Economic development in New York State — a tale of two cities

Among all the public issues discussed and debated on the federal, state and local levels of government, there is major consensus about the importance of economic matters – creating jobs, stimulating the economy. Once you get past those clichés, however, there is no major consensus about what to do about such things or how to measure the benefits of public development projects.

Steve Banko and I, in a campaign in the distant past, were once assigned the duty of writing a candidate’s economic development plan. It was very long – 49 different activities. The Buffalo Courier-Express printed it in toto. And when it was done, Steve and I had a good laugh when we realized that all we had actually done was to come up with a list of 49 action verbs – develop, produce, encourage, plan, stimulate, and on and on and on.

As people prepare to go to prison for their transgressions concerning the Buffalo Billion, the state has now refocused its economic development attention on the Queens Billions. While the state is busy handing out our money, many of us are left to wonder, what is the real benefit?

Three-quarters of the Buffalo Billion went to build and outfit the mammoth building in South Buffalo where Tesla is manufacturing/promising to manufacture/ trying to figure out how to manufacture roofing panels that keep your home warm while capturing energy from the sun. Employment by Tesla and their partner at the facility, Panasonic, peaked recently at about 800. Then Tesla laid off 50 people. Their contract with the State of New York says that employment will be more than 1,400 by April 2020. Otherwise the company will be liable for tens of millions of dollars in fines.

Tesla seems to be devoting most of its attention these days on building cars, or maybe going to Mars, and those projects seem to have many of their own problems. Tesla is struggling to figure out how to perfect the solar roofing product. Their share of national solar energy product sales is diminishing. It doesn’t seem like they will be throwing a big pizza party for the 1,400th employee in South Buffalo 14 months from now.

Meanwhile in Queens, New York City, the state and city have offered Amazon about $3 billion in tax benefits and related perks to build a facility that will employ 25,000 people. Amazon seems to be in a better position to actually deliver on their jobs commitment than Tesla.

In Buffalo the offer of 1,400 jobs has been welcomed by politicians and community folks alike. In New York City, many politicians and community folks are saying take your 25,000 jobs and shove it. It must be nice.

In Buffalo politicians and business leaders are holding their breath, hoping that Tesla can deliver on what was promised. In New York politicians, particularly the local state senator who may hold the key to whether the Amazon project proceeds; plus some City Council members; plus a neighboring congresswoman, are so offended by all that Amazon and this particular development stand for that they are manning the barricades.

There were reports in the Jeff Bezos-owned Washington Post last week that Bezos-owned Amazon was considering pulling out of the New York City deal. Bezos-owned Amazon played down the story in the Bezos-owned Washington Post. Think back to your American history classes when very rich people controlled everything and there were such things as “interlocking directorates.” Thank goodness that such situations were so, so early twentieth century and no longer occur.

Caught In the middle of all the cross-fire in both cities is Governor Andrew Cuomo. He is not in a position to produce the promised jobs in Buffalo to continue the Tesla deal and can only hope for the best. As for the Queens deal, while Cuomo has been trending left politically he is not in a position to side with elected and community representatives to stand up to the largest company in the world after he just negotiated a deal with that company. What’s a governor to do?

There is a common thread running through both of these deals. Andrew Cuomo loves BIG projects – think of the new Tappan Zee Mario Cuomo Bridge in the Hudson Valley. But BIG is expensive, has lots of moving parts that are not easily controllable, and often attracts greedy people who are more than willing to cut corners to make tons of money for themselves. Sarah Palin might call it “crony capitalism,” while other would describe it as “corporate welfare.”

No one should expect every economic development project to turn out successfully, and there are many much smaller government financed projects other than the Tesla plant and the Amazon facility that turn out quite well. But when you gamble with three quarters of a billion public dollars or three billion public dollars you better have done your due diligence and be careful about all the details. Things like how the bidding is rigged prepared (the Buffalo Billion project); or whether a deal with the biggest corporation in America (Amazon) might set off neighbors concerned about things like the cost of housing and encourage politicians looking to promote their own anti-corporate bigness agenda.

While focusing on the two geographic ends of the State of New York, we need to pause for a moment to also consider that there are a whole lot of upstate cities and towns that look like they never got out of the 1930s, fighting their own economic development battles with lesser tools.

Bad business deals, of course, do not only or always involve governments trying to play king-maker. Think Donald Trump and company, with all their bankruptcies, stiffed contractors and projects that literally didn’t get off the ground. Well, okay, Trump Tower Moscow would have had some sort of government funding attached to it. Could Sarah Palin have seen the Trump Tower Moscow from her home in Alaska?

On a local front we continue to see battles from time-to-time about tax breaks for businesses that want to move from one community to another in a neighboring zip code, or promise new jobs that they may or may not be able to deliver on. Thankfully there has been more attention paid recently to clawbacks of public funds on the tax breaks that don’t pan out.

Massive public projects tend to attract out-of-proportion attention. Think new stadium developments that can gobble up hundreds of millions of dollars where even the traditional rallying cry of more jobs cannot be invoked with a straight face.

Then think about what good that large amounts of public money might do if re-directed into repairing roads and bridges; or reducing the costs of a college education; or encouraging anti-poverty work that can actually save money long term; or maybe just spending fewer tax dollars.

And wonder, why, and why not?

One thought on “Economic development in New York State — a tale of two cities

  1. Politicians should stay out of the economic development business. Every politician takes credit for jobs and the economy when the reality is that from the President on down to the Mayor, they have very little to do with either.

    Politicians feel like they have to do something and they all want ribbons to cut and by doling out tax dollars to developers they get campaign contributions in return. It is all about pay to play with very little results for the public or taxpayers.

    I wish the President, the Governor and the Mayor would focus on hiring quality people, delivering quality and efficient government services. They all enjoy feeling important by rubbing elbows with wealthy people touting ribbon cutting projects and campaign cash.

    Politicians know nothing about creating jobs and they show it again and again with every project that fails to live up to the hype.

    Like

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