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June 9, 2013

Tweaks urged for trade zone

— A consultant hired to help develop a foreign trade zone for Cambria County is recommending that the county commissioners scale back their original plans.

Although José Latour of Miami says the foreign trade zone is a good idea and promises to attract foreign investment and new jobs, two other incentive programs are not worth pursuing.

The information was included in a feasibility study commissioned by Johnstown-Cambria County Airport Authority that was obtained by The Tribune-Democrat.

A foreign trade zone centered at John Murtha Johnstown-Cambria County Airport would allow foreign companies to delay or reduce duty payments on products brought to the United States for final manufacturing or specialized alterations that add value.

“Cambria County is strongly advised to establish a foreign trade zone under its jurisdiction,” Latour wrote, citing a new federal rule he said makes the zone “perfect for Cambria County.”

The change streamlines paperwork for designating sub-zones of the county’s FTZ, allowing companies to set up shop in different areas.

Latour also cites what he called the “remarkable” speed of negotiations for a joint venture between two local companies and an Argentine wine producer.

The agreement announced in February will allow E&M Bottling to set up a bottling operation in a Vo-Tech Drive facility that is already inspected for food and beverage production.

The building is owned by W.C. McQuaide Inc., which is providing transportation and logistics support for Tapiz vineyards’ exported barrels of wine.  

Latour said the deal proves the county’s value as a foreign trade zone.

“I have been involved in similar negotiations for two decades and have never witnessed such rapid success,” he wrote.

But the county’s proposal for a federal EB-5 center should be put on hold, Latour recommended. The Citizenship and Immigration Services EB-5 program provides work visas for foreign investors who start new businesses or buy existing ones and employ local workers.

Because Cambria County’s foreign trade zone business activities will not be centered around a single large project, the benefits would not justify the $150,000 to $200,000 for setting up an EB-5, Latour wrote. Smaller investors looking at Cambria County can use another regional center.

The county also is discouraged from spending money for historically underutilized business zones, also known as HUBZones. Instead, the county should help potential businesses be aware of the opportunity so they can pay for the certification themselves.

Finally, Latour said the county should look into the U.S. Treasury’s New Market Tax Credit funding. The program gives tax credits to those investing in low income communities. Latour said he believes there is an opportunity for the county, but recommended putting off the initiative until the Foreign Trade Zone is established and defined.

He noted only “handful” of law firms are qualified to establish the New Market program, and estimated it will cost at least $40,000.

County commissioners have proposed creating a new economic-development authority to launch and run the foreign trade zone, but critics of Cambria County point to services already available through other programs.

Business leaders William Polacek and Mark Pasquerilla each suggested that Johnstown Area Regional Industries could take on the job.

“My big thing is that JARI has had a good track record in creating jobs,” Pasquerilla said.

President Commissioner Doug Lengenfelder said the new organization will be using existing organizations instead of hiring its own staff.

In an exclusive interview, Lengenfelder told The Tribune-Democrat that plans call for JARI to essentially act as the new agency's workforce, using its expertise to guide new companies through the maze of starting up operations.

Another yet-to-be identified organization will serve as the new authority's executive director, managing its day-to-day operations.

Because negotiations were not final, Lengenfelder would not name the organization publicly. He identified it as being associated with a university in Pennsylvania.

That leaves the overseeing board members free to beat the bushes for prospective foreign operations that could benefit from the program, he said.

“This (new) organization doesn't have the ability or expertise to get a business started in this county,” Lengenfelder said.

“That’s where JARI comes in. When the economic development authority gets someone to the point where they say they want to come to Cambria County, they turn them over to JARI to help them with all that type of details of starting up.”

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