Sunday, March 11, 2007

All washed up?

With every market downtrend on Wall Street, Saratoga County’s plan to tap the Hudson seems a bit more like an attempt to slice a sliver off that pie in the sky. As has been reported for the past two months or so, chipmaker Advanced Micro Devices Inc. looks to be in a bit of a corporate boondoggle, thanks to their ambitious flying-by-the-seat-of-the-pants business practices.

AMD has less than two years to get a shovel in the ground for their chip plant in Malta before the more than $1.1 billion worth of funding and tax credits from the state vanishes into thin air. And if that funding does evaporate, so does the county’s most thirsty customer. Were this to happen, the result would be a burdensome water pipeline that would be too expensive to tap into.

True, the county NEEDS water to push development any further up the Northway. And the city’s plan to tap Saratoga Lake won’t produce nearly the volume the county Legislature envisions the area needing to push Wilton’s urban sprawl northward. And true, the plan to extend a virtual aorta through the county won’t get any cheaper in the future.

But when the whole plan is based on another plan that seems to be teetering on a market whim, it seems as though there’s a horse-before-the-cart situation at hand. No county water would mean there can’t be a county chip plant; but no county chip plant would mean a county water plan that will need to be bailed out by either Clifton Park or Saratoga Springs or both. There are also other issues that could face the plan to tap the Hudson, such as how to best get the miles of land easments needed to put a pipe in the ground.

As lucrative as AMD’s plan may seem from the outset, the language being used by market analysts is anything but definitive and far from encouraging. As AMD prepares to pitch the plan this year to its corporate Board of Directors, the company’s stock has lost nearly 60 percent of its share value –an estimated $10 billion worth of shareholder wealth.

Some blue chip investors might see this as a pittance for a company that has recently made a significant dent in a chip market dominated by Intel. Most would agree, however, the sharp decline as of late does not bode well for AMD’s almost perpetual expansion. The true test will come later this year, when AMD releases its new products; as noted in a recent Associated Press report, Intel has already released its four-core chip, meaning AMD’s product must be cheaper and better to right some of the company’s recent downtrend.

In the mean time, the county should really consider alternate and more market-safe methods to bringing AMD the water they thirst at a cheaper cost than $2.05 per 1,000 gallons. Were tapping Schenectady’s Great Flats aquifer a significantly less costly endeavor, it might be investigating for the county.

But with more than a billion ducats on the line, AMD’s board probably won’t take it much into consideration in their decision to build the new chip plant. What they will take into consideration is whether or not the market is robust enough to support a $3.2 billion plant, even if the state is picking up nearly a third of the tab. That same plant might be just as cheap to build in the more tax-friendly south or perhaps Malaysia.

Unfortunately, the time for investigating alternatives has long since passed, and now the county must fly by the seat of its pants, just like AMD has been prone to do on the market. So until the first chip moves off the production line, there should be a fair number of supervisors preparing a mitigation plan to explain how a $67 million water plant with no users won’t have a dreadful impact on the county’s finances.

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