WAS THE SENATOR WAVING to the fish or blessing them? Neither, said our photo caption. U.S. Senator Charles Schumer, touring an old Greenport factory in September 2011, had tossed a handful of fish food into one of the many fish tanks of a promising new company called Local Ocean. The senator, hand outstretched, smiled as fish roiled the water. Maybe the fish were happy too.
Nobody answered the phone at Local Ocean’s office in Manhattan this week. About 19 people have already been laid off at the Greenport site, where a few workers remain to feed the fish. State Environmental Conservation Police are monitoring the situation. Officials worry what might happen if thousands of fish in the tanks are left to die.
The company couldn’t pay its mortgage. It’s obviously not selling fish. Maybe somebody wants to buy it. Maybe not. And along with the possibility of a big mess to clean up, some folks have begun to wonder how this might affect county taxpayers.
Local Ocean built its aquaculture facility here four years ago. The owners said it would be a self-contained system for raising saltwater fish destined for restaurants and markets. In addition to its plans to create jobs here, the company promised that its patented fish farm process would produce no waste discharge–nothing dumped in the ground, the river or local sewage treatment facilities. Until now it appears to have lived up to that startling claim.
The county, through the Economic Development Corporation and the Industrial Development Agency, did what it could to encourage Local Ocean to locate here, offering what’s called a pilot agreement, an acronym for payment in lieu of taxes, which takes the property off the tax rolls for a period of time. The county also granted the company an exemption from sales tax on materials used to upgrade its factory.
Municipalities throughout the state have used these types of incentives for years to attract new businesses. The incentives can be revoked if the business fails to perform and the municipality has the will to enforce its rules.
Local Ocean looked like it could succeed. It got plenty of media attention for adopting an environmentally responsible way to raise a healthy and healthful, protein-rich food source… indoors, and it eventually obtained approval to sell the product commercially for humans to eat. But the business plan was flawed in key ways, though the county could not have known that.
Local Ocean fish farm process couldn’t withstand a legal challenge in the form of a patent infringement suit brought by an Israeli firm. That left the Greenport company without the right to sell its fish unless it worked out a deal with the patent holder or successfully appealed the suit. With big debts, no way to sell its fish and shaky prospects for its product the company seems to have folded.
What’s the financial exposure of county taxpayers from the assistance made available to Local Ocean? “There is none,” said Ken Flood, executive director of the county Economic Development Corp. among other roles. When the company missed its pilot agreement payments a while back, the county put the property back on the tax rolls and eventually foreclosed. The factory will be auctioned next week. We probably missed out on some sales tax, but local suppliers got their money and people were employed using the tax-free materials to upgrade the building. The lingering question is: Who pays to dispose of the fish?
The county has heeded the red flag raised by the collapse of Local Ocean. Officials have has instituted yearly, on-site inspections of the businesses that enjoy county benefits–there are about 10 of them now–to determine whether they are living up to their agreements with the county. It’s unsettling that this inspection regime was not already in place, but at least local development agencies seem to have learned something.
And yet it’s hard to imagine anything the county could do to predict the failure of a future Local Ocean, because failure is the fate of most new businesses. And some of the county’s own development ideas might generously be called screwy. The Local Ocean saga is not cause to restrict or reduce incentives for entrepreneurs wanting to do business here. It’s a reason to be proud that we did risk a little to support an innovative idea. Don’t fault the county officials for this investment; better to demand they tell us what bright new business ideas they have in the pipeline.