A Wellsville manufacturer that once dominated a sector of the coal industry is making the shift to clean energy, revitalizing one of Allegany County's largest employers in the process.
Arvos Ljungström is in the midst of Phase 1 of a $10.7 million expansion project to handle new work in wind energy. The company earned a contract last fall to service the Sunrise Wind offshore wind project, which is expected to generate over 900 megawatts and power 600,000 New York homes.
Ljungström will manufacture steel components for the foundations of wind turbines that will sit 30 miles east of Montauk Point, off Long Island.
The project marks quite a shift for Ljungström, a company that once claimed 90% of the global market for air preheaters utilized at coal-burning power plants. Ljungström was forced to pivot with the decline of the coal industry. The percentage of U.S. electricity generated by coal has essentially been cut in half over the last decade, fueled by a push for clean energy.
Ljungström created a new department, Custom Manufacturing Solutions, to explore new product lines in renewables.
In response, Ljungström plans to hire approximately 60 people between May and October, with another 60 hires expected in 2023. The work could eventually lead to the hiring of "upwards of another 100," Greg Muscato, Ljungström's Vice President and Chief Human Resource Officer, recently told the Allegany County IDA.
Many of the new hires will be welders responsible for fabricating the materials that will make the wind turbines stand tall above the sea.
"Our biggest capacity is what we do with steel," said Muscato. "We're a fabrication shop that can take a sheet of 10x20 foot steel and we can bend it, cut it up to six inches thick, we can weld it, machine it, whatever we need to do, and then we can lift it because we've got heavy lifting capabilities as well."
Jeff Gallo, Ljungström's Director of Manufacturing Technologies, said the company's goal is to have the ability to manufacture "anything for the offshore wind market that can actually be shipped."
Factory floor space that was once dedicated to coal products is being converted to offshore wind. Gallo said Ljungström expects to start making prototypes and test pieces in July, with deliveries starting in December.
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Financial incentives will impact local tax base
Ljungström was recently awarded a financial assistance package from the Allegany County IDA to facilitate the development. Most of the improvements will be centered inside Ljungström's existing 253,400 square foot building on Truax Road.
The IDA voted unanimously this month to grant Ljungström tax relief on the project, including sales tax exemptions up to around $1.6 million and a property tax exemption of around $4 million over 15 years. The company will pay no taxes for the first 10 years of the PILOT agreement, ramping back up to a full tax bill over the final five years.
IDA Executive Director Craig Clark said the relief amounts to $300,000 per year spread across the various taxing entities, including the county, town and school district.
The project will create 120 new jobs and retain 130 more for an overall impact of 250, with a total payroll around $13 million, according to the IDA. Clark said the new jobs, primarily welding positions, will be full-time and pay around $40,000 to $50,000.
"This is a big enough project with a big enough impact to the whole community, we feel we have to do something," said Clark.
Two parcels on Ljungström's 36 acre campus on Truax Road were collectively assessed for over $7 million in 2021. While supportive of the project, town supervisor Shad Alsworth noted the loss to the tax base will have to be made up by other taxpayers at a time when two other high-profile properties in Wellsville, the former Dresser-Rand and the Riverwalk Plaza, have sought lower assessments after losing occupancy in recent years.
The reduced assessed value in the town could result in an increase to the tax rate despite flat spending in the budget. Alsworth said county taxpayers will essentially be investing $4 million over 15 years into the Ljungström property.
"This is probably the most promising thing that has ever been brought from the IDA through a PILOT, as far as impact to the community. There's no doubt about that," said Alsworth. "It's just tough to swallow. … We need to bring business and this is unfortunately the cost of doing business."
Officials hope the 250 jobs associated with the project offset the reduction to the tax base as Ljungström employees purchase homes, automobiles, and local goods and services. The company received over $3 million in grants from the state and the Appalachian Regional Commission to support the project and workforce development.
"That's why you invest in manufacturing. It's not just the 130 new jobs, 250 when you put them together, it's what those 250 people are doing buying houses, buying things, generating sales tax," said Clark. "It's the spinoffs. That's a significant impact."
Ljungström traces its lineage in Wellsville back to 1903. While it still produces air preheaters for coal and gas applications, Muscato said the company's path is "on a complete change" to work in the renewable energy field. Ljungström also has a research and development effort underway in carbon capture technology, with pilot projects in Canada and California.
"We're hoping this is the foundation that we're setting hopefully for the next 20 years, to get into this new industry," said Muscato. "There are many more states that will be building these products."
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