Gotham Gazette https://www.gothamgazette.com/component/tags/tag/2439 Fri, 28 Feb 2020 02:07:38 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) Pointing to Amazon Announcement, Long Island City Co-op Renews Calls for Similar Tax Relief https://www.gothamgazette.com/city/8092-pointing-to-amazon-announcement-long-island-city-co-op-renews-calls-for-similar-tax-relief https://www.gothamgazette.com/city/8092-pointing-to-amazon-announcement-long-island-city-co-op-renews-calls-for-similar-tax-relief 640px long island city new york may 2015 panorama 3

CityLights, second building from right (photo: King of Hearts/Wikimedia Commons)


Amazon’s announcement that it will locate one of its two new “headquarters” in Long Island City, Queens triggered immediate backlash among some elected officials and residents of the community who fear the effects it will have on local housing prices and already strained infrastructure, among other consequences. But the residents of CityLights, the largest affordable co-op in Queens, are particularly incensed by the deal, and are calling out city and state officials for giving the nearly trillion-dollar technology giant billions in public subsidies while continuing to deny their own demand for an extension of a property tax abatement that they enjoyed for two decades.

Amazon, CityLights residents also say, will pay far less for leasing land for its new campus than the co-op does each year.

CityLights is a 42-story, 522-unit building home to 1,000 mostly middle- and fixed-income New Yorkers, and is managed by Queens West Development Corporation, a subsidiary of the state-run Empire State Development (ESD), a non-profit economic development agency. The building phased out of a 20-year tax abatement program in July and also saw a nearly doubling of its tax assessment by the city. The building now faces a $5.1 million tax bill -- it was $5.8 million but was reduced after the residents appealed to the city -- which threatens, they say, to push residents out of their homes because of a roughly 60 percent increase over five years in payments-in-lieu-of-taxes (PILOT). (The Amazon deal with the city and state also includes a PILOT program, whereby instead of paying taxes an entity contributes to some other fund, such as an infrastructure bank.)

Built on state-owned land, CityLights’ ground lease alone costs nearly $500,000 annually for the 700,000-square-foot building. By comparison, Amazon is expected to pay about $850,000 for the roughly 4 million square feet that the company will occupy in Long Island City.  

In a letter sent Tuesday to ESD President Howard Zemsky, Citylights Board President Joanna Rock called for the CityLights ground lease to be forgiven. “It is absurd that we are forced to pay half-a-million-dollars a year to ESD when our apartments were sold to us by the State under the guise of affordability,” she wrote. “But it adds insult to injury that Amazon will be charged far less than our “affordable” complex for the privilege of being in Long Island City.”

In a phone interview, Rock said it was “shameful” that CityLights residents have had to fight the city and the state for over a year-and-a-half for much-needed relief while Amazon was enticed with untold incentives (the negotiation process was in secret, with non-disclosure agreements signed).

“We watched the neighborhood go from dilapidated warehouses to high-rises and we’re being valued based on the rental buildings around us because that’s how the city does it,” she said, “and then Amazon comes in, and not only are they getting all these incentives, but [their ground lease] is like 85 percent less than what we pay. We’re a co-op, a not-for-profit. They are one of the wealthiest companies in existence.”

In a letter to CityLights residents in June, Zemsky indicated that ESD was working with the city “to craft a tailored solution.” But, he noted that the state could not act without approval from the city’s Department of Finance. Neither ESD nor the city Department of Finance responded to requests for comment for this article.

“I’m not even sure how to put into words how upsetting this is,” Rock said.

Local elected officials also took umbrage at the plight of CityLights residents in light of the Amazon deal. “Empire State Development is supposed to promote and protect our local economy, not pad the pockets of the richest man in the world,” City Council Member Jimmy Van Bramer, who represents Long Island City, said in a statement on Tuesday. “It is ridiculous that the bad HQ2 deal would charge Amazon a significantly lower rate per square foot for its ground lease than Citylights, the largest affordable housing co-op in Queens. The State must preserve the affordability of Long Island City and prioritize longtime residents and working families when dishing out tax breaks, not large corporations.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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Note -  This article has been updated to note that CityLights' tax bill was $5.1 million, not $5.2 million. 

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Pointing to Amazon Announcement, Long Island City Co-op Renews Calls for Similar Tax Relief Tue, 20 Nov 2018 05:00:00 +0000
State-Backed, Scandal-Plagued Entities Seek New Chapter https://www.gothamgazette.com/state/7732-state-backed-scandal-plagued-entities-seek-new-chapter https://www.gothamgazette.com/state/7732-state-backed-scandal-plagued-entities-seek-new-chapter govcuomo roswell

Howard Zemsky, of ESD, in Buffalo (photo via the Governor's office)


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.

The new face of the state’s tech development projects, Doug Grose, strikes a different image: subdued, old-school business executive.

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.

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.

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.

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.

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.

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 $1.5-billion computer chip center in Utica to a sprawling $24-billion nanotechnology complex at SUNY Polytechnic in Albany.

“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.

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.

“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.”

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.

“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.

He previously held numerous roles in the upstate tech industry, often overseeing public-private partnerships.

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, according to the Times Union. He came back to the company in 2004, helping lay the groundwork for a public-private partnership that has seen IBM establish a large lab at SUNY Polytechnic.

Grose is also a former CEO of GlobalFoundries, one of the biggest semiconductor makers in the world. It began receiving state funds and tax breaks in 2006, under then-Governor George Pataki.

Empire State Development touts GlobalFoundries as a success story. The company, which runs a computer chip lab called Fab 8 in Saratoga County, has created 3,500 jobs, according to the Albany-based Center for Economic Growth.

Grose has kept a low profile throughout his career. That marks a strong contrast with Kaloyeros, who was was known to speed around Albany 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 pointed out in 2002. After a Gotham Gazette profile in 2015, spurred by reports that SUNY Polytechnic had been subpoenaed, Kaloyeros offered, then rescinded an interview, citing the “threat of jail.”

While Grose sought to distinguish his style from that of Kaloyeros, he also had praise for SUNY Polytechnic’s former leader.

“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.”

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.

They voted to voluntarily conform to the state’s Freedom of Information Law in 2016 and 2017. A bill 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.

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 currently stalled in the Assembly.

Recent months have seen Fort Schuyler and Fuller Road open their meetings to the public, and they have begun posting recordings of their sessions to YouTube.

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.

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.

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."

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.

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.

"I want the taxpayers of New York to know that every dollar is guarded and guarded professionally,” Cuomo said in announcing the move in September of 2016.

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.

“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.

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.

“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.

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.

Government watchdogs say irrespective of the bureaucracy surrounding development projects, under the status quo, Cuomo ultimately calls the shots.

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.

Grose indicated his vision is at least as ambitious as Kaloyeros’ was -- even if it comes without the boasting.

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.

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.

“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.”

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by Shant Shahrigianh, Gotham Gazette
      

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State-Backed, Scandal-Plagued Entities Seek New Chapter Tue, 12 Jun 2018 04:00:00 +0000
First Annual State Economic Development Report Falls Short, Watchdogs Say https://www.gothamgazette.com/state/7480-first-annual-state-economic-development-report-falls-short-watchdogs-say https://www.gothamgazette.com/state/7480-first-annual-state-economic-development-report-falls-short-watchdogs-say Zemsky economic development

Howard Zemsky (photo: Govenor's Office)


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.

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.

The inaugural report was late.

“It will be out this week -- and that’s my fault, truthfully,” ESD president and CEO Howard Zemsky told state legislators somewhat sheepishly during the joint legislative budget hearing 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.”

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 an audit 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.

“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.

The annual report 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.”

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).

“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.”

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.

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.

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).

“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 pushed by CBC and other fiscal watchdogs and government reform groups.

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.

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.

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.

“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.”

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.

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.

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.  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. 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.

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 on Tuesday. (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.)

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.

"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."

The report also highlights 378 projects investing in infrastructure, marketing, and capacity building, leveraging $2.2 billion in private investment.

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.

“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.

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.

“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.

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?”

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.

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.

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by Rachel Silberstein, State government reporter, Gotham Gazette
     

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First Annual State Economic Development Report Falls Short, Watchdogs Say Wed, 14 Feb 2018 05:00:00 +0000