Critics Say Problems With Cuomo's Economic Development Programs Go Beyond Corruption

Jul 23, 2018

Governor Cuomo’s economic development programs have been the subject of two federal corruption trials that ended with convictions for two of Cuomo’s former associates. Some say problems with the state’s $9 billion economic development programs go beyond  corruption, and that the structure of the programs is flawed.

Cuomo’s former closest aide, Joe Percoco, in March was convicted of bribery. On July 12, Alain Kaloyeros, the former president of SUNY Polytechnic Institute and the former architect of the governor’s biggest economic development deals, including the Buffalo Billion, was found guilty of bid rigging.     

But groups on the left and the right of the political spectrum say the problem with the state’s economic development deals go beyond the corruption cases.

“It’s almost incidental. It’s a predictable result of a bad policy, ” said E.J. McMahon, with the fiscally conservative budget watchdog group the Empire Center.

McMahon says the state has built, equipped and owned $1 billion worth of facilities, including the Solar City factory in Buffalo, and a film industry hub near Syracuse during Cuomo’s tenure. Solar City employs around 20 percent of the 3,000 employees initially projected. And the film center, which stood empty for years, was sold to Onondaga County for $1. But McMahon says even if they were successful, it’s the wrong business for the state to be in.

“This is, in classic terms almost Marxist,” McMahon said. “This is the state owning the means of production. It’s corporate welfare on steroids.”

McMahon says manufacturers already get tax breaks that are built into state law. He says the state’s resources are better spent on infrastructure, and New York should leave more speculative ventures to the corporations.

“What roads could you build, what bridges could you build?” McMahon said. “With the money you are spending on factories for private corporations.”

Greg Biryla, with the New York chapter of the National Federation of Independent Businesses, says the state has resorted to building factories and offering programs like Start-Up NY, which offers ten years of tax subsidies to new companies, because the state’s business climate is so poor.

“We have myriad taxes and regulations,” Biryla said. “We spend $9 billion in economic development essentiality because it’s so hard to attract employers organically.”

Biryla says if taxes and regulations were significantly cut, businesses would have a better chance of growing.

“If you want honest to god job growth – fix our tax burden,” he said. “Businesses that are delivering services and goods that the market demands will succeed.”

Ron Deutsch, with the union-funded Fiscal Policy Institute, agrees that the state should not be in the business of building factories for private businesses. He says if the “mega deals” can’t be stopped, then the governor and legislature should at least make them more transparent. He says they could create a public data base that reveals which companies receive funding and the true costs of the projects.

“The contracts, and the negotiations and what not are shrouded in secrecy when you compare it to something like a non-profit contract,” Deutsch said.

He says not-for-profits have to show far more documentation in exchange for state funding than did the business deals that led to the corruption convictions.

The State Senate passed some transparency measures before the legislative session ended in June, but they stalled in the Assembly.

Despite the corruption convictions, Governor Cuomo continues to promote his economic development programs. Earlier this month he announced $10 million in downtown revitalization grants for the Mohawk Valley city of Rome.

“The tide is turned, and the tide is now going with us,” Cuomo told a gathering of local elected officials on July 2. This state today, 8 million private sector jobs, more jobs than have ever existed in the history of the state of New York.

And Cuomo continues to tout economic successes in Buffalo, saying the city has turned around.

Jason Conwall, a spokesman for the Empire State Development agency, which now oversees the SUNY Polytechnic economic development projects as well as hundreds of other, smaller efforts, says, in a statement, that it’s “disheartening” that the negative “rhetoric” about the programs is too narrowly focused on a few big projects. And he accuses critics of deliberately trying to “mislead” the public.  

Conwall says the Regional Economic Development Councils, which are led by local leaders, have 6,000 different projects that are already completed or on track for completion. And he says the state is spending big on infrastructure, with $12 billion committed or planned for projects, like upgrading many of the state’s airports and train stations.