New York state has so far invested more than $2 billion across upstate to revitalize economies up and down the Thruway. Gov. Andrew Cuomo says these projects will be transformative, but they carry big risks as well as potential rewards.
The governor uses the phrase “game changer” when he talks about what he’s trying to do in Buffalo, Rochester, Syracuse, Utica and Dunkirk. But is his approach, luring companies to New York by building them expensive facilities at taxpayer expense, really going to transform regional economies? Cuomo thinks so.
So does Alain Kaloyeros, the governor’s point person on upstate economic development. “If you look at Albany, the model the governor referred to, what started with every deal being 500, 1,000 jobs, ended up being in the thousands more of support jobs,” said Kaloyeros.
Cuomo’s approach carries risk, however. Take SolarCity in Buffalo, for example.
The state is investing $750 million to build and equip what is being billed as the largest solar panel manufacturing plant in North America. But the company is losing a lot of money — close to $100 million a month in the first quarter of this year. What’s more, the industry is rapidly changing and subject to stiff competition from the Chinese.
John Kaehny, executive director of good government group Reinvent Albany, said SolarCity is just one example of why high-tech can be such a big risk. “There’s big, big problems in very volatile industries,” said Kaehny.
Even if projects pan out, they won’t significantly boost a region’s employment unless they spur massive spin-off development.
The three Buffalo Billion projects are projected to create about 2,300 direct jobs in a market with some 570,000 jobs. Those new jobs would boost employment in the Buffalo area by less than one-half of 1 percent. The same goes for other cities.
These jobs come at a big cost to taxpayers. Jobs at the state-funded photonics initiative in Rochester carry a per-job price tag of $250,000 and change. The cost per job at SolarCity in Buffalo tops a half-million dollars.
Greg LeRoy is executive director of Good Jobs First, a national research organization that tracks economic development subsidies. He said the governor is giving away too much in exchange for these jobs.
“He’s buying jobs at prices that the state will never break even on,” said LeRoy.
As well as creating jobs, economic development policies usually aim to grow a community’s tax base. That’s especially important upstate, where an eroding tax base has saddled residents with sky-high taxes.
But this economic development model for upstate creates little new tax revenue for cash-strapped communities because the high-tech manufacturing plants are owned by state-controlled nonprofits. Nonprofits in New York do not have to pay property taxes, sales taxes or any other taxes other than payroll taxes.
Voluntary payments are an option. In Albany, one of those nonprofits agreed to pay the city half a million dollars per year for at least three years to help make up for some of the lost tax revenue.
LeRoy said the lack of tax revenue means local taxpayers get little to no benefit of new development.
“When subsidized companies or enterprises don’t pay property taxes or sales taxes, that means everybody else has to pay higher taxes or get lousier public services,” said LeRoy.
LeRoy, who has studied subsidy deals across the country, said Cuomo’s approach is unlikely to help upstate grow either its tax base or job market.
“I think New York state is getting a very bad value for its buck,” said LeRoy. “I don’t think the legacy of this administration is going to be the kind of reform in economic development that New York state so desperately needs.”