XYLON

This past year we completed the sale of 18 North Main Street to Xylon and the Industrial Development Agency put together a package that allowed us to hold the mortgage for ten years and also set aside $50,000 to match renovations to the building. It is expected that Xylon will begin operation during the year 2007.

GRAY MANUFACTURING

In April 2007, we completed our negotiations and leased the new building in the South Yards to Gray Manufacturing. Gray currently is operating and renovating transit cars from the Buffalo Transit Authority.

GATES ROCKWELL BUILDING

This past year, Erie Line Antiques has brought in an additional tenant, which is an auction service. They have two of the floors completely filled with antiques. The IDA, this year authorized the updating of the sprinkler system to a dry system which was completed in February of this year.

SOUTH YARDS PROJECT

The South Yards Project was brought to a completion, audits were completed, the financing finished and we were notified by the Economic Development Administration that it was one of the top projects in the United States and is being considered for an award. We also received from Senator George Winner, $125,000 which will be used to extend the rail line in the South Yards and install a new switch which will provide better rail access to the South Yards.

PAAA

In February 2007, the IDA formally adopted the Public Authority Accountability Act Policies, including a personnel policy. These policies will allow us to be more accountable and more transparent in the operations of the Agency, which include procurement, ethics, etc. The personnel policies also provide for the appointment of a governance committee, personnel committee, and an audit committee, which have been appointed by Chairman Nasca.

ALSTOM

This year we worked with Alstom to provide the area they needed for parking which was the former satellite building and we settled an encroachment, which was hindering the development of it, by Andy Butler. Butler has removed his encroachment off the property to allow Alstom to complete the parking lot. Alstom has also put together a program to invest $6 million in new facilities down in the area to better allow them to load and unload transit cars. The IDA authorized the project and granted tax-exempt status for the project through March 31, 2008.

TRIKEENAN

Trikeenan has occupied the former Steuben Tile building in the Shawmut Park and is producing tiles and exporting tiles to Europe. They are working diligently to create additional sales which will allow the company to operate at full capacity. Currently they are operating with three shifts.

EMPIRE ZONE

The Hornell Empire Zone continued to support the recruitment and expansion of businesses through the program’s tax credits and incentives. The Zone worked closely with the IDA for recruitment of Gray Manufacturing and re-location to the South Yards Industrial Park. Gray Manufacturing’s expansion from startup to full operations will expand the City’s transit cluster and further enhance the area’s manufacturing base.

The Zone’s Development Plan was approved by Empire State Development in December 2006, and at year’s end the Zone had more than 60 certified businesses. During 2006-07, the Zone certified nine businesses, including three in the City of Hornell. The Zone also obtained approval of the Hornell Area YMCA’s Community Development Project and allocated more than

$1 mil. of Empire Zone credits to support the capital fund raising campaign. The Zone also supported two previously approved community development projects. The Zone also submitted a request for eligibility for a Regionally Significant Project for Dresser Rand’s Painted Post plant site. The project has been supported by Empire State Development and when completed will be the Zone’s first Regionally Significant Project. The Zone sponsored a technical assistance workshop with the NYS Department of Taxation and Finance to assist businesses and finance professionals to access Empire Zone credits.

The Zone is administered by the IDA and the City of Hornell is the governing municipality. The Zone had a seven member Administrative Board, recently expanded to eight members to include a representative from the County of Steuben

EXECUTIVE DIRECTOR’S COMMENTS

This past year allowed us to review the operations of the Agency. We brought on Jim Rahmlow to assist us in our bookkeeping. Adopting our new policies gives us better direction and a more efficient method of operation. It has been a busy year and we have worked with several prospects. Shawn Hogan, set up a meeting with the IDA and Alstom with Senators Clinton and Schumer regarding Alstom’s upcoming extension of contracts with the Metropolitan Transit Authority.

I also testified in Buffalo, before the Senate Committee on small governments regarding IDA reform. The IDA reforms which were being pushed by the State did not happen this year, however, we must guard against the future when they diminish the ability of an IDA to do the projects like we have done in Hornell.

I look forward to this coming year as a banner year for our Agency and I appreciate the opportunity to serve you. Thank you.