax dollars are now being used to train people who will
move to other states and compete against the NYS businesses that remain. Austin, Texas and Denver, Colorado did not become entrepreneur and investment capital hotbeds by training entrepreneurs; they became magnets by having policies that allow businesses to thrive.

     No decision has been made on selling Plainville Farms yet, and most CEOs don’t publicly think out-loud. I am publicly thinking out-loud, because the business climate in NYS weighs heavily on my decision. I felt an entrepreneur’s thinking would be instructive to others, and I felt morally obligated to advance common sense solutions to NYS economic woes, prior to making any sell decision.


The Consequences of Albany’s Policies

     For the last 10 plus years, the leadership of New York State has been pathetic. The governor and senate and assembly majority leaders have:

1) Hijacked our representative democracy,

2) Implemented policies that significantly decreased Upstate New York’s per capita income relative to the rest of the country,

3) Implemented policies that raised workers’ compensation, health insurance, and energy costs to such an extent that hundreds of thousands of good paying jobs fled New York State,

4) Failed to adequately fund inner city schools and placed millions of youth in jeopardy,

5) Raised civil service pensions and Medicaid benefits to unsustainable levels, forcing unaffordable property and sales tax increases,

6) Not delivered an on-time budget,

7) Promoted state-sponsored gambling to cover budget shortfalls resulting from the leadership’s irresponsible policies, and

8) Implemented policies that cause our youth to flee New York State.

The Facts

*1983-2002 data

     From 1990-2000, Upstate NY’s population grew at less than one-twelfth the national average. Sadder is the fact that 30% of the new residents were prisoners! Between 1990 and 2002, 1.7 million people moved out of Upstate. Thirty-three percent of those leaving moved to cold climates.

     Upstate NY’s population is now made up of proportionally more seniors and fewer people between the ages of 20-30 than it was 20 years ago. Nationally, the proportion of the population over 65 declined, while in Upstate NY it grew. The aging population, coupled with the fact that New York State has the most expensive Medicaid plan in the country, is a recipe for rapidly escalating taxes. New York taxpayers pay 50% more for Medicaid than the next highest state. The average NYS Medicaid recipient receives $7,000 per year versus a national average for large states of $4,600. In Onondaga County 1 in 17 people are on Medicaid, versus 1 in 20 in other states. In Onondaga County, Medicaid costs have increased 42% in three years, from $55 million in 2001 to $78 million in 2004.

     The situation is analogous with regard to civil service pensions. In Onondaga County, state mandated county pension costs have moved from $1 million in 2001 to $24 million in 2004. NYS is requiring taxpayers, many who lost some one third of their 401(k) and other retirement investments in the 2000-2003 stock market declines, to make up the civil pension losses for the same period. Both the county portions of the Medicaid and civil pension increases are being made up with higher property and sales taxes. The generous state pension benefits, along with an unusually high number of local government employees (63/1000 versus 49/1000 people nationally), create a $4 billion a year economic drag on the Upstate economy. The bottom line is that proportionally more people are receiving extremely generous benefits that fewer people are providing.

     Personal income adjusted for inflation in the 1990’s increased a mere 9% in Upstate while it grew 29% nationally. Not only do we have lower incomes Upstate, but we pay far higher taxes. In 2002, NYS had the highest state and local taxes on personal income of all 50 states. State and local taxes were $4,645 per capita in NYS and $3,149 on average across the country.

     From 1990-2000, NYS lost 30% of its manufacturing jobs. NYS lost these jobs at a rate 4 times the national average. Since 2000, NYS has lost another 18% of its manufacturing jobs. In fourteen years, NYS has given up more than 530,000 of its highest paying jobs. In the 1990’s, while the nation added 37% more high skilled manufacturing jobs, NYS has lost 14% of the high skilled manufacturing jobs it had.

     Relatively high Workers’ Compensation costs are one of the reasons why manufacturers leave NYS. The National Council on Compensation Insurance estimated the average cost of a worker’s compensation case in NYS to be $11,793 or 72% above the national average.

     In 2002, NYS manufacturers employed 805,200, or one of every six people employed in the state. Yet, manufacturing is far more significant than this, as manufacturers create 2.67 other jobs with contractors and people who provide services to their employees in the retail and not-for-profit sectors. Thus, directly and indirectly manufacturers still provide Upstate NY with 49.6% of all of its jobs.

     These are the facts. This is the state of Upstate over which our leaders in Albany preside. This is not the Upstate either you or I want. Yet, this is the Upstate our governor, senate leader, and assembly leader policies have created. If leading the Upstate economy was an athletic competition among the 50 states, Governor Pataki’s, Senator Bruno’s, and Assemblyman Silver’s record would be 0-49.


The Absolute Rule of Three

     The genius of a representative democracy is twofold. First, it provides a system of checks so no interest is over represented. Second, it provides a feedback system, so all interests are represented.

     In NYS, the senate and assembly leaders have destroyed representative democracy. They have done this by controlling the committee chairships and budgets, state campaign funds, the budgets for members’ staffs, and member budget line items. The leadership uses all of these tools to reward legislators who support their positions, and harm, in a relative sense, those who oppose them.

     Admittedly, NYS is difficult to govern, as the senate tends to reflect suburban and rural interests while the assembly tends to reflect urban interests. Policies and laws, appropriate for areas with high population densities, are often inappropriate for areas with low population densities. For example, taxing energy at higher rates than other states to raise government revenue does little harm in areas with high population densities like NY City, as so little energy is used on a per capita basis in the employment of the city’s population. At the same time, taxing energy at high rates in Upstate NY is extremely counterproductive, as the taxes make its manufacturers less competitive with their counterparts in other states. Similarly, policies and laws should allow workers’ compensation, Medicaid benefits, and civil service pensions, to be higher in New York City as costs of living are higher. Yet, rather than recognize the different circumstances and creatively craft policies and laws to deal with them, our Albany leaders give no consideration to those they do not represent and fight like children to obtain exactly what they need for the special interests they represent.

     Some would fault NYS’s powerful special interests like the teachers, heath care, and civil service unions, and the trial lawyers. These groups provide a large share of the funds to elect Albany’s leadership and their supporters. In the short run, these groups’ interests are antithetical to business interests. However, this is not the case in the long run. It would be helpful to their constituents’ futures, and all New Yorkers, if these very powerful groups would support the restoration of the democratic process in Albany and policies to improve the business climate. In the long run, a growing population, increasing personal income, and a growing tax base are in their interests.

     Personally, I do not blame the special interest groups for trying to influence Albany, as the public does not entrust these groups with the leadership of the state. These groups are simply looking after their members’ interests. To me the fault lies mostly with the senate and assembly leaders for not respecting the democracy process. Fault also lies with the business people like me for poorly representing our interests, and with voters, like me, for continuously reelecting our sheepish representatives.


Fire Representatives Who Support the Absolute Rule
of the Senate & Majority Leaders

     Most people are as frustrated as I am about New York State’s leadership, but no one knows what to do about it. After much thought, I suggest the following. With your help, we will send thousands of emails and letters during the month of October to our Albany leaders. We will remind them for whom they work. We will insist they restore democracy, pass into law a fiscal discipline, and hold them accountable to the improvement of people’s well being in all regions of the state. We will remind them that creating an environment attractive to business is the basis for good paying jobs, excellent schools, the retention of young people within the state, and sustainable Medicaid benefits and public pensions. They seem to be woefully oblivious of this common sense fact. They seem to think special deals, which retain and attract a handful of businesses, are sufficient substitutes. In addition, we will send thousands of emails and letters to the Republican and Democratic Party Committees asking them to nominate common, plain speaking candidates with win-win philosophies, who are committed to restoring the democratic process. We will ask them to nominate good people from all walks of life, who are willing to serve 4-6 years, rather than the clever career politicians, who acquiesce to the leadership and their corruption of the democratic process.

     Our representative feedback mechanism is broken. Out of control government and mandated public and private entitlements cause investment capital, entrepreneurs, and youth to flee.

     We must not allow three people to usurp our state’s democratic process. The governor and the senate and assembly leaders will misuse their power and imperil our future for only as long as we allow it. It will take only 5 minutes to go to FreeNYS.org and to email simultaneously 337 government leaders and party committee chairs. Five minutes of your time now, and thirty minutes of your time to vote at each election, can positively change the leadership of NYS.

     New York State has the natural resources, human capital, educational institutions, infrastructure, and natural beauty to be among the best places to live in the United States. We only lack a functioning democracy, fiscal integrity and discipline, and leadership that is accountable to standards of performance. We only lack leadership that seeks first to understand, thinks win-win, and synergistically serves their constituents. Upon correcting the 10 issues outlined above, entrepreneurs and high paying jobs would flock to NYS and the tax base and property values would increase dramatically. New York State would become the place to be.

Mark W. Bitz    

President    

Plainville Farms    

Home   |   Initiatives   |   Facts & Links