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 2017-10-23T05:54:46+00:00 Webmaster webmaster@gothamgazette.com 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>