Gotham Gazette Gotham Gazette is an online publication covering New York policy and politics as well as news on public safety, transportation, education, finance and more. http://www.gothamgazette.com/component/tags/tag/empire-state-development-corporation 2018-08-19T10:20:55+00:00 Webmaster webmaster@gothamgazette.com State-Backed, Scandal-Plagued Entities Seek New Chapter 2018-06-12T04:00:00+00:00 2018-06-12T04:00:00+00:00 http://www.gothamgazette.com/?id=7732:state-backed-scandal-plagued-entities-seek-new-chapter Ben Max <p><img src="http://www.gothamgazette.com/images/graphics/2018/govcuomo-roswell.jpg" alt="govcuomo roswell" width="600" height="400" /></p> <p>Howard Zemsky, of ESD, in Buffalo (photo via the Governor's office)</p> <hr /> <p>Alain Kaloyeros, the former head of SUNY Polytechnic Institute heading to trial this month for alleged corruption, was known for his luxury sports cars, self-aggrandizing boasts, and awkward social media posts.</p> <p>The new face of the state’s tech development projects, Doug Grose, strikes a different image: subdued, old-school business executive.</p> <p>Coming after Kaloyeros’ fall from grace and amid twin corruption trials, Grose’s appointment seems aimed at assuring taxpayers that state government is turning a new page when it comes to investing public funds in ambitious research and business ventures.</p> <p>Last month, Grose became president of the Fort Schuyler and Fuller Road management corporations -- the state entities at the center of the Kaloyeros bid-rigging and bribery case. The two nonprofits have doled out state grants and overseen projects spearheaded by Kaloyeros, who was empowered by Governor Andrew Cuomo, and will be merged to form a new organization, called NY CREATES. Grose will be president of that nonprofit body once the ongoing process is complete.</p> <p>Empire State Development, the state’s main economic development agency, partnered with SUNY to form NY CREATES -- or New York Center for Research, Economic Advancement, Technology, Engineering and Science. The new organization filed its certificate of incorporation with the state last month and plans to file for 501(c)3 status, according to an ESD spokesperson. Since shortly after the indictments of Kaloyeros and other top Cuomo aides, associates, and donors, ESD was charged with overseeing the nonprofits associated with SUNY and the governor’s extensive economic development programming. It was a move announced by the governor in response to the scandals involving some of his signature projects.</p> <p>After the November 2016 indictments of Kaloyeros, former Cuomo top aide and campaign manager Joseph Percoco, and others, Fort Schuyler and Fuller Road became synonymous with corruption, leading to the effort to rebrand and reorganize.</p> <p>Fort Schuyler awarded multimillion-dollar contracts that Kaloyeros allegedly helped rig in 2013 so they went to major Cuomo campaign donors. Along with Fuller Road, which was not named in the Kaloyeros indictment, Fort Schuyler has overseen hundreds of millions of dollars in state investment in the governor’s economic development programs, namely the Buffalo Billion. Some of them have been associated with SUNY Polytechnic, an advanced science research institution founded by Kaloyeros, a physicist.</p> <p>As NY CREATES launches and seeks to attract both trust and partners, Grose is seen at ESD and elsewhere as the right person for the job. He insists NY CREATES will bring transparency to the economic development programs under its umbrella. Those range from a <a href="http://www.ftsmc.org/utica/" target="_blank" rel="noopener">$1.5-billion computer chip center in Utica</a> to a sprawling <a href="http://www.frmc.us/statewide-facilities/" target="_blank" rel="noopener">$24-billion nanotechnology complex at SUNY Polytechnic in Albany</a>.</p> <p>“How I want to run this has the elements of a business, with sound fiscal and legal controls and a focus on return on investment,” Grose told Gotham Gazette in an interview.</p> <p>Grose’s long resume includes a stint as executive vice president of NanoTech Resources in 2004. Kaloyeros, who oversaw growth in the nanotech complex at SUNY Polytechnic, was Grose’s boss at the time.</p> <p>“My leadership style is quite different,” Grose said of Kaloyeros. “It’s much more, I’ll say, business-based, and you got rewarded or you got in trouble if you didn’t provide the return on investment made.”</p> <p>Grose, 68, came out of retirement to helm NY CREATES, which he said will pay him $280,000 a year. ESD and SUNY leaders and the former president of Fort Schuyler and Fuller Road, Bob Megna, worked to draft Grose. His job will have a tighter focus than that of Kaloyeros, who made nearly $1 million per year helming all of SUNY Polytechnic.</p> <p>“I didn’t come here, honestly, for financial reasons. I came here because of an allegiance that I have to New York State,” said Grose, who was raised in the Mohawk Valley and earned multiple degrees from Rensselaer Polytechnic Institute.</p> <p>He previously held numerous roles in the upstate tech industry, often overseeing public-private partnerships.</p> <p>In 1979, he began a more than 20-year-long run at IBM, where he was in charge of chip production at labs in East Fishkill and Vermont, <a href="https://www.timesunion.com/business/article/Return-to-trust-in-tech-school-12891469.php" target="_blank" rel="noopener">according to the Times Union</a>. He came back to the company in 2004, helping lay the groundwork for a public-private partnership that has seen IBM establish <a href="https://www.timesunion.com/business/article/SUNY-Poly-signs-new-leases-with-IBM-Research-12711815.php" target="_blank" rel="noopener">a large lab</a> at SUNY Polytechnic.</p> <p>Grose is also a former CEO of GlobalFoundries, one of the biggest semiconductor makers in the world. It began receiving <a href="https://www.timesunion.com/7day-business/article/GlobalFoundries-may-be-getting-more-NYS-funding-11172783.php" target="_blank" rel="noopener">state funds and tax breaks</a> in 2006, under then-Governor George Pataki.</p> <p>Empire State Development touts GlobalFoundries as a success story. The company, which runs <a href="https://www.forbes.com/sites/patrickmoorhead/2018/02/04/the-u-s-already-has-bleeding-edge-technology-manufacturing-with-globalfoundries-fab-8-in-malta-ny/#3c0d55a923af" target="_blank" rel="noopener">a computer chip lab called Fab 8</a> in Saratoga County, has created 3,500 jobs, according to the Albany-based Center for Economic Growth.</p> <p>Grose has kept a low profile throughout his career. That marks a strong contrast with Kaloyeros, who was was known to <a href="http://www.gothamgazette.com/5912-alain-kaloyeros-powerful-centerpiece-of-" target="_blank" rel="noopener">speed around Albany</a> in a Ferrari Spider. “Dr. Nano,” as his license plate said, made immature Facebook posts and was known for braggadocio, as the New York Times <a href="https://www.nytimes.com/2002/07/26/nyregion/public-lives-behind-a-research-center-a-geek-with-great-cars.html" target="_blank" rel="noopener">pointed out</a> in 2002. After a Gotham Gazette profile in 2015, spurred by reports that SUNY Polytechnic had been subpoenaed, Kaloyeros offered, then rescinded an interview, <a href="http://www.gothamgazette.com/government/5925-buffalo-billion-boss-offers-cancels-interview-claims-threat-of-jail" target="_blank" rel="noopener">citing the “threat of jail.”</a></p> <p>While Grose sought to distinguish his style from that of Kaloyeros, he also had praise for SUNY Polytechnic’s former leader.</p> <p>“He was a visionary in terms of what he wanted to create and he had big ideas,” Grose said of Kaloyeros. “Many of them came true.”</p> <p>Asked about improving transparency into Fort Schuyler and Fuller Road (and, soon, NY CREATES) projects, Grose noted steps that boards of those organizations took before he came on about a month ago.</p> <p>They voted to voluntarily conform to the state’s Freedom of Information Law in 2016 and 2017. <a href="http://nyassembly.gov/leg/?default_fld=&amp;leg_video=&amp;bn=A05854&amp;term=2017&amp;Summary=Y&amp;Actions=Y" target="_blank" rel="noopener">A bill</a> ensuring that FOIL applies to agencies like Fort Schuyler has been introduced in the state Assembly, though it is currently stalled in the Governmental Operations Committee.</p> <p>Cuomo, a Democrat, appoints the head of ESD, currently Howard Zemsky. The governor in the past pushed both more funding through Fort Schuyler and Fuller Road and resisted calls to increase transparency and oversight of their projects. He also appears to have a fairly tight grip over what legislation moves through the Democrat-led Assembly. A variety of accountability measures that have passed the Republican-controlled Senate are <a href="http://www.gothamgazette.com/state/7718-attention-shifts-to-assembly-hesitation-on-accountability-bills-opposed-by-cuomo" target="_blank" rel="noopener">currently stalled</a> in the Assembly.</p> <p>Recent months have seen Fort Schuyler and Fuller Road open their meetings to the public, and they have begun posting <a href="https://www.youtube.com/channel/UCKb1tyhvr9_5h-rWuyvC1vQ" target="_blank" rel="noopener">recordings</a> of their <a href="https://www.youtube.com/channel/UCeIjOusMd8u2u6h1_pHbD8g" target="_blank" rel="noopener">sessions</a> to YouTube.</p> <p>However, hard numbers about Fort Schuyler and Fuller Road projects remain difficult to come by. Their websites do not detail how much money the state has actually invested in their projects so far, and they don’t show proof of job growth -- the stated goal of the those investments. One bill in the accountability agenda that has not moved through the Assembly is for a “database of deals” that would catalog such spending and its results across all state economic development programming.</p> <p>Grose said NY CREATES will dispel the mystery. He said his approach is to make sure “there is no doubt about what an investment may be for and who’s involved and what the result is.” He did not provide specifics for what that will look like.</p> <p>Asked how much debt projects under Fort Schuyler and Fuller Road have accumulated, Grose said, "I can't give you a sense. I have no context where I would say I've seen it all added up." Asked whether it would be fair to say the projects were facing hundreds of millions in debt, Grose replied, "I think that's an accurate portrayal." He added, "It’s related to building facilities in Albany. It’s basically paying back loans to build Albany campus facilities."</p> <p>Cuomo has been keeping his distance from Fort Schuyler and Fuller Road and is yet to comment on NY CREATES. His office did not respond to requests for comment for this article.</p> <p>Shortly after the criminal complaint against Kaloyeros became public, the governor announced that Empire State Development would assume oversight of all the projects under SUNY Polytechnic’s aegis.</p> <p>"I want the taxpayers of New York to know that every dollar is guarded and guarded professionally,” <a href="https://www.bizjournals.com/albany/news/2016/09/23/suny-polys-ongoing-projects-move-to-esd-control.html" target="_blank" rel="noopener">Cuomo said</a> in announcing the move in September of 2016.</p> <p>However, government watchdogs have decried that change -- and the creation of NY CREATES -- as inadequate. To groups like Reinvent Albany, Cuomo is doing too little, too late.</p> <p>“Ultimately, we would look at NY CREATES as shuffling around the deck chairs on the titanically confusing and corruption-prone apparatus that the state has created to hand out tax dollars,” said John Kaehny, executive director of Reinvent Albany, which closely tracks state economic development efforts.</p> <p>He noted that Cuomo has blocked the reform legislation that includes a bill to restore the state comptroller’s power to pre-audit state contracts over $250,000 that flow through SUNY-affiliated nonprofits -- a power that was stripped by Cuomo and the Legislature in the governor’s first year in office, 2011. Comptroller Tom DiNapoli has repeatedly said it should be brought back.</p> <p>“Whatever marginal gain comes out of this is going to be so tiny as not to warrant the pixels on the press release that will come from it,” Kaehny said of NY CREATES.</p> <p>ESD argues that NY CREATES is not just a rebrand, but that it represents a new way of doing business that will be more transparent and less conducive to exploitation.</p> <p>Government watchdogs say irrespective of the bureaucracy surrounding development projects, under the status quo, Cuomo ultimately calls the shots.</p> <p>Grose said he will be answerable to the boards of Fort Schuyler and Fuller Road and, later, the board of NY CREATES; ESD is getting a say in who joins the board of the new organization, and Zemsky will serve as an “ex-officio” member. “I also report to the chancellor of SUNY as a direct boss,” Grose said.</p> <p>Grose indicated his vision is at least as ambitious as Kaloyeros’ was -- even if it comes without the boasting.</p> <p>Grose plans to expand the scope of the state’s public-private tech partnerships to include educational institutions outside SUNY Polytechnic -- and even in other states.</p> <p>He said he will continue Fort Schuyler and Fuller Road’s focus on nanotechnology, and seek to further develop its work in photonics, tech dealing with data transfer through light waves.</p> <p>“I haven’t really focused on what’s happened in the last 10 to 12 years,” he said, alluding to the scandals. “My view going forward is to focus on core objectives and develop strong partnerships that have the right agreements that back them up.”</p> <p>

***
by Shant Shahrigianh, Gotham Gazette
      

Read more by this writer.

</p>
<p><img src="http://www.gothamgazette.com/images/graphics/2018/govcuomo-roswell.jpg" alt="govcuomo roswell" width="600" height="400" /></p> <p>Howard Zemsky, of ESD, in Buffalo (photo via the Governor's office)</p> <hr /> <p>Alain Kaloyeros, the former head of SUNY Polytechnic Institute heading to trial this month for alleged corruption, was known for his luxury sports cars, self-aggrandizing boasts, and awkward social media posts.</p> <p>The new face of the state’s tech development projects, Doug Grose, strikes a different image: subdued, old-school business executive.</p> <p>Coming after Kaloyeros’ fall from grace and amid twin corruption trials, Grose’s appointment seems aimed at assuring taxpayers that state government is turning a new page when it comes to investing public funds in ambitious research and business ventures.</p> <p>Last month, Grose became president of the Fort Schuyler and Fuller Road management corporations -- the state entities at the center of the Kaloyeros bid-rigging and bribery case. The two nonprofits have doled out state grants and overseen projects spearheaded by Kaloyeros, who was empowered by Governor Andrew Cuomo, and will be merged to form a new organization, called NY CREATES. Grose will be president of that nonprofit body once the ongoing process is complete.</p> <p>Empire State Development, the state’s main economic development agency, partnered with SUNY to form NY CREATES -- or New York Center for Research, Economic Advancement, Technology, Engineering and Science. The new organization filed its certificate of incorporation with the state last month and plans to file for 501(c)3 status, according to an ESD spokesperson. Since shortly after the indictments of Kaloyeros and other top Cuomo aides, associates, and donors, ESD was charged with overseeing the nonprofits associated with SUNY and the governor’s extensive economic development programming. It was a move announced by the governor in response to the scandals involving some of his signature projects.</p> <p>After the November 2016 indictments of Kaloyeros, former Cuomo top aide and campaign manager Joseph Percoco, and others, Fort Schuyler and Fuller Road became synonymous with corruption, leading to the effort to rebrand and reorganize.</p> <p>Fort Schuyler awarded multimillion-dollar contracts that Kaloyeros allegedly helped rig in 2013 so they went to major Cuomo campaign donors. Along with Fuller Road, which was not named in the Kaloyeros indictment, Fort Schuyler has overseen hundreds of millions of dollars in state investment in the governor’s economic development programs, namely the Buffalo Billion. Some of them have been associated with SUNY Polytechnic, an advanced science research institution founded by Kaloyeros, a physicist.</p> <p>As NY CREATES launches and seeks to attract both trust and partners, Grose is seen at ESD and elsewhere as the right person for the job. He insists NY CREATES will bring transparency to the economic development programs under its umbrella. Those range from a <a href="http://www.ftsmc.org/utica/" target="_blank" rel="noopener">$1.5-billion computer chip center in Utica</a> to a sprawling <a href="http://www.frmc.us/statewide-facilities/" target="_blank" rel="noopener">$24-billion nanotechnology complex at SUNY Polytechnic in Albany</a>.</p> <p>“How I want to run this has the elements of a business, with sound fiscal and legal controls and a focus on return on investment,” Grose told Gotham Gazette in an interview.</p> <p>Grose’s long resume includes a stint as executive vice president of NanoTech Resources in 2004. Kaloyeros, who oversaw growth in the nanotech complex at SUNY Polytechnic, was Grose’s boss at the time.</p> <p>“My leadership style is quite different,” Grose said of Kaloyeros. “It’s much more, I’ll say, business-based, and you got rewarded or you got in trouble if you didn’t provide the return on investment made.”</p> <p>Grose, 68, came out of retirement to helm NY CREATES, which he said will pay him $280,000 a year. ESD and SUNY leaders and the former president of Fort Schuyler and Fuller Road, Bob Megna, worked to draft Grose. His job will have a tighter focus than that of Kaloyeros, who made nearly $1 million per year helming all of SUNY Polytechnic.</p> <p>“I didn’t come here, honestly, for financial reasons. I came here because of an allegiance that I have to New York State,” said Grose, who was raised in the Mohawk Valley and earned multiple degrees from Rensselaer Polytechnic Institute.</p> <p>He previously held numerous roles in the upstate tech industry, often overseeing public-private partnerships.</p> <p>In 1979, he began a more than 20-year-long run at IBM, where he was in charge of chip production at labs in East Fishkill and Vermont, <a href="https://www.timesunion.com/business/article/Return-to-trust-in-tech-school-12891469.php" target="_blank" rel="noopener">according to the Times Union</a>. He came back to the company in 2004, helping lay the groundwork for a public-private partnership that has seen IBM establish <a href="https://www.timesunion.com/business/article/SUNY-Poly-signs-new-leases-with-IBM-Research-12711815.php" target="_blank" rel="noopener">a large lab</a> at SUNY Polytechnic.</p> <p>Grose is also a former CEO of GlobalFoundries, one of the biggest semiconductor makers in the world. It began receiving <a href="https://www.timesunion.com/7day-business/article/GlobalFoundries-may-be-getting-more-NYS-funding-11172783.php" target="_blank" rel="noopener">state funds and tax breaks</a> in 2006, under then-Governor George Pataki.</p> <p>Empire State Development touts GlobalFoundries as a success story. The company, which runs <a href="https://www.forbes.com/sites/patrickmoorhead/2018/02/04/the-u-s-already-has-bleeding-edge-technology-manufacturing-with-globalfoundries-fab-8-in-malta-ny/#3c0d55a923af" target="_blank" rel="noopener">a computer chip lab called Fab 8</a> in Saratoga County, has created 3,500 jobs, according to the Albany-based Center for Economic Growth.</p> <p>Grose has kept a low profile throughout his career. That marks a strong contrast with Kaloyeros, who was was known to <a href="http://www.gothamgazette.com/5912-alain-kaloyeros-powerful-centerpiece-of-" target="_blank" rel="noopener">speed around Albany</a> in a Ferrari Spider. “Dr. Nano,” as his license plate said, made immature Facebook posts and was known for braggadocio, as the New York Times <a href="https://www.nytimes.com/2002/07/26/nyregion/public-lives-behind-a-research-center-a-geek-with-great-cars.html" target="_blank" rel="noopener">pointed out</a> in 2002. After a Gotham Gazette profile in 2015, spurred by reports that SUNY Polytechnic had been subpoenaed, Kaloyeros offered, then rescinded an interview, <a href="http://www.gothamgazette.com/government/5925-buffalo-billion-boss-offers-cancels-interview-claims-threat-of-jail" target="_blank" rel="noopener">citing the “threat of jail.”</a></p> <p>While Grose sought to distinguish his style from that of Kaloyeros, he also had praise for SUNY Polytechnic’s former leader.</p> <p>“He was a visionary in terms of what he wanted to create and he had big ideas,” Grose said of Kaloyeros. “Many of them came true.”</p> <p>Asked about improving transparency into Fort Schuyler and Fuller Road (and, soon, NY CREATES) projects, Grose noted steps that boards of those organizations took before he came on about a month ago.</p> <p>They voted to voluntarily conform to the state’s Freedom of Information Law in 2016 and 2017. <a href="http://nyassembly.gov/leg/?default_fld=&amp;leg_video=&amp;bn=A05854&amp;term=2017&amp;Summary=Y&amp;Actions=Y" target="_blank" rel="noopener">A bill</a> ensuring that FOIL applies to agencies like Fort Schuyler has been introduced in the state Assembly, though it is currently stalled in the Governmental Operations Committee.</p> <p>Cuomo, a Democrat, appoints the head of ESD, currently Howard Zemsky. The governor in the past pushed both more funding through Fort Schuyler and Fuller Road and resisted calls to increase transparency and oversight of their projects. He also appears to have a fairly tight grip over what legislation moves through the Democrat-led Assembly. A variety of accountability measures that have passed the Republican-controlled Senate are <a href="http://www.gothamgazette.com/state/7718-attention-shifts-to-assembly-hesitation-on-accountability-bills-opposed-by-cuomo" target="_blank" rel="noopener">currently stalled</a> in the Assembly.</p> <p>Recent months have seen Fort Schuyler and Fuller Road open their meetings to the public, and they have begun posting <a href="https://www.youtube.com/channel/UCKb1tyhvr9_5h-rWuyvC1vQ" target="_blank" rel="noopener">recordings</a> of their <a href="https://www.youtube.com/channel/UCeIjOusMd8u2u6h1_pHbD8g" target="_blank" rel="noopener">sessions</a> to YouTube.</p> <p>However, hard numbers about Fort Schuyler and Fuller Road projects remain difficult to come by. Their websites do not detail how much money the state has actually invested in their projects so far, and they don’t show proof of job growth -- the stated goal of the those investments. One bill in the accountability agenda that has not moved through the Assembly is for a “database of deals” that would catalog such spending and its results across all state economic development programming.</p> <p>Grose said NY CREATES will dispel the mystery. He said his approach is to make sure “there is no doubt about what an investment may be for and who’s involved and what the result is.” He did not provide specifics for what that will look like.</p> <p>Asked how much debt projects under Fort Schuyler and Fuller Road have accumulated, Grose said, "I can't give you a sense. I have no context where I would say I've seen it all added up." Asked whether it would be fair to say the projects were facing hundreds of millions in debt, Grose replied, "I think that's an accurate portrayal." He added, "It’s related to building facilities in Albany. It’s basically paying back loans to build Albany campus facilities."</p> <p>Cuomo has been keeping his distance from Fort Schuyler and Fuller Road and is yet to comment on NY CREATES. His office did not respond to requests for comment for this article.</p> <p>Shortly after the criminal complaint against Kaloyeros became public, the governor announced that Empire State Development would assume oversight of all the projects under SUNY Polytechnic’s aegis.</p> <p>"I want the taxpayers of New York to know that every dollar is guarded and guarded professionally,” <a href="https://www.bizjournals.com/albany/news/2016/09/23/suny-polys-ongoing-projects-move-to-esd-control.html" target="_blank" rel="noopener">Cuomo said</a> in announcing the move in September of 2016.</p> <p>However, government watchdogs have decried that change -- and the creation of NY CREATES -- as inadequate. To groups like Reinvent Albany, Cuomo is doing too little, too late.</p> <p>“Ultimately, we would look at NY CREATES as shuffling around the deck chairs on the titanically confusing and corruption-prone apparatus that the state has created to hand out tax dollars,” said John Kaehny, executive director of Reinvent Albany, which closely tracks state economic development efforts.</p> <p>He noted that Cuomo has blocked the reform legislation that includes a bill to restore the state comptroller’s power to pre-audit state contracts over $250,000 that flow through SUNY-affiliated nonprofits -- a power that was stripped by Cuomo and the Legislature in the governor’s first year in office, 2011. Comptroller Tom DiNapoli has repeatedly said it should be brought back.</p> <p>“Whatever marginal gain comes out of this is going to be so tiny as not to warrant the pixels on the press release that will come from it,” Kaehny said of NY CREATES.</p> <p>ESD argues that NY CREATES is not just a rebrand, but that it represents a new way of doing business that will be more transparent and less conducive to exploitation.</p> <p>Government watchdogs say irrespective of the bureaucracy surrounding development projects, under the status quo, Cuomo ultimately calls the shots.</p> <p>Grose said he will be answerable to the boards of Fort Schuyler and Fuller Road and, later, the board of NY CREATES; ESD is getting a say in who joins the board of the new organization, and Zemsky will serve as an “ex-officio” member. “I also report to the chancellor of SUNY as a direct boss,” Grose said.</p> <p>Grose indicated his vision is at least as ambitious as Kaloyeros’ was -- even if it comes without the boasting.</p> <p>Grose plans to expand the scope of the state’s public-private tech partnerships to include educational institutions outside SUNY Polytechnic -- and even in other states.</p> <p>He said he will continue Fort Schuyler and Fuller Road’s focus on nanotechnology, and seek to further develop its work in photonics, tech dealing with data transfer through light waves.</p> <p>“I haven’t really focused on what’s happened in the last 10 to 12 years,” he said, alluding to the scandals. “My view going forward is to focus on core objectives and develop strong partnerships that have the right agreements that back them up.”</p> <p>

***
by Shant Shahrigianh, Gotham Gazette
      

Read more by this writer.

</p>
First Annual State Economic Development Report Falls Short, Watchdogs Say 2018-02-14T05:00:00+00:00 2018-02-14T05:00:00+00:00 http://www.gothamgazette.com/?id=7480:first-annual-state-economic-development-report-falls-short-watchdogs-say Ben Max <p><img src="http://www.gothamgazette.com/images/graphics/2017/30900390955_2c459ccf1a_z.jpg" alt="Zemsky economic development" width="600" height="400" /></p> <p>Howard Zemsky (photo: Govenor's Office)</p> <hr /> <p>Starting this year, the state’s central economic development agency is required to produce an annual comprehensive report of all of the state-funded programs it oversees. The requirement of Empire State Development (ESD) was part of the state budget agreement reached last April amid intensifying criticism of Governor Andrew Cuomo’s approach to economic development.</p> <p>With the report due on December 31 of each year, ESD must compile the past fiscal year's “aggregate totals” for each economic development program administered by the agency, examining “program progress, program participation rates, economic impact, regional distribution, industry trends, and any other information deemed necessary by the commissioner," according to the 2017-2018 enacted budget.</p> <p>The inaugural report was late.</p> <p>“It will be out this week -- and that’s my fault, truthfully,” ESD president and CEO Howard Zemsky told state legislators somewhat sheepishly during <a href="https://www.youtube.com/watch?v=qXFM8uvQwD0" target="_blank" rel="noopener">the joint legislative budget hearing</a> on economic development in Albany on January 29. He added, “I think you’ll find it to be very thorough, very forthcoming, and very extensive.”</p> <p>Cuomo’s economic development czar, who is appointed by Cuomo, was queried on the report’s status by Senate Finance Chair Cathy Young, an Upstate Republican, who cited <a href="https://www.osc.state.ny.us/audits/allaudits/093017/16s40.pdf" target="_blank" rel="noopener">an audit</a> by State Comptroller Tom DiNapoli that found ESD failed to meet more than half of the reporting requirements for tax credit and job creation programs that were due between April 2012 and September 2016.</p> <p>“Some of them have been successful, but many of these programs have run into substantial issues, such as far lower job creation than expected…In light of these issues, ESD is often unwilling to share information with the legislature and the public on these projects,” said Young.</p> <p><a href="https://esd.ny.gov/sites/default/files/ESD_2017_Annual_Report_0.pdf" target="_blank" rel="noopener">The annual report</a> was released last week, on February 5, but watchdogs and experts say it falls far short of a comprehensive analysis drawing clear connections between the state’s numerous investments and job growth, and only highlights the need for a comprehensive “database of deals.”</p> <p>Much of the 128-page document offers a photo-heavy, though thorough overview of the state’s “holistic” approach to transforming New York State, through business grants and tax incentives, as well as workforce development, Regional Economic Development Councils, downtown revitalization programs, and more. The latter third of the report provides a more data-centric breakdown of the economic impact of 1,153 projects overseen by ESD that received financial assistance in state fiscal year 2017 (April 1, 2016-March 31, 2017).</p> <p>“This report highlights all of these strategies throughout and also includes a section of detailed statistical information. Extensive additional information on thousands of economic development projects throughout the state is available on our website,” writes Zemsky in his opening message. “Our strategy is not only providing positive economic results in the short term but also planting seeds for sustainable economic prosperity over the long term.”</p> <p>The investments are broken down into four categories: tax expenditure programs -- which includes the Excelsior jobs program, the entertainment tax credit and Start-Up NY -- loans and grants, marketing and advertising, and innovation. In total, $1.8 billion was provided by ESD in support of these projects, which are expected to leverage nearly $18.6 billion in business and partner investments. According to the report, 162 projects have direct job commitments that leverage $14 billion and require the creation and retention of over 65,000 jobs in New York, for an average cost of $13,205 per job.</p> <p>Among watchdogs who reviewed the ESD report, the primary criticisms are that it lacks recipient-level data, it at times only shows “net new job commitments” instead of actual jobs created, and has inconsistent definitions for what constitutes a job.</p> <p>Recipient-level data, which shows return on investment from individual projects, is crucial for determining any program’s true cost-per-job, according to David Friedfel, director of state studies for Citizens Budget Commission (CBC).</p> <p>“Taxpayers should know if individual projects are receiving benefits under multiple programs, the total amount of state and local spending, the number of jobs promised and created, and the amount of capital expense committed and expended by the company,” said Friedfel in an email, noting that such information could be made available with the creation of an online “database of deals,” a key recommendation repeatedly <a href="https://cbcny.org/research/blueprint-economic-development-reform" target="_blank" rel="noopener">pushed by CBC</a> and other fiscal watchdogs and government reform groups.</p> <p>A spokesperson for ESD pointed out the statute specifically requires the agency to provide “aggregate totals” for the programs and noted that report provides links to quarterly reports offering more granular details.</p> <p>The Excelsior jobs program issued $25.3 million in tax credits to 62 businesses, according to the report. Those business pledged to create 10,072 jobs, retain 30,279 jobs, and invest more than $2.4 billion. The total tax credits committed to these 62 businesses is $174.2 million over the life of the projects. This amounts to $4,318 in tax credits committed per job created and retained.</p> <p>The report should also show actual jobs created, not just commitments under the Excelsior jobs program, something the database of deals would document in real time, according to Friedfel, since companies often commit to creating a certain number of jobs, and then the project either fails to come to fruition, or the actual number of jobs created falls short of expectations. At times, more jobs are created than originally expected.</p> <p>“The committed jobs are just the goals, the report should have actuals,” said Friedfel. “Also, the difference between commitments and actual job creation is the reason why economic development spending should be pay-for-performance, with companies being reimbursed after job creation goals are met.”</p> <p>While much of the report’s tax credit data does a better job of presenting actual job creation numbers, critics say the figures are still misleading because the term “job” is defined differently throughout.</p> <p>In part due to the broad scope of the report, jobs for different types of economic development programs are counted using different sets of criteria. In an attempt to preempt this criticism, the report classifies jobs associated with the entertainment industry tax credit as “hires” rather than “jobs” because these are typically short-term gigs that are counted regardless of how long the employees work. The cost-per-job for these roles is considerably lower than more permanent, full-time positions produced by other programs. The state’s controversial film and television tax credit has benefited 289 projects, resulting in $2.9 billion in private investment and a cost-per-hire of $2,841.</p> <p>Another anomaly is Start-Up NY, which, due to the particulars of its tax requirements, only counts employees that are full-time and permanent for at least six months -- a threshold that should probably be applied for all job counts, some critics say. &nbsp;In 2016, businesses in the Start-Up NY program reported business tax benefits of $949,868 and reported their employees received $3 million in personal income tax benefits, which brings the state investment to a $3.9 million total, according to the report. The businesses also report investing over $31 million and creating a total of 1,135 new jobs, of which 722 were "net new jobs," or jobs that lasted longer than six months.&nbsp;The ESD report omits a cost-per-job breakdown for Start-Up NY, perhaps because the 2017 data is unavailable yet, but it notes that 67 businesses were approved in 2017, projecting the creation of 1,000 jobs and $28 million in investment. Based on 2016 jobs numbers provided, the cost was $5,470 per net new job.</p> <p>The program has been the source of significant criticism of those who point to weak job creation, including, most recently, Senate Majority Leader John Flanagan, who called for an end to the program <a href="https://www.newsday.com/news/region-state/start-up-ny-flanagan-1.16741920" target="_blank" rel="noopener">on Tuesday</a>. (Ongoing questions about the effectiveness of Governor Cuomo’s job creation efforts also come as elements of his economic development programs are at play in twin corruption trials happening this year, where Cuomo associates and donors are accused of bid-rigging and bribery.)</p> <p>Critics argue that the same job-counting criteria should be applied across the board and question whether jobs created by companies benefiting from more than one public subsidy have been counted twice.</p> <p>"The charts and data in the report are in different formats and don't allow for apples to apples comparisons of different subsidy programs,” said John Kaehny, executive director of Reinvent Albany, a leading advocate for the database of deals. “There is no baseline data showing existing jobs or growth rates for regions. What's striking about the report is how little actual data there is that sheds light on performance by region, program or recipient."</p> <p>The report also highlights 378 projects investing in infrastructure, marketing, and capacity building, leveraging $2.2 billion in private investment.</p> <p>Many long-time critics of the state’s economic development programs are not likely to be appeased by the numbers regardless of how they are presented. E.J. McMahon, research director of the Empire Center for Public Policy, calls himself “close to atheistic ” on the field of taxpayer-funded economic development.</p> <p>“Part of the problem is distinguishing between what incentive claims to have delivered and what would have happened anyway without the incentive,” said McMahon, who frequently rails against the state’s entertainment tax credit, which disproportionately benefits economically-thriving New York City.</p> <p>The credit grants tax reimbursements of up to 30 percent for production companies that film in New York City or its suburbs. Farther upstate, the entertainment incentive grows to 40 percent. The number of entertainment ventures filmed in the city has ballooned in recent years, but naysayers note that New York City has always been a coveted filming location for the movie and television industry.</p> <p>“The people who are fans of the film credit have consistently pretended for years that no one would have been making films in New York City without the tax credit. All it proves is if you pay someone to do something, they will do it,” said McMahon.</p> <p>Getting lost in the conversation is what economists call “opportunity costs,” which is “what we didn't do because we gave you the money," according McMahon. "The true cost of filming ‘Blue Bloods’ in Queens is not that we gave them $25 million, it’s what could the State of New York have spent that $25 million on? What kind of mental health services could you have provided to people on the street for $25 million? What’s the societal value of that over having Tom Selleck walking around Queens?”</p> <p>A spokesperson for Comptroller DiNapoli’s office declined to comment on the ESD report, stating that the agency currently has an audit of ESD underway. Senator Young was unavailable for comment due to all-day budget hearings Monday and Tuesday, a spokesperson said.</p> <p><em>Correction: An earlier version of this article miscalculated the cost per job for Start-Up NY. The article has been amended to reflect this correction.</em></p> <p>

***
by Rachel Silberstein, State government reporter, Gotham Gazette
     

Read more by this writer.

</p>
<p><img src="http://www.gothamgazette.com/images/graphics/2017/30900390955_2c459ccf1a_z.jpg" alt="Zemsky economic development" width="600" height="400" /></p> <p>Howard Zemsky (photo: Govenor's Office)</p> <hr /> <p>Starting this year, the state’s central economic development agency is required to produce an annual comprehensive report of all of the state-funded programs it oversees. The requirement of Empire State Development (ESD) was part of the state budget agreement reached last April amid intensifying criticism of Governor Andrew Cuomo’s approach to economic development.</p> <p>With the report due on December 31 of each year, ESD must compile the past fiscal year's “aggregate totals” for each economic development program administered by the agency, examining “program progress, program participation rates, economic impact, regional distribution, industry trends, and any other information deemed necessary by the commissioner," according to the 2017-2018 enacted budget.</p> <p>The inaugural report was late.</p> <p>“It will be out this week -- and that’s my fault, truthfully,” ESD president and CEO Howard Zemsky told state legislators somewhat sheepishly during <a href="https://www.youtube.com/watch?v=qXFM8uvQwD0" target="_blank" rel="noopener">the joint legislative budget hearing</a> on economic development in Albany on January 29. He added, “I think you’ll find it to be very thorough, very forthcoming, and very extensive.”</p> <p>Cuomo’s economic development czar, who is appointed by Cuomo, was queried on the report’s status by Senate Finance Chair Cathy Young, an Upstate Republican, who cited <a href="https://www.osc.state.ny.us/audits/allaudits/093017/16s40.pdf" target="_blank" rel="noopener">an audit</a> by State Comptroller Tom DiNapoli that found ESD failed to meet more than half of the reporting requirements for tax credit and job creation programs that were due between April 2012 and September 2016.</p> <p>“Some of them have been successful, but many of these programs have run into substantial issues, such as far lower job creation than expected…In light of these issues, ESD is often unwilling to share information with the legislature and the public on these projects,” said Young.</p> <p><a href="https://esd.ny.gov/sites/default/files/ESD_2017_Annual_Report_0.pdf" target="_blank" rel="noopener">The annual report</a> was released last week, on February 5, but watchdogs and experts say it falls far short of a comprehensive analysis drawing clear connections between the state’s numerous investments and job growth, and only highlights the need for a comprehensive “database of deals.”</p> <p>Much of the 128-page document offers a photo-heavy, though thorough overview of the state’s “holistic” approach to transforming New York State, through business grants and tax incentives, as well as workforce development, Regional Economic Development Councils, downtown revitalization programs, and more. The latter third of the report provides a more data-centric breakdown of the economic impact of 1,153 projects overseen by ESD that received financial assistance in state fiscal year 2017 (April 1, 2016-March 31, 2017).</p> <p>“This report highlights all of these strategies throughout and also includes a section of detailed statistical information. Extensive additional information on thousands of economic development projects throughout the state is available on our website,” writes Zemsky in his opening message. “Our strategy is not only providing positive economic results in the short term but also planting seeds for sustainable economic prosperity over the long term.”</p> <p>The investments are broken down into four categories: tax expenditure programs -- which includes the Excelsior jobs program, the entertainment tax credit and Start-Up NY -- loans and grants, marketing and advertising, and innovation. In total, $1.8 billion was provided by ESD in support of these projects, which are expected to leverage nearly $18.6 billion in business and partner investments. According to the report, 162 projects have direct job commitments that leverage $14 billion and require the creation and retention of over 65,000 jobs in New York, for an average cost of $13,205 per job.</p> <p>Among watchdogs who reviewed the ESD report, the primary criticisms are that it lacks recipient-level data, it at times only shows “net new job commitments” instead of actual jobs created, and has inconsistent definitions for what constitutes a job.</p> <p>Recipient-level data, which shows return on investment from individual projects, is crucial for determining any program’s true cost-per-job, according to David Friedfel, director of state studies for Citizens Budget Commission (CBC).</p> <p>“Taxpayers should know if individual projects are receiving benefits under multiple programs, the total amount of state and local spending, the number of jobs promised and created, and the amount of capital expense committed and expended by the company,” said Friedfel in an email, noting that such information could be made available with the creation of an online “database of deals,” a key recommendation repeatedly <a href="https://cbcny.org/research/blueprint-economic-development-reform" target="_blank" rel="noopener">pushed by CBC</a> and other fiscal watchdogs and government reform groups.</p> <p>A spokesperson for ESD pointed out the statute specifically requires the agency to provide “aggregate totals” for the programs and noted that report provides links to quarterly reports offering more granular details.</p> <p>The Excelsior jobs program issued $25.3 million in tax credits to 62 businesses, according to the report. Those business pledged to create 10,072 jobs, retain 30,279 jobs, and invest more than $2.4 billion. The total tax credits committed to these 62 businesses is $174.2 million over the life of the projects. This amounts to $4,318 in tax credits committed per job created and retained.</p> <p>The report should also show actual jobs created, not just commitments under the Excelsior jobs program, something the database of deals would document in real time, according to Friedfel, since companies often commit to creating a certain number of jobs, and then the project either fails to come to fruition, or the actual number of jobs created falls short of expectations. At times, more jobs are created than originally expected.</p> <p>“The committed jobs are just the goals, the report should have actuals,” said Friedfel. “Also, the difference between commitments and actual job creation is the reason why economic development spending should be pay-for-performance, with companies being reimbursed after job creation goals are met.”</p> <p>While much of the report’s tax credit data does a better job of presenting actual job creation numbers, critics say the figures are still misleading because the term “job” is defined differently throughout.</p> <p>In part due to the broad scope of the report, jobs for different types of economic development programs are counted using different sets of criteria. In an attempt to preempt this criticism, the report classifies jobs associated with the entertainment industry tax credit as “hires” rather than “jobs” because these are typically short-term gigs that are counted regardless of how long the employees work. The cost-per-job for these roles is considerably lower than more permanent, full-time positions produced by other programs. The state’s controversial film and television tax credit has benefited 289 projects, resulting in $2.9 billion in private investment and a cost-per-hire of $2,841.</p> <p>Another anomaly is Start-Up NY, which, due to the particulars of its tax requirements, only counts employees that are full-time and permanent for at least six months -- a threshold that should probably be applied for all job counts, some critics say. &nbsp;In 2016, businesses in the Start-Up NY program reported business tax benefits of $949,868 and reported their employees received $3 million in personal income tax benefits, which brings the state investment to a $3.9 million total, according to the report. The businesses also report investing over $31 million and creating a total of 1,135 new jobs, of which 722 were "net new jobs," or jobs that lasted longer than six months.&nbsp;The ESD report omits a cost-per-job breakdown for Start-Up NY, perhaps because the 2017 data is unavailable yet, but it notes that 67 businesses were approved in 2017, projecting the creation of 1,000 jobs and $28 million in investment. Based on 2016 jobs numbers provided, the cost was $5,470 per net new job.</p> <p>The program has been the source of significant criticism of those who point to weak job creation, including, most recently, Senate Majority Leader John Flanagan, who called for an end to the program <a href="https://www.newsday.com/news/region-state/start-up-ny-flanagan-1.16741920" target="_blank" rel="noopener">on Tuesday</a>. (Ongoing questions about the effectiveness of Governor Cuomo’s job creation efforts also come as elements of his economic development programs are at play in twin corruption trials happening this year, where Cuomo associates and donors are accused of bid-rigging and bribery.)</p> <p>Critics argue that the same job-counting criteria should be applied across the board and question whether jobs created by companies benefiting from more than one public subsidy have been counted twice.</p> <p>"The charts and data in the report are in different formats and don't allow for apples to apples comparisons of different subsidy programs,” said John Kaehny, executive director of Reinvent Albany, a leading advocate for the database of deals. “There is no baseline data showing existing jobs or growth rates for regions. What's striking about the report is how little actual data there is that sheds light on performance by region, program or recipient."</p> <p>The report also highlights 378 projects investing in infrastructure, marketing, and capacity building, leveraging $2.2 billion in private investment.</p> <p>Many long-time critics of the state’s economic development programs are not likely to be appeased by the numbers regardless of how they are presented. E.J. McMahon, research director of the Empire Center for Public Policy, calls himself “close to atheistic ” on the field of taxpayer-funded economic development.</p> <p>“Part of the problem is distinguishing between what incentive claims to have delivered and what would have happened anyway without the incentive,” said McMahon, who frequently rails against the state’s entertainment tax credit, which disproportionately benefits economically-thriving New York City.</p> <p>The credit grants tax reimbursements of up to 30 percent for production companies that film in New York City or its suburbs. Farther upstate, the entertainment incentive grows to 40 percent. The number of entertainment ventures filmed in the city has ballooned in recent years, but naysayers note that New York City has always been a coveted filming location for the movie and television industry.</p> <p>“The people who are fans of the film credit have consistently pretended for years that no one would have been making films in New York City without the tax credit. All it proves is if you pay someone to do something, they will do it,” said McMahon.</p> <p>Getting lost in the conversation is what economists call “opportunity costs,” which is “what we didn't do because we gave you the money," according McMahon. "The true cost of filming ‘Blue Bloods’ in Queens is not that we gave them $25 million, it’s what could the State of New York have spent that $25 million on? What kind of mental health services could you have provided to people on the street for $25 million? What’s the societal value of that over having Tom Selleck walking around Queens?”</p> <p>A spokesperson for Comptroller DiNapoli’s office declined to comment on the ESD report, stating that the agency currently has an audit of ESD underway. Senator Young was unavailable for comment due to all-day budget hearings Monday and Tuesday, a spokesperson said.</p> <p><em>Correction: An earlier version of this article miscalculated the cost per job for Start-Up NY. The article has been amended to reflect this correction.</em></p> <p>

***
by Rachel Silberstein, State government reporter, Gotham Gazette
     

Read more by this writer.

</p>
Assembly Takes Stock of State Economic Development Programs Ahead of Next Negotiations 2017-11-14T05:00:00+00:00 2017-11-14T05:00:00+00:00 http://www.gothamgazette.com/?id=7321:assembly-takes-stock-of-state-economic-development-programs-ahead-of-next-negotiations Ben Max <p><img src="http://www.gothamgazette.com/images/graphics/2017/34868772685_4a41dee04d_z.jpg" alt="34868772685 4a41dee04d z" width="640" height="427" /></p> <p>Howard Zemsky in Buffalo (via Governor's Office)</p> <hr /> <p>Ahead of the 2018 legislative session, the New York State Assembly’s Economic Development Committee held a hearing Monday in Albany to evaluate the progress of the state’s multitude of economic development programs and hear testimony from companies and organizations that have benefited from state grants.</p> <p>Taking center stage was Howard Zemsky, Governor Andrew Cuomo’s economic development czar as president and CEO of Empire State Development, who defended the state’s jobs programs and was grilled for nearly an hour by members of the committee. Committee members, led by chair Robin Schimminger, a Democrat from Erie County, raised concerns about the effectiveness of Buffalo’s annual 43North competition and Regional Economic Development Council grants; lower-than-expected job production; and increased regulatory burdens on small businesses.</p> <p>Cuomo has staked much of his legacy and devoted billions of state dollars to revitalizing the upstate economy. The state has infused $8 billion a year into economic projects since he took office in 2011, according to <a href="http://www.democratandchronicle.com/story/news/politics/albany/2017/06/07/new-york-job-programs-investigation/102323140/" target="_blank" rel="noopener noreferrer">a Gannett Albany review</a>. But as Cuomo’s economic development programs have multiplied each year, the Legislature has failed to pass any meaningful oversight measures to ensure transparency, that beneficiaries are meeting job creation goals, or that grants and incentives are going to well-vetted recipients. While some efforts, such as those aimed at farms and breweries, have been successful, others, like Cuomo’s Start-Up New York program, have fallen short of job creation goals.</p> <p>At Monday’s hearing, Zemsky noted that upstate cities have seen a boom in tech sector jobs, which on average pay more than non-tech sector jobs, and touted a dramatic increase in venture capital investment throughout the state. The Empire State Development head said that ESD takes a “holistic” approach, pointing to the success of its downtown and waterfront revitalization efforts, which aim to attract a younger, more vibrant talent base, and investing in science, technology, engineering and mathematics (STEM) education.</p> <p>He briefly defended the Regional Economic Development Councils, which have been accused of favoritism and conflicts of interests, and touted Buffalo as a success story -- a city that has been a major focus for Gov. Cuomo and transformed from a financially depressed post-industrial town to a vibrant hub of entrepreneurship.</p> <p>“A lot of what we have done in Buffalo we have used as a template in many other parts of the state and I’m proud that we took some risks and took some chance,” said Zemsky. “Every year we improve and make adjustments.”</p> <p>Schimminger cited an article noting that three-quarters of companies that are attracted to Buffalo by the 43North program have since left the city and inquired about whether the residency requirements, currently a year, could be extended.</p> <p>“We’re only a few years into the program, but after every year the 43North board reassesses and reevaluates what went right, what didn’t go right, just like we do in government. Is it possible that we might change the regulations, that we might change the time frame? That’s under active discussion,” said Zemsky, noting that many companies retain active connections to Buffalo even after they leave.</p> <p>Zemsky’s presentation rang hollow for at least one committee member, Assemblymember Raymond Walter, a Republican from Amherst, who told Zemsky to provide hard data about the returns delivered by the state’s Buffalo investments rather than “offering platitudes.”</p> <p>“Our job here is to draw a direct connection between what we are doing with taxpayer dollars to that renaissance and I’m not convinced you can do that,” said Walter. “If we could focus on that, rather than the platitudes, that would be great.”</p> <p>Zemsky pointed Walter to ESD’s progress report, insisting the number of new firms has grown and jobs have dramatically accelerated in Buffalo, by “almost any metric,” particularly when compared to other struggling cities.</p> <p>The conversation quickly turned personal, with Zemsky, who is a Buffalo businessman, accusing the Assembly member of opposing the state’s efforts to spur Buffalo’s economy, and demanding, “Do you go to any of the REDC meetings, do you know anything that is actually going on?”</p> <p>At one point during the heated exchange about interpreting Buffalo’s jobs data, which Walter said mostly highlights low-skill jobs growth, Zemsky snapped, “You don’t know anything about the innovation economy.”</p> <p>The biggest indicator of Buffalo’s growth, Zemsky pointed to <a href="https://www.nytimes.com/2014/10/20/upshot/where-young-college-graduates-are-choosing-to-live.html?mtrref=gothamist.com&amp;gwh=8F08A0901526DF9D7B923B841CCE335E&amp;gwt=pay" target="_blank" rel="noopener noreferrer">the rise</a> of the area’s millennial population over the last decade. “Turning the corner on that is the most important thing we can do,” he said.</p> <p>After Zemsky, the Assembly panel was addressed by various industry leaders and experts, who described how programs like the Start-Up New York jobs program and the Southern Tier Startup Alliance (NYSTAR) have created or retained thousands of jobs and spurred both investment and innovation.</p> <p>A representative of watchdog group ReInvent Albany then presented the positions of good government organizations, calling for the passage of a number of bills introduced in the Legislature last year, which would increase oversight of and transparency in the state’s economic development programs.</p> <p>Among the legislative fixes proposed by Reinvent Albany and others is the creation of a “database of deals,” which would digitally list every entity receiving funds from the state along with where each dollar is going; a bill to restore the powers of the state Comptroller to review procurement contracts for SUNY, CUNY, and Office of General Services; and campaign finance restrictions to curb the appearance or reality of pay-to-play politics.</p> <p>At least two bills, including the database of deals and one requiring nonprofit organizations affiliated with government entities to be subject to the freedom of information law and the open meetings law, are sponsored by Schimminger, but did not make it to the Assembly floor. Legislation related to procurement reform appeared to gain steam early this year in light of a major bid-rigging scandal that will see close associates of and donors to Cuomo on trial for corruption in 2018, but <a href="http://www.gothamgazette.com/state/6875-ramped-up-economic-development-funding-less-transparency-in-new-state-budget" target="_blank" rel="noopener noreferrer">nothing was passed</a> as the Legislature acquiesced to the governor’s objections.</p> <p>“The only thing the Legislature did do is write a check for $1.8 billion in the extender budget passed in April, a blank check granted by the Legislature to Governor Cuomo for economic development projects with no additional oversight,” said Alex Camarda, senior policy advisor for Reinvent Albany.</p> <p>Schimminger welcomed Camarda’s comments, saying that &nbsp;good government groups are “preaching to the choir” when they call for increased accountability and oversight.</p> <p>“Not a single one of those bills that you mentioned have been blocked by the committee, in fact, many of them -- the database of deals, the Start-Up fix -- have come out of the committee but are delayed elsewhere,” said the Assembly member, referring to the fact that the legislation had been held up in other legislative committees.</p> <p>The wisdom behind Start-Up New York, which creates tax-free zones for new businesses, local development corporations and other economic development programs is the finding that startups create significantly more jobs than companies that have matured 10 to 30 years and drive economic development. But critics say these programs <a href="http://www.democratandchronicle.com/story/news/politics/albany/2017/06/07/new-york-job-programs-investigation/102323140/" target="_blank" rel="noopener noreferrer">continue to fall short</a> of the job creation goals and many beneficiaries of these state incentives have failed to report on sufficient or any progress made through their grants.</p> <p>Despite the fact that several members of Cuomo’s circle are set to appear in court next year for their roles in the bid-rigging scandal involving the state’s Buffalo Billion program, a second round of cash investment to the project was approved in this year’s budget, with no new accountability measures.</p> <p>While Schimminger acknowledged these problems in his opening remarks, the hearing was primarily an information-gathering session, and those outstanding issues will be addressed during the next legislative session, he told Camarda. The governor will unveil his next executive budget in January, leading to months of negotiations and hearings.</p> <p>

***
by Rachel Silberstein, State government reporter, Gotham Gazette
     

Read more by this writer.

</p>
<p><img src="http://www.gothamgazette.com/images/graphics/2017/34868772685_4a41dee04d_z.jpg" alt="34868772685 4a41dee04d z" width="640" height="427" /></p> <p>Howard Zemsky in Buffalo (via Governor's Office)</p> <hr /> <p>Ahead of the 2018 legislative session, the New York State Assembly’s Economic Development Committee held a hearing Monday in Albany to evaluate the progress of the state’s multitude of economic development programs and hear testimony from companies and organizations that have benefited from state grants.</p> <p>Taking center stage was Howard Zemsky, Governor Andrew Cuomo’s economic development czar as president and CEO of Empire State Development, who defended the state’s jobs programs and was grilled for nearly an hour by members of the committee. Committee members, led by chair Robin Schimminger, a Democrat from Erie County, raised concerns about the effectiveness of Buffalo’s annual 43North competition and Regional Economic Development Council grants; lower-than-expected job production; and increased regulatory burdens on small businesses.</p> <p>Cuomo has staked much of his legacy and devoted billions of state dollars to revitalizing the upstate economy. The state has infused $8 billion a year into economic projects since he took office in 2011, according to <a href="http://www.democratandchronicle.com/story/news/politics/albany/2017/06/07/new-york-job-programs-investigation/102323140/" target="_blank" rel="noopener noreferrer">a Gannett Albany review</a>. But as Cuomo’s economic development programs have multiplied each year, the Legislature has failed to pass any meaningful oversight measures to ensure transparency, that beneficiaries are meeting job creation goals, or that grants and incentives are going to well-vetted recipients. While some efforts, such as those aimed at farms and breweries, have been successful, others, like Cuomo’s Start-Up New York program, have fallen short of job creation goals.</p> <p>At Monday’s hearing, Zemsky noted that upstate cities have seen a boom in tech sector jobs, which on average pay more than non-tech sector jobs, and touted a dramatic increase in venture capital investment throughout the state. The Empire State Development head said that ESD takes a “holistic” approach, pointing to the success of its downtown and waterfront revitalization efforts, which aim to attract a younger, more vibrant talent base, and investing in science, technology, engineering and mathematics (STEM) education.</p> <p>He briefly defended the Regional Economic Development Councils, which have been accused of favoritism and conflicts of interests, and touted Buffalo as a success story -- a city that has been a major focus for Gov. Cuomo and transformed from a financially depressed post-industrial town to a vibrant hub of entrepreneurship.</p> <p>“A lot of what we have done in Buffalo we have used as a template in many other parts of the state and I’m proud that we took some risks and took some chance,” said Zemsky. “Every year we improve and make adjustments.”</p> <p>Schimminger cited an article noting that three-quarters of companies that are attracted to Buffalo by the 43North program have since left the city and inquired about whether the residency requirements, currently a year, could be extended.</p> <p>“We’re only a few years into the program, but after every year the 43North board reassesses and reevaluates what went right, what didn’t go right, just like we do in government. Is it possible that we might change the regulations, that we might change the time frame? That’s under active discussion,” said Zemsky, noting that many companies retain active connections to Buffalo even after they leave.</p> <p>Zemsky’s presentation rang hollow for at least one committee member, Assemblymember Raymond Walter, a Republican from Amherst, who told Zemsky to provide hard data about the returns delivered by the state’s Buffalo investments rather than “offering platitudes.”</p> <p>“Our job here is to draw a direct connection between what we are doing with taxpayer dollars to that renaissance and I’m not convinced you can do that,” said Walter. “If we could focus on that, rather than the platitudes, that would be great.”</p> <p>Zemsky pointed Walter to ESD’s progress report, insisting the number of new firms has grown and jobs have dramatically accelerated in Buffalo, by “almost any metric,” particularly when compared to other struggling cities.</p> <p>The conversation quickly turned personal, with Zemsky, who is a Buffalo businessman, accusing the Assembly member of opposing the state’s efforts to spur Buffalo’s economy, and demanding, “Do you go to any of the REDC meetings, do you know anything that is actually going on?”</p> <p>At one point during the heated exchange about interpreting Buffalo’s jobs data, which Walter said mostly highlights low-skill jobs growth, Zemsky snapped, “You don’t know anything about the innovation economy.”</p> <p>The biggest indicator of Buffalo’s growth, Zemsky pointed to <a href="https://www.nytimes.com/2014/10/20/upshot/where-young-college-graduates-are-choosing-to-live.html?mtrref=gothamist.com&amp;gwh=8F08A0901526DF9D7B923B841CCE335E&amp;gwt=pay" target="_blank" rel="noopener noreferrer">the rise</a> of the area’s millennial population over the last decade. “Turning the corner on that is the most important thing we can do,” he said.</p> <p>After Zemsky, the Assembly panel was addressed by various industry leaders and experts, who described how programs like the Start-Up New York jobs program and the Southern Tier Startup Alliance (NYSTAR) have created or retained thousands of jobs and spurred both investment and innovation.</p> <p>A representative of watchdog group ReInvent Albany then presented the positions of good government organizations, calling for the passage of a number of bills introduced in the Legislature last year, which would increase oversight of and transparency in the state’s economic development programs.</p> <p>Among the legislative fixes proposed by Reinvent Albany and others is the creation of a “database of deals,” which would digitally list every entity receiving funds from the state along with where each dollar is going; a bill to restore the powers of the state Comptroller to review procurement contracts for SUNY, CUNY, and Office of General Services; and campaign finance restrictions to curb the appearance or reality of pay-to-play politics.</p> <p>At least two bills, including the database of deals and one requiring nonprofit organizations affiliated with government entities to be subject to the freedom of information law and the open meetings law, are sponsored by Schimminger, but did not make it to the Assembly floor. Legislation related to procurement reform appeared to gain steam early this year in light of a major bid-rigging scandal that will see close associates of and donors to Cuomo on trial for corruption in 2018, but <a href="http://www.gothamgazette.com/state/6875-ramped-up-economic-development-funding-less-transparency-in-new-state-budget" target="_blank" rel="noopener noreferrer">nothing was passed</a> as the Legislature acquiesced to the governor’s objections.</p> <p>“The only thing the Legislature did do is write a check for $1.8 billion in the extender budget passed in April, a blank check granted by the Legislature to Governor Cuomo for economic development projects with no additional oversight,” said Alex Camarda, senior policy advisor for Reinvent Albany.</p> <p>Schimminger welcomed Camarda’s comments, saying that &nbsp;good government groups are “preaching to the choir” when they call for increased accountability and oversight.</p> <p>“Not a single one of those bills that you mentioned have been blocked by the committee, in fact, many of them -- the database of deals, the Start-Up fix -- have come out of the committee but are delayed elsewhere,” said the Assembly member, referring to the fact that the legislation had been held up in other legislative committees.</p> <p>The wisdom behind Start-Up New York, which creates tax-free zones for new businesses, local development corporations and other economic development programs is the finding that startups create significantly more jobs than companies that have matured 10 to 30 years and drive economic development. But critics say these programs <a href="http://www.democratandchronicle.com/story/news/politics/albany/2017/06/07/new-york-job-programs-investigation/102323140/" target="_blank" rel="noopener noreferrer">continue to fall short</a> of the job creation goals and many beneficiaries of these state incentives have failed to report on sufficient or any progress made through their grants.</p> <p>Despite the fact that several members of Cuomo’s circle are set to appear in court next year for their roles in the bid-rigging scandal involving the state’s Buffalo Billion program, a second round of cash investment to the project was approved in this year’s budget, with no new accountability measures.</p> <p>While Schimminger acknowledged these problems in his opening remarks, the hearing was primarily an information-gathering session, and those outstanding issues will be addressed during the next legislative session, he told Camarda. The governor will unveil his next executive budget in January, leading to months of negotiations and hearings.</p> <p>

***
by Rachel Silberstein, State government reporter, Gotham Gazette
     

Read more by this writer.

</p>
In Wake of Charges, Cuomo Promises Change, Offers Few Details 2016-09-28T04:00:00+00:00 2016-09-28T04:00:00+00:00 http://www.gothamgazette.com/?id=6553:in-wake-of-charges-cuomo-promises-change-offers-few-details Ben Max <p><img src="http://www.gothamgazette.com/images/graphics/2014/03/29878309492_c6ac23da80_z.jpg" alt="Cuomo gaggle teacher award night" width="600" height="393" /></p> <p>Gov. Cuomo (photo: Kevin P. Coughlin/Governor's Office)</p> <hr /> <p>A day after United States Attorney Preet Bharara unveiled a myriad of corruption charges against two of his closest allies and some of his biggest donors related to their abuse of the state&rsquo;s economic development programs, Gov. Andrew Cuomo traveled to Buffalo to announce he was expanding the program that sparked Bharara&rsquo;s investigation.</p> <p>Cuomo publicly acknowledged the &ldquo;truly disappointing&rdquo; allegations and told the gathered crowd that his administration plans to learn from revelations about bid-rigging and bribery schemes. He also promised not to &ldquo;miss a beat&rdquo; and pledged his administration will &ldquo;redouble our efforts&rdquo; on economic development projects in Buffalo and Western New York.</p> <p>What exactly Cuomo has learned and what he and his administration actually plan to do about the alleged corruption - which was uncovered by reporters and watchdogs over a year ago and outlined by Bharara last week - remains largely unclear. The lack of clarity is especially stark given the amount of time the administration has had to formulate a response to problems and change protocols.</p> <p>On Friday, Cuomo announced that the Empire State Development Corporation would take over a portfolio of projects previously overseen by SUNY Polytechnic President Alain Kaloyeros, who was suspended without pay after he was charged Thursday in two separate bid-rigging investigations (one by Bharara and one by Attorney General Eric Schneiderman).</p> <p>&ldquo;We are today going to take that portfolio of responsibility, those projects, transfer them all to the Empire State Development Corporation, which is run by a fellow named Howard Zemsky is his name, and he&rsquo;ll take over management of that immediately,&rdquo; Cuomo said on Friday.</p> <p>Asked if the governor&rsquo;s announcement would end the use of nonprofits under SUNY Poly to administer economic development projects, Cuomo spokesperson Dani Lever told Gotham Gazette that &ldquo;ESDC will oversee all economic development projects.&rdquo;</p> <p>Cuomo said this week that Zemsky will formulate new procedures and oversight mechanisms to be unveiled in January during the governor&rsquo;s State of the State Address. Cuomo is also expected to debut a new phase of the Buffalo Billion in the same speech.</p> <p>On Friday, Cuomo also cited a report from Bart Schwartz, a lawyer retained by the governor in April after it became public that Bharara had subpoenaed a number of Cuomo officials and allies as part of his Buffalo Billion probe.</p> <p>&ldquo;We engaged an organization headed by a former prosecutor to review our entire procurement system. We have that report. It recommends changes to the procurement system,&rdquo; Cuomo said on Friday of Schwartz&rsquo;s investigation. &ldquo;We accept all the changes to the procurement system and we are going to be instituting them immediately to make sure whatever can be done to protect the taxpayer dollars is going to be done.&rdquo;</p> <p>However, the Cuomo administration has not made Schwartz&rsquo;s report public. Cuomo announced that the &ldquo;independent&rdquo; investigation came to a conclusion on the same day Bharara unveiled related charges, in an apparent attempt at moving the conversation from the charges toward reforms. The governor said earlier this year that he wouldn&rsquo;t have a problem releasing Schwartz&rsquo;s report, but that it may not be made public depending on whether Bharara&rsquo;s office approved its release.</p> <p>Bharara&rsquo;s office declined to comment on whether its representatives had spoken to Schwartz or the Cuomo administration about the report.</p> <p>Schwartz&rsquo;s office declined to comment on whether the report will be made public or how it will be implemented.</p> <p>The Cuomo administration failed to return requests for comment about whether the report will be made public and what kind of changes will be made to the state&rsquo;s economic development programs to reduce corruption risk. Representatives for Cuomo also failed to respond to a question about whether Schwartz looked into, or continues to investigate, malfeasance in the state&rsquo;s economic development programs.</p> <p>When Bharara announced the charges at a Thursday news conference, he said that his investigation is &ldquo;ongoing.&rdquo; Bharara said that Cuomo was not implicated in the criminal complaint, but would not comment about whether the governor is an ongoing target. On Wednesday, Cuomo told reporters that he was not interviewed by Bharara&rsquo;s office and that he did not expect to testify in Percoco&rsquo;s trial, if there is one.</p> <p>David Friedfel, director of state studies for the Citizens Budget Commission, said CBC welcomes the handover of state projects to Empire State Development Corp. &ldquo;We certainly think the move to the ESDC is a good idea. In general we take the view that if you can&rsquo;t do what you want to do with economic development through a government entity you should not be able to do it or be allowed to create a non-government entity to do it,&rdquo; he said.</p> <p>While ESDC does appear to have stricter contracting rules in place than SUNY Poly and its nonprofits, in the end both are controlled by Cuomo.</p> <p>And ESDC didn&rsquo;t go untouched by the recently revealed criminal charges, which were brought against nine people and showed a system lacking oversight. One of the charges against Cuomo&rsquo;s close friend and former top aide Joseph Percoco is that he took a $35,000 bribe to get ESDC to select a company for a project it didn&rsquo;t technically qualify for.</p> <p>Watchdogs believe the state used SUNY Poly and the nonprofits it oversees, like Fort Schuyler Management, in an end-run around standard state contracting protocols and to reduce public scrutiny, in part to fast track expensive projects. On Wednesday, Cuomo repeatedly blamed the alleged corruption on that same system, which he has done nothing to reform. He told reporters on Wednesday that the system &ldquo;had worked fine for 15 years. In retrospect I did not revisit their procurement system because they&rsquo;re a separate branch, they&rsquo;re a separate agency,&rdquo; Cuomo said, appearing to reference SUNY Poly. &ldquo;We will do just that,&rdquo; he promised of such a reexamination.</p> <p>Cuomo said on Friday in Buffalo that Zemsky will &ldquo;learn from what happened and to see how we can improve the system to make sure that it never happens again.&rdquo;</p> <p>The idea that there isn&rsquo;t already a blueprint on the table on how to avoid the pitfalls connected to the administration&rsquo;s use of nonprofits to administer economic development programs is laughable to many groups that have been calling for drastic changes for years and warning of corruption.</p> <p>&ldquo;Right now all we have are vague, undefined reforms wrapped in secrecy,&rdquo; said John Kaehny of Reinvent Albany, a group that has followed economic development projects closely. &ldquo;The questions we have about the administration&rsquo;s approach remain the same as the questions we had last year.&rdquo;</p> <p>While Cuomo plans to wait until January to unveil his changes to the state&rsquo;s economic development procurement system, a number of watchdog groups have been clear for over a year on what changes needed to occur to better prevent corruption. Comptroller Thomas DiNapoli has also complained that Cuomo and the Legislature stripped him of his ability to review contracts at SUNY, something watchdogs have echoed. State legislative leaders have said little about the issue.</p> <p>In a letter dated September 23, 2015, several groups, including CBC, Reinvent Albany, Citizens Union, Fiscal Policy Institute, and the New York Public Interest Research Group, called on Cuomo to increase accountability and transparency surrounding economic development projects. The groups asked Cuomo to consider &ldquo;making one state agency the sole negotiator and implementer of state subsidy deals with public review and input, and ending the use of state controlled non-profit groups and the state university system in the contract award process.&rdquo;</p> <p>In a letter dated December 23, 2015, some of the same groups called on the state to implement a &ldquo;database of deals&rdquo; to allow for greater transparency and give New Yorkers a better idea of whether businesses that receive subsidies, like SolarCity, are actually keeping their promises to the state on deliverables like jobs.</p> <p>Wall Street&rsquo;s faith in SolarCity has been shaken in recent months and the company has altered the timeline for what it will produce. Meanwhile, the state paused a payment to the company this week that would allow it to purchase factory equipment it needs for its Riverbend Plant. The state has repeatedly skipped scheduled payments to SolarCity this year, <a href="http://www.politico.com/states/new-york/albany/story/2016/09/state-delays-payments-on-solarcity-factory-equipment-105776" target="_blank">as reported by Politico New York</a>.</p> <p>Friedfel said that CBC would prefer to see the state stick to economic development programs where businesses are forced to deliver on their promises before they see payment from the state. &ldquo;Our view, taken apart from the criminal charges, is that economic development should be done with set metrics that are accomplished ahead of time the state makes any payments,&rdquo; he said. &ldquo;The state should only spend after promises are delivered on.&rdquo;</p> <p>

***
by David King, Albany editor, Gotham Gazette
     

Read more by this writer.

</p> <p>Note: Gotham Gazette is an independent publication of Citizens Union Foundation, sister organization of Citizens Union.</p>
<p><img src="http://www.gothamgazette.com/images/graphics/2014/03/29878309492_c6ac23da80_z.jpg" alt="Cuomo gaggle teacher award night" width="600" height="393" /></p> <p>Gov. Cuomo (photo: Kevin P. Coughlin/Governor's Office)</p> <hr /> <p>A day after United States Attorney Preet Bharara unveiled a myriad of corruption charges against two of his closest allies and some of his biggest donors related to their abuse of the state&rsquo;s economic development programs, Gov. Andrew Cuomo traveled to Buffalo to announce he was expanding the program that sparked Bharara&rsquo;s investigation.</p> <p>Cuomo publicly acknowledged the &ldquo;truly disappointing&rdquo; allegations and told the gathered crowd that his administration plans to learn from revelations about bid-rigging and bribery schemes. He also promised not to &ldquo;miss a beat&rdquo; and pledged his administration will &ldquo;redouble our efforts&rdquo; on economic development projects in Buffalo and Western New York.</p> <p>What exactly Cuomo has learned and what he and his administration actually plan to do about the alleged corruption - which was uncovered by reporters and watchdogs over a year ago and outlined by Bharara last week - remains largely unclear. The lack of clarity is especially stark given the amount of time the administration has had to formulate a response to problems and change protocols.</p> <p>On Friday, Cuomo announced that the Empire State Development Corporation would take over a portfolio of projects previously overseen by SUNY Polytechnic President Alain Kaloyeros, who was suspended without pay after he was charged Thursday in two separate bid-rigging investigations (one by Bharara and one by Attorney General Eric Schneiderman).</p> <p>&ldquo;We are today going to take that portfolio of responsibility, those projects, transfer them all to the Empire State Development Corporation, which is run by a fellow named Howard Zemsky is his name, and he&rsquo;ll take over management of that immediately,&rdquo; Cuomo said on Friday.</p> <p>Asked if the governor&rsquo;s announcement would end the use of nonprofits under SUNY Poly to administer economic development projects, Cuomo spokesperson Dani Lever told Gotham Gazette that &ldquo;ESDC will oversee all economic development projects.&rdquo;</p> <p>Cuomo said this week that Zemsky will formulate new procedures and oversight mechanisms to be unveiled in January during the governor&rsquo;s State of the State Address. Cuomo is also expected to debut a new phase of the Buffalo Billion in the same speech.</p> <p>On Friday, Cuomo also cited a report from Bart Schwartz, a lawyer retained by the governor in April after it became public that Bharara had subpoenaed a number of Cuomo officials and allies as part of his Buffalo Billion probe.</p> <p>&ldquo;We engaged an organization headed by a former prosecutor to review our entire procurement system. We have that report. It recommends changes to the procurement system,&rdquo; Cuomo said on Friday of Schwartz&rsquo;s investigation. &ldquo;We accept all the changes to the procurement system and we are going to be instituting them immediately to make sure whatever can be done to protect the taxpayer dollars is going to be done.&rdquo;</p> <p>However, the Cuomo administration has not made Schwartz&rsquo;s report public. Cuomo announced that the &ldquo;independent&rdquo; investigation came to a conclusion on the same day Bharara unveiled related charges, in an apparent attempt at moving the conversation from the charges toward reforms. The governor said earlier this year that he wouldn&rsquo;t have a problem releasing Schwartz&rsquo;s report, but that it may not be made public depending on whether Bharara&rsquo;s office approved its release.</p> <p>Bharara&rsquo;s office declined to comment on whether its representatives had spoken to Schwartz or the Cuomo administration about the report.</p> <p>Schwartz&rsquo;s office declined to comment on whether the report will be made public or how it will be implemented.</p> <p>The Cuomo administration failed to return requests for comment about whether the report will be made public and what kind of changes will be made to the state&rsquo;s economic development programs to reduce corruption risk. Representatives for Cuomo also failed to respond to a question about whether Schwartz looked into, or continues to investigate, malfeasance in the state&rsquo;s economic development programs.</p> <p>When Bharara announced the charges at a Thursday news conference, he said that his investigation is &ldquo;ongoing.&rdquo; Bharara said that Cuomo was not implicated in the criminal complaint, but would not comment about whether the governor is an ongoing target. On Wednesday, Cuomo told reporters that he was not interviewed by Bharara&rsquo;s office and that he did not expect to testify in Percoco&rsquo;s trial, if there is one.</p> <p>David Friedfel, director of state studies for the Citizens Budget Commission, said CBC welcomes the handover of state projects to Empire State Development Corp. &ldquo;We certainly think the move to the ESDC is a good idea. In general we take the view that if you can&rsquo;t do what you want to do with economic development through a government entity you should not be able to do it or be allowed to create a non-government entity to do it,&rdquo; he said.</p> <p>While ESDC does appear to have stricter contracting rules in place than SUNY Poly and its nonprofits, in the end both are controlled by Cuomo.</p> <p>And ESDC didn&rsquo;t go untouched by the recently revealed criminal charges, which were brought against nine people and showed a system lacking oversight. One of the charges against Cuomo&rsquo;s close friend and former top aide Joseph Percoco is that he took a $35,000 bribe to get ESDC to select a company for a project it didn&rsquo;t technically qualify for.</p> <p>Watchdogs believe the state used SUNY Poly and the nonprofits it oversees, like Fort Schuyler Management, in an end-run around standard state contracting protocols and to reduce public scrutiny, in part to fast track expensive projects. On Wednesday, Cuomo repeatedly blamed the alleged corruption on that same system, which he has done nothing to reform. He told reporters on Wednesday that the system &ldquo;had worked fine for 15 years. In retrospect I did not revisit their procurement system because they&rsquo;re a separate branch, they&rsquo;re a separate agency,&rdquo; Cuomo said, appearing to reference SUNY Poly. &ldquo;We will do just that,&rdquo; he promised of such a reexamination.</p> <p>Cuomo said on Friday in Buffalo that Zemsky will &ldquo;learn from what happened and to see how we can improve the system to make sure that it never happens again.&rdquo;</p> <p>The idea that there isn&rsquo;t already a blueprint on the table on how to avoid the pitfalls connected to the administration&rsquo;s use of nonprofits to administer economic development programs is laughable to many groups that have been calling for drastic changes for years and warning of corruption.</p> <p>&ldquo;Right now all we have are vague, undefined reforms wrapped in secrecy,&rdquo; said John Kaehny of Reinvent Albany, a group that has followed economic development projects closely. &ldquo;The questions we have about the administration&rsquo;s approach remain the same as the questions we had last year.&rdquo;</p> <p>While Cuomo plans to wait until January to unveil his changes to the state&rsquo;s economic development procurement system, a number of watchdog groups have been clear for over a year on what changes needed to occur to better prevent corruption. Comptroller Thomas DiNapoli has also complained that Cuomo and the Legislature stripped him of his ability to review contracts at SUNY, something watchdogs have echoed. State legislative leaders have said little about the issue.</p> <p>In a letter dated September 23, 2015, several groups, including CBC, Reinvent Albany, Citizens Union, Fiscal Policy Institute, and the New York Public Interest Research Group, called on Cuomo to increase accountability and transparency surrounding economic development projects. The groups asked Cuomo to consider &ldquo;making one state agency the sole negotiator and implementer of state subsidy deals with public review and input, and ending the use of state controlled non-profit groups and the state university system in the contract award process.&rdquo;</p> <p>In a letter dated December 23, 2015, some of the same groups called on the state to implement a &ldquo;database of deals&rdquo; to allow for greater transparency and give New Yorkers a better idea of whether businesses that receive subsidies, like SolarCity, are actually keeping their promises to the state on deliverables like jobs.</p> <p>Wall Street&rsquo;s faith in SolarCity has been shaken in recent months and the company has altered the timeline for what it will produce. Meanwhile, the state paused a payment to the company this week that would allow it to purchase factory equipment it needs for its Riverbend Plant. The state has repeatedly skipped scheduled payments to SolarCity this year, <a href="http://www.politico.com/states/new-york/albany/story/2016/09/state-delays-payments-on-solarcity-factory-equipment-105776" target="_blank">as reported by Politico New York</a>.</p> <p>Friedfel said that CBC would prefer to see the state stick to economic development programs where businesses are forced to deliver on their promises before they see payment from the state. &ldquo;Our view, taken apart from the criminal charges, is that economic development should be done with set metrics that are accomplished ahead of time the state makes any payments,&rdquo; he said. &ldquo;The state should only spend after promises are delivered on.&rdquo;</p> <p>

***
by David King, Albany editor, Gotham Gazette
     

Read more by this writer.

</p> <p>Note: Gotham Gazette is an independent publication of Citizens Union Foundation, sister organization of Citizens Union.</p>
Reevaluating New York Economic Development Programs 2016-08-10T04:00:00+00:00 2016-08-10T04:00:00+00:00 http://www.gothamgazette.com/?id=6475:reevaluating-new-york-economic-development-programs Ben Max <p><img src="http://www.gothamgazette.com/images/graphics/2014/03/28875889095_fd243305e8_z.jpg" alt="Cuomo Geico jobs econ dev" width="600" height="400" /></p> <p>Gov. Cuomo at a jobs announcement (photo:&nbsp;Philip Kamrass, Governor's Office)</p> <hr /> <p>Over the last few weeks, several reports and legislative hearings have once again cast an unflattering light on New York&rsquo;s economic development policies. Unfortunately, this is nothing new. In my 14 years serving in the State Senate, I&rsquo;ve seen the names of the programs change, but the results remain the same &ndash; huge giveaways to a select group of companies that don&rsquo;t live up to their job creation promises.</p> <p>On the Friday before the Independence Day holiday &ndash; a great time to dump bad news - the state released the job creation figures for Start-Up New York, Governor Cuomo&rsquo;s much-touted program of tax-free zones primarily around colleges. You had to read the fine print to find the number of jobs created for the first two years of the program: 76 in 2014 and 408 in 2015 (although closer analysis revealed the actual number for 2015 was 395). This from a program for which the state has spent over $50 million, around $130,000 per job, just for advertising alone. The report also indicates about $1.1 million in tax breaks associated with the program in addition to these expensive ads.</p> <p>At an August 3 hearing, the Assembly Committee on Economic Development grilled administration officials on these unimpressive results, and also questioned why the bulk of these government funded ads were spent in the months before the 2014 election, when the governor was seeking a second term. In his testimony, E.J. McMahon of the Empire Center for Public Policy, a conservative policy think-tank, provided some particularly useful analysis of just how much money is being devoted to these programs, and pointed out that the problems with Start-Up are just the tip of the iceberg.</p> <p>According to McMahon:<br />&ldquo;In the 2017 fiscal year, on-budget disbursements for economic development are projected to increase by $844 million&mdash;more than doubling the fiscal 2016 figure&hellip;From 2017 through 2021, the Empire State Development Corp. is expected to spend more than $6.6 billion on these and other programs, with roughly three-quarters of the money generated by backdoor borrowing&hellip;At least a half-billion more will be spent during this period on the Excelsior Jobs Program. And another $420 million a year in refundable tax credits will flow into the pockets of film and TV producers and production companies&mdash;plus $50 million a year in newly created music and video game development tax credits.&rdquo;</p> <p>Coming up with a complete accounting of all programs is extremely difficult, given the lack of transparency around economic development expenditures. Other states such as Illinois and Vermont require a Unified Economic Development Budget as part of their budget process, and I have long carried legislation that would create such a budgetary requirement in New York. Many legislators and testifiers at the Assembly hearing expressed frustration at the difficulty of evaluating the effectiveness of these programs given the lack of information about real cost and job creation numbers.</p> <p>Recent <a href="http://www.osc.state.ny.us/press/index.htm" target="_blank">reports</a> from Comptroller Thomas DiNapoli on the Excelsior Jobs and Power for Jobs programs have highlighted similar issues. In his review of the Excelsior program administered by Empire State Development, the comptroller found a lack of documentation that many participants were even eligible. Furthermore, because of a reliance on self-reporting, for many companies it was impossible to verify job creation claims, or that the jobs created met requirements for work hours. Additionally, the comptroller found that job-creation goals for some companies were lowered after they failed to meet their targets.</p> <p>Problems with the Power for Jobs program administered by the New York Power Authority (NYPA) were even more galling. NYPA allocates power to businesses and not-for-profits that agree to retain or create jobs in New York and to make capital investments. Among other findings, the Comptroller discovered that NYPA&rsquo;s method of reporting participation in the program resulted in overstating job retention and creation by almost 30,000 jobs.</p> <p>It is understandable that the governor and economic development agencies want to appear proactive in efforts to create jobs, particularly in struggling areas of the state. However, New York&rsquo;s hard-working families need real jobs, not just accounting tricks. Economic development programs need to be based on facts, not wishful thinking, and must be completely transparent about their costs and results.</p> <p>The evidence continues to pour in that New York&rsquo;s current policies may benefit specific recipients, but they do not amount to a coherent or cost-effective strategy for job creation in our state.</p> <p>***<br />Liz Krueger is a New York State Senator representing the East Side of Manhattan, and the ranking Democratic member of the Senate Finance Committee. On Twitter <a href="https://twitter.com/LizKrueger" target="_blank">@LizKrueger</a>.</p> <p>

***
Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

</p> <p>Note: this column has been updated to accurately reflect the tax breaks associated with Start-Up NY, about $1.1 million, included in the report referenced.</p>
<p><img src="http://www.gothamgazette.com/images/graphics/2014/03/28875889095_fd243305e8_z.jpg" alt="Cuomo Geico jobs econ dev" width="600" height="400" /></p> <p>Gov. Cuomo at a jobs announcement (photo:&nbsp;Philip Kamrass, Governor's Office)</p> <hr /> <p>Over the last few weeks, several reports and legislative hearings have once again cast an unflattering light on New York&rsquo;s economic development policies. Unfortunately, this is nothing new. In my 14 years serving in the State Senate, I&rsquo;ve seen the names of the programs change, but the results remain the same &ndash; huge giveaways to a select group of companies that don&rsquo;t live up to their job creation promises.</p> <p>On the Friday before the Independence Day holiday &ndash; a great time to dump bad news - the state released the job creation figures for Start-Up New York, Governor Cuomo&rsquo;s much-touted program of tax-free zones primarily around colleges. You had to read the fine print to find the number of jobs created for the first two years of the program: 76 in 2014 and 408 in 2015 (although closer analysis revealed the actual number for 2015 was 395). This from a program for which the state has spent over $50 million, around $130,000 per job, just for advertising alone. The report also indicates about $1.1 million in tax breaks associated with the program in addition to these expensive ads.</p> <p>At an August 3 hearing, the Assembly Committee on Economic Development grilled administration officials on these unimpressive results, and also questioned why the bulk of these government funded ads were spent in the months before the 2014 election, when the governor was seeking a second term. In his testimony, E.J. McMahon of the Empire Center for Public Policy, a conservative policy think-tank, provided some particularly useful analysis of just how much money is being devoted to these programs, and pointed out that the problems with Start-Up are just the tip of the iceberg.</p> <p>According to McMahon:<br />&ldquo;In the 2017 fiscal year, on-budget disbursements for economic development are projected to increase by $844 million&mdash;more than doubling the fiscal 2016 figure&hellip;From 2017 through 2021, the Empire State Development Corp. is expected to spend more than $6.6 billion on these and other programs, with roughly three-quarters of the money generated by backdoor borrowing&hellip;At least a half-billion more will be spent during this period on the Excelsior Jobs Program. And another $420 million a year in refundable tax credits will flow into the pockets of film and TV producers and production companies&mdash;plus $50 million a year in newly created music and video game development tax credits.&rdquo;</p> <p>Coming up with a complete accounting of all programs is extremely difficult, given the lack of transparency around economic development expenditures. Other states such as Illinois and Vermont require a Unified Economic Development Budget as part of their budget process, and I have long carried legislation that would create such a budgetary requirement in New York. Many legislators and testifiers at the Assembly hearing expressed frustration at the difficulty of evaluating the effectiveness of these programs given the lack of information about real cost and job creation numbers.</p> <p>Recent <a href="http://www.osc.state.ny.us/press/index.htm" target="_blank">reports</a> from Comptroller Thomas DiNapoli on the Excelsior Jobs and Power for Jobs programs have highlighted similar issues. In his review of the Excelsior program administered by Empire State Development, the comptroller found a lack of documentation that many participants were even eligible. Furthermore, because of a reliance on self-reporting, for many companies it was impossible to verify job creation claims, or that the jobs created met requirements for work hours. Additionally, the comptroller found that job-creation goals for some companies were lowered after they failed to meet their targets.</p> <p>Problems with the Power for Jobs program administered by the New York Power Authority (NYPA) were even more galling. NYPA allocates power to businesses and not-for-profits that agree to retain or create jobs in New York and to make capital investments. Among other findings, the Comptroller discovered that NYPA&rsquo;s method of reporting participation in the program resulted in overstating job retention and creation by almost 30,000 jobs.</p> <p>It is understandable that the governor and economic development agencies want to appear proactive in efforts to create jobs, particularly in struggling areas of the state. However, New York&rsquo;s hard-working families need real jobs, not just accounting tricks. Economic development programs need to be based on facts, not wishful thinking, and must be completely transparent about their costs and results.</p> <p>The evidence continues to pour in that New York&rsquo;s current policies may benefit specific recipients, but they do not amount to a coherent or cost-effective strategy for job creation in our state.</p> <p>***<br />Liz Krueger is a New York State Senator representing the East Side of Manhattan, and the ranking Democratic member of the Senate Finance Committee. On Twitter <a href="https://twitter.com/LizKrueger" target="_blank">@LizKrueger</a>.</p> <p>

***
Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

</p> <p>Note: this column has been updated to accurately reflect the tax breaks associated with Start-Up NY, about $1.1 million, included in the report referenced.</p>
Spurred by Buffalo Billion, Reformers Look to Fix State Business Subsidies 2015-10-19T00:37:47+00:00 2015-10-19T00:37:47+00:00 http://www.gothamgazette.com/?id=5940:spurred-by-buffalo-billion-reformers-look-to-fix-state-business-subsidies Super User <p><img src="http://www.gothamgazette.com/images/20270165526_1d289da1ce_z.jpg" alt="Cuomo Buffalo thank you" width="600" height="400" /></p> <p>Cuomo in Buffalo (<a href="https://www.flickr.com/photos/governorandrewcuomo/20270165526/in/album-72157656766450752/" target="_blank">photo</a>: Governor's Office via flickr)</p> <hr /> <p>United States Attorney Preet Bharara's attention has been drawn away from his normal stomping grounds to Buffalo, intrigued by what critics say is a shadowy network of state authorities and state-controlled non-profits handing out large business subsidies and contracts with little to no oversight.</p> <p>Watchdogs say that Gov. Andrew Cuomo, through SUNY Polytechnic head <a href="http://www.gothamgazette.com/index.php/government/5912-alain-kaloyeros-powerful-centerpiece-of-buffalo-billion-could-become-household-name" target="_blank">Alain Kaloyeros</a>, is essentially rewarding campaign donors with major contracts while using state cash to win political favor in economically-depressed areas. That sense has been exacerbated by a forceful <a href="http://www.gothamgazette.com/index.php/government/5925-buffalo-billion-boss-offers-cancels-interview-claims-threat-of-jail" target="_blank">push back</a> against transparency by both the Cuomo administration and Kaloyeros.</p> <p>Last legislative session the renewal of the 421-A tax break for real estate developers was the center of debate over business subsidies thanks to Bharara's indictments of former Assembly Speaker Sheldon Silver and former Senate Majority Leader Dean Skelos. Both face corruption charges stemming from their involvement with a major donor who sought renewal of the tax break.</p> <p>But Bharara's interest in Buffalo Billion has shifted the gaze of some reformers and legislators to discretionary subsidies that are controlled by the Governor. At the heart of the U.S. Attorney's investigation appears to be requests for proposals written in a way to ensure one company, led by a major donor to the governor, would win the lucrative contract at stake.</p> <p>"We believe many of these programs are out of control," said John Kaehny of Reinvent Albany, a group that has been focused on these subsidies. Kaehny said the programs have been "generally wasteful and driven more by pay-to-play or interest in providing local pork than derived from sound public policy."</p> <p>Kaehny, a number of other reformers, and a small group of legislators want to pull back the curtain on these deals and create a system of true accountability that would show how contracts are awarded, how many jobs the contracts create, and how much state money is spent per job. Kaehny isn't exactly holding his breath, though, because he believes the current system was designed specifically to obfuscate and confuse.</p> <p>"We do not see any reasonable motivation for the convoluted governance structure created by the governor other than to avoid oversight," Kaehny told Gotham Gazette. Kaehny said Cuomo has "created a legal fiction" involving SUNY Research Foundation and the Fort Schuyler Management Corporation, which sign contracts "on behalf of" state agencies like SUNY Poly. The state funnels money for a number of programs from Empire State Development Corporation, a state-run authority that has virtually no legislative or public oversight.</p> <p>"Funding also comes from theoretically independent state authorities like NYSERDA and the Power Authority, which are told by the governor to provide money, power and land to SUNY Poly, which then gives resources away to select businesses," said Kaehny. "We believe this complexity is a deliberate effort to avoid transparency and accountability by the governor."</p> <p>Some lawmakers are in the early stages of exploring legislative changes to how the state approves business subsidies. A few of them have been motivated by an Investigative Post <a href="http://www.investigativepost.org/2015/09/30/minority-workers-get-short-shrift-at-riverbend/" target="_blank">report</a> that the Cuomo administration dropped requirements to hire workers of color in one Buffalo Billion contract from 25 to 15 percent.</p> <p>Others have been troubled by Cuomo's <a href="http://www.ibtimes.com/andrew-cuomo-ge-deal-ny-taxpayers-subsidize-general-electric-critics-slam-company-2068579" target="_blank">efforts</a> to entice General Electric (GE) to move its headquarters back to the state. So far Cuomo has refused to detail what kind of incentives he has offered the company. Some legislators are concerned the company has yet to make good on its pledge to clean up the PCBs it poured into the Hudson River years ago and that its headquarters would have no economic benefit for the state.</p> <p>"We have a real problem in New York with learning from history," said Ron Deutsch of the Fiscal Policy Institute. He said that New York has given businesses like GE, IBM, and Globalfoundries major incentives only to see them cut jobs, or move overseas. "We do nothing to hold anyone accountable" in the end, he said.</p> <p>Cuomo has made it clear in conversations with the press that he sees no reason to scrutinize the Buffalo Billion program. Asked if he thought any procedures needed to be changed because of the investigation, Cuomo <a href="http://www.capitalnewyork.com/article/albany/2015/10/8579002/cuomo-no-reason-question-buffalo-billion-contracting" target="_blank">responded</a>: "Do you know if there was any problem? No. If you knew there was a problem, then you would fix the problem. But we don't know any problem."</p> <p>Good Jobs First, a national policy group that tracks business subsidies, actually rated New York 8th out of all 50 states on transparency for subsidy disclosures in a <a href="http://www.goodjobsfirst.org/showusthesubsidizedjobs" target="_blank">report</a> released in January of last year.</p> <p>Another <a href="http://www.goodjobsfirst.org/megadeals" target="_blank">study</a> by the group found that New York spends more on "megadeals" than any other state. Megadeals are defined as subsidy agreements with businesses that cost $75 million or more. The 2013 report by Good Jobs First found that New York had spent $11.4 billion on such deals from 1984 to 2013.</p> <p>When asked where New York's subsidy programs rank overall compared to other states, Greg LeRoy, executive director of Good Jobs First, replied, "Pick your metric."</p> <p>SUNY Poly issued the following statement:</p> <p>"In fact, neither SUNY Poly nor its affiliates have ever been in a position to unilaterally approve a single Buffalo project, including Buffalo project contracts or expenditures. The New York State system simply does not allow it. There are checks and balances at every step, layers of state oversight, internal and external audits, public hearings, public board meetings, and public votes."</p> <p>So what can be done to prevent both the appearance and the reality of conflicts of interest; restore transparency and confidence in the system; and make sure someone is accountable for the way billions of dollars of taxpayer money is spent? Reformers have some suggestions.</p> <p>One simple reform would be to ban businesses that win subsidies from donating large amounts to elected officials. The state need only look to New York City to see an effective model. In 2007, then City Council Speaker Christine Quinn and Mayor Michael Bloomberg <a href="http://www.gothamgazette.com/index.php/economy/3585-what-the-campaign-finance-bill-would-do--and-not-do" target="_blank">reached a campaign financing deal</a> that drastically reduced the amount any government contractor or group with business before the city can give to any campaign.</p> <p>"Even the appearance of conflict of interest is a problem," said Deutsch, of the Fiscal Policy Institute.</p> <p>Another piece of the puzzle could be eliminating the LLC loophole so that businesses cannot create multiple fronts to pour cash into the campaign coffers of state electeds.</p> <p>To enhance transparency, advocates say the convoluted route by which money goes from the state to businesses needs to be simplified.</p> <p>Kaehny said he wants to see the Empire State Development Corporation become a one-stop shop for business subsidies. Preventing state-controlled non-profits from distributing state funds would theoretically increase transparency by streamlining the decision-making process.</p> <p>Both the Comptroller and Attorney General do have some oversight capabilities, but the Comptroller had some authority <a href="http://www.timesunion.com/local/article/DiNapoli-We-used-to-have-more-oversight-over-6554885.php" target="_blank">stripped away</a> in 2011 by a bill that limited the office's ability to audit SUNY and CUNY as well as its hospitals and construction funds. Fort Schuyler and SUNY Poly have led the distribution of Buffalo Billion funds.</p> <p>DiNapoli noted the situation during a <a href="http://www.wcny.org/oct-6-2015-comptroller-dinapoli-save-burden-lake-dr-clifton-wharton-jonathan-gradess/" target="_blank">recent appearance</a> on WCNY's Capitol Pressroom with Susan Arbetter. "Our authority in some of these areas was curtailed a few years ago," DiNapoli said. "We complained about that at the time."</p> <p>Kaehny said he wants to see the Comptroller and the Attorney General push publically on the issue of transparency. It isn't totally obvious how hard the Comptroller has been pushing for this information or not. If we had a right-wing Republican in the office I'm fairly sure we would see someone pushing relentlessly and using their bully pulpit when they weren't given the answers," Kaehny said, referring to the fact that all of the statewide offices are controlled by Democrats.</p> <p>"The Comptroller could speak up clearly and directly and say: 'Here is what we don't know. Here are the dark spots. Here is where we see these structures created to defeat transparency,'" Kaehny said.</p> <p>Still, many calling for change would like the Comptroller's office to have complete oversight over all subsidy deals.</p> <p>One final, and perhaps farfetched possibility would be creating a State Independent Budget Office in the model of New York City's that would actually weigh the risks and possible rewards of highly nuanced tech and other business deals so that legislators and the public would understand where state money may be going. Deutsch said that someone needs to start asking a basic question: "How much is a job worth?"</p> <p>The Cuomo administration has repeatedly <a href="http://www.nystateofpolitics.com/2015/09/hochul-probe-wont-stifle-buffalo-billion-jobs/" target="_blank">stated</a> that the Buffalo Billion will create 14,000 reliable jobs and attract $8 billion in investment as a result of the roughly $1 billion state expenditure.</p> <p>It seems unlikely any of the reforms being discussed to the subsidy process will pick up steam in an election year, especially as Albany waits to see if Bharara's investigation leads to criminal charges.</p> <p>"There are simple solutions," said Kaehny, "but they are very hard to get done because there is no will."</p> <p>***<br />by David King, Albany editor, Gotham Gazette<br /><a href="https://twitter.com/DavidHowardKing" target="_blank">@DavidHowardKing</a></p> <p>Note: this article has been updated with a clarification from John Kaehny that Reinvent Albany beieves "many," not "most," of the subsidy programs are "out of control"</p> <p><img src="http://www.gothamgazette.com/images/20270165526_1d289da1ce_z.jpg" alt="Cuomo Buffalo thank you" width="600" height="400" /></p> <p>Cuomo in Buffalo (<a href="https://www.flickr.com/photos/governorandrewcuomo/20270165526/in/album-72157656766450752/" target="_blank">photo</a>: Governor's Office via flickr)</p> <hr /> <p>United States Attorney Preet Bharara's attention has been drawn away from his normal stomping grounds to Buffalo, intrigued by what critics say is a shadowy network of state authorities and state-controlled non-profits handing out large business subsidies and contracts with little to no oversight.</p> <p>Watchdogs say that Gov. Andrew Cuomo, through SUNY Polytechnic head <a href="http://www.gothamgazette.com/index.php/government/5912-alain-kaloyeros-powerful-centerpiece-of-buffalo-billion-could-become-household-name" target="_blank">Alain Kaloyeros</a>, is essentially rewarding campaign donors with major contracts while using state cash to win political favor in economically-depressed areas. That sense has been exacerbated by a forceful <a href="http://www.gothamgazette.com/index.php/government/5925-buffalo-billion-boss-offers-cancels-interview-claims-threat-of-jail" target="_blank">push back</a> against transparency by both the Cuomo administration and Kaloyeros.</p> <p>Last legislative session the renewal of the 421-A tax break for real estate developers was the center of debate over business subsidies thanks to Bharara's indictments of former Assembly Speaker Sheldon Silver and former Senate Majority Leader Dean Skelos. Both face corruption charges stemming from their involvement with a major donor who sought renewal of the tax break.</p> <p>But Bharara's interest in Buffalo Billion has shifted the gaze of some reformers and legislators to discretionary subsidies that are controlled by the Governor. At the heart of the U.S. Attorney's investigation appears to be requests for proposals written in a way to ensure one company, led by a major donor to the governor, would win the lucrative contract at stake.</p> <p>"We believe many of these programs are out of control," said John Kaehny of Reinvent Albany, a group that has been focused on these subsidies. Kaehny said the programs have been "generally wasteful and driven more by pay-to-play or interest in providing local pork than derived from sound public policy."</p> <p>Kaehny, a number of other reformers, and a small group of legislators want to pull back the curtain on these deals and create a system of true accountability that would show how contracts are awarded, how many jobs the contracts create, and how much state money is spent per job. Kaehny isn't exactly holding his breath, though, because he believes the current system was designed specifically to obfuscate and confuse.</p> <p>"We do not see any reasonable motivation for the convoluted governance structure created by the governor other than to avoid oversight," Kaehny told Gotham Gazette. Kaehny said Cuomo has "created a legal fiction" involving SUNY Research Foundation and the Fort Schuyler Management Corporation, which sign contracts "on behalf of" state agencies like SUNY Poly. The state funnels money for a number of programs from Empire State Development Corporation, a state-run authority that has virtually no legislative or public oversight.</p> <p>"Funding also comes from theoretically independent state authorities like NYSERDA and the Power Authority, which are told by the governor to provide money, power and land to SUNY Poly, which then gives resources away to select businesses," said Kaehny. "We believe this complexity is a deliberate effort to avoid transparency and accountability by the governor."</p> <p>Some lawmakers are in the early stages of exploring legislative changes to how the state approves business subsidies. A few of them have been motivated by an Investigative Post <a href="http://www.investigativepost.org/2015/09/30/minority-workers-get-short-shrift-at-riverbend/" target="_blank">report</a> that the Cuomo administration dropped requirements to hire workers of color in one Buffalo Billion contract from 25 to 15 percent.</p> <p>Others have been troubled by Cuomo's <a href="http://www.ibtimes.com/andrew-cuomo-ge-deal-ny-taxpayers-subsidize-general-electric-critics-slam-company-2068579" target="_blank">efforts</a> to entice General Electric (GE) to move its headquarters back to the state. So far Cuomo has refused to detail what kind of incentives he has offered the company. Some legislators are concerned the company has yet to make good on its pledge to clean up the PCBs it poured into the Hudson River years ago and that its headquarters would have no economic benefit for the state.</p> <p>"We have a real problem in New York with learning from history," said Ron Deutsch of the Fiscal Policy Institute. He said that New York has given businesses like GE, IBM, and Globalfoundries major incentives only to see them cut jobs, or move overseas. "We do nothing to hold anyone accountable" in the end, he said.</p> <p>Cuomo has made it clear in conversations with the press that he sees no reason to scrutinize the Buffalo Billion program. Asked if he thought any procedures needed to be changed because of the investigation, Cuomo <a href="http://www.capitalnewyork.com/article/albany/2015/10/8579002/cuomo-no-reason-question-buffalo-billion-contracting" target="_blank">responded</a>: "Do you know if there was any problem? No. If you knew there was a problem, then you would fix the problem. But we don't know any problem."</p> <p>Good Jobs First, a national policy group that tracks business subsidies, actually rated New York 8th out of all 50 states on transparency for subsidy disclosures in a <a href="http://www.goodjobsfirst.org/showusthesubsidizedjobs" target="_blank">report</a> released in January of last year.</p> <p>Another <a href="http://www.goodjobsfirst.org/megadeals" target="_blank">study</a> by the group found that New York spends more on "megadeals" than any other state. Megadeals are defined as subsidy agreements with businesses that cost $75 million or more. The 2013 report by Good Jobs First found that New York had spent $11.4 billion on such deals from 1984 to 2013.</p> <p>When asked where New York's subsidy programs rank overall compared to other states, Greg LeRoy, executive director of Good Jobs First, replied, "Pick your metric."</p> <p>SUNY Poly issued the following statement:</p> <p>"In fact, neither SUNY Poly nor its affiliates have ever been in a position to unilaterally approve a single Buffalo project, including Buffalo project contracts or expenditures. The New York State system simply does not allow it. There are checks and balances at every step, layers of state oversight, internal and external audits, public hearings, public board meetings, and public votes."</p> <p>So what can be done to prevent both the appearance and the reality of conflicts of interest; restore transparency and confidence in the system; and make sure someone is accountable for the way billions of dollars of taxpayer money is spent? Reformers have some suggestions.</p> <p>One simple reform would be to ban businesses that win subsidies from donating large amounts to elected officials. The state need only look to New York City to see an effective model. In 2007, then City Council Speaker Christine Quinn and Mayor Michael Bloomberg <a href="http://www.gothamgazette.com/index.php/economy/3585-what-the-campaign-finance-bill-would-do--and-not-do" target="_blank">reached a campaign financing deal</a> that drastically reduced the amount any government contractor or group with business before the city can give to any campaign.</p> <p>"Even the appearance of conflict of interest is a problem," said Deutsch, of the Fiscal Policy Institute.</p> <p>Another piece of the puzzle could be eliminating the LLC loophole so that businesses cannot create multiple fronts to pour cash into the campaign coffers of state electeds.</p> <p>To enhance transparency, advocates say the convoluted route by which money goes from the state to businesses needs to be simplified.</p> <p>Kaehny said he wants to see the Empire State Development Corporation become a one-stop shop for business subsidies. Preventing state-controlled non-profits from distributing state funds would theoretically increase transparency by streamlining the decision-making process.</p> <p>Both the Comptroller and Attorney General do have some oversight capabilities, but the Comptroller had some authority <a href="http://www.timesunion.com/local/article/DiNapoli-We-used-to-have-more-oversight-over-6554885.php" target="_blank">stripped away</a> in 2011 by a bill that limited the office's ability to audit SUNY and CUNY as well as its hospitals and construction funds. Fort Schuyler and SUNY Poly have led the distribution of Buffalo Billion funds.</p> <p>DiNapoli noted the situation during a <a href="http://www.wcny.org/oct-6-2015-comptroller-dinapoli-save-burden-lake-dr-clifton-wharton-jonathan-gradess/" target="_blank">recent appearance</a> on WCNY's Capitol Pressroom with Susan Arbetter. "Our authority in some of these areas was curtailed a few years ago," DiNapoli said. "We complained about that at the time."</p> <p>Kaehny said he wants to see the Comptroller and the Attorney General push publically on the issue of transparency. It isn't totally obvious how hard the Comptroller has been pushing for this information or not. If we had a right-wing Republican in the office I'm fairly sure we would see someone pushing relentlessly and using their bully pulpit when they weren't given the answers," Kaehny said, referring to the fact that all of the statewide offices are controlled by Democrats.</p> <p>"The Comptroller could speak up clearly and directly and say: 'Here is what we don't know. Here are the dark spots. Here is where we see these structures created to defeat transparency,'" Kaehny said.</p> <p>Still, many calling for change would like the Comptroller's office to have complete oversight over all subsidy deals.</p> <p>One final, and perhaps farfetched possibility would be creating a State Independent Budget Office in the model of New York City's that would actually weigh the risks and possible rewards of highly nuanced tech and other business deals so that legislators and the public would understand where state money may be going. Deutsch said that someone needs to start asking a basic question: "How much is a job worth?"</p> <p>The Cuomo administration has repeatedly <a href="http://www.nystateofpolitics.com/2015/09/hochul-probe-wont-stifle-buffalo-billion-jobs/" target="_blank">stated</a> that the Buffalo Billion will create 14,000 reliable jobs and attract $8 billion in investment as a result of the roughly $1 billion state expenditure.</p> <p>It seems unlikely any of the reforms being discussed to the subsidy process will pick up steam in an election year, especially as Albany waits to see if Bharara's investigation leads to criminal charges.</p> <p>"There are simple solutions," said Kaehny, "but they are very hard to get done because there is no will."</p> <p>***<br />by David King, Albany editor, Gotham Gazette<br /><a href="https://twitter.com/DavidHowardKing" target="_blank">@DavidHowardKing</a></p> <p>Note: this article has been updated with a clarification from John Kaehny that Reinvent Albany beieves "many," not "most," of the subsidy programs are "out of control"</p>