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Cuomo's Dilemma

Regional councils need funds he doesn’t have

Last week, the astounding occurred. It wasn’t that an economic development committee chaired by a university president and a heavy-hitting civic leader announced a list of projects they want the governor to fund. So far, no surprise: Everybody around here wants Albany’s money. Governor Cuomo announced last year that he would put a billion dollars on the table for economic development projects, and he appointed broad-based councils for each of the Upstate regions and Downstate, too. He tasked them to work cooperatively, and then he went off by himself to do what governors do—he attended a ribbon-cutting where, once again, a multi-billion-dollar state subsidy for a peripatetic international technology corporation got announced, and hailed, as a breakthrough.

That’s long been the paradigm. It’s because capital crosses borders at the direction of Wall Street bankers to whom public officials have to stand and deliver if they want some of that capital to stay here at home. That’s why nobody expected much from the regional economic advisory councils except more of the same—more handouts to powerful insiders, more taxpayer shakedowns for established companies, more cynically empty promises from comfy bureaucrats of jobs, jobs, jobs.

That’s not what happened, and the usual insiders are not happy. The committee led by UB President Satish Tripathi and civic heavy-hitter Howard Zemsky put forward a set of requests for stunningly atypical investments based on a stunningly realistic assessment of where the five counties of Western New York are and where they’ve been going unless we change. Tripathi and Zemsky ask for money for job training, for two hard-science projects at Roswell Park and Hauptman-Woodward research institutes, for some transportation infrastructure for downtown Buffalo, for tourism assistance for the tourism hub in Niagara Falls, and for help for the city centers of Jamestown and Olean.

They did not ask for real-estate subsidies for the “medical corridor,” but rather for support for the scientists already working there and for training the people who should one day work there. They did not ask for more money for buildings to replace buildings recently reconstructed at the UB South Campus, but rather for some long-needed infrastructure for getting people to work at the crossroads of the region in downtown Buffalo. Downtown Niagara Falls could use better tourist amenities, and the Tripathi-Zemsky committee endorsed that ask. And since it is a regional committee, help for Jamestown and for Olean was framed as helping those struggling small cities to revitalize their centers, specifically citing findings that restraining sprawl means avoiding higher infrastructure and maintenance costs for a shrinking tax base.

Unlike what has come out of the developer-driven committees of the past, this plan is reality-based. The final document the Tripathi-Zemsky group produced looks quite different from the first draft, but only in one aspect: Instead of leading off with a portrait of a region that is dramatically shrinking in overall population and specifically in its cohort of young adults, those data got move to the back of the book. But each proposal the committee entertained was subjected to a three-part test that was rooted in consideration of those data. They asked whether a project would create, retain, or fill jobs; whether it will maximize return on investment; and whether the project was ready for implementation.

Participants report what the document shows: that the leaders were focused intently on Western New York’s regional population loss, on the economic costs of sprawl, and on making the promise of the state university system meaningful specifically because of this region’s need to do a better job of retaining and attracting talented young people—or any young people. The report calls for $74.4 million in direct state assistance for 20 projects. (That number has a history here: From 2009 through 2011, Erie County government under just-defeated Chris Collins received $74.4 million in federal “stimulus” funding from the 2009 American Recovery and Reinvestment Act, funds which Collins stored in the county’s fund balance rather than using them for economic stimulus.) The $74.4 million in New York State funds that the committee asks would leverage a total of $284 million in other investments.

The new voices in the room

The report, available online from Empire State Development Corporation, is much heavier on process improvements, civic engagement, and identifying actual trends in the regional economy than on financial asks. It is the first participant-shaped strategy document whose participants were more than the usual local insiders—which is probably why the first “ask” in the document is for a car-repair training center, and also why the document is focused on smart growth and the potential infrastructure cost savings if smart growth principles are endorsed rather than ignored—even though one member, Tom Kucharski, the president of Buffalo Niagara Enterprise, objected, in full earshot of the media, expressing his utter disdain for focusing investment in downtown Buffalo, downtown Niagara Falls, downtown Jamestown, downtown Olean. The choice of projects—so clearly focused on human capital and on ending sprawl—indicates that the previous hegemony of the self-styled economic development class here has been challenged.

The other stunner in this document, besides the project recommendations and the frank footnoting of demographic decline, is the positive, hopeful tone about the “unique opportunities” that the region has. The Tripathi-Zemsky approach was to bring every community segment into a room that was heretofore barred to labor, community activists, technocrats, and micro-entrepreneurs. In this room, data mattered more than muscle, and the prospect of creative problem-solving now looks much more real. The negativity of Buffalo Niagara Partnership and Unshackle Upstate propaganda is missing entirely.

But will the developer-driven, insider-focused process that has so dominated the economic conversation here, and Empire State Development Corporation’s previous practices, change? That’s a fair question, because today, the developer-focused, insider-subsidizing, parking-ramp extravaganza called Erie Canal Harbor—which is still all about creating more dollar-sucking retail in one of the most over-retailed areas of America—has cash on hand, actual cash money, with a total of $153 million getting drawn into projects that will help our regional economy about as much as a Mars bar helps a starving man whose fields are salted and whose herds are gone, and for about as long.

How will Andrew Cuomo meet the Tripathi and Zemsky request for $74.4 million now that our governor has just announced a $350 million current-year state shortfall?

Cuomo’s golden handcuffs

Wall Street, which spent the last generation redirecting industrial capital away from places like Upstate New York, is currently sputtering, which is a principal reason why New York State faces a revenue shortfall. In the last year for which data from tax returns are available, tax revenue from Manhattan alone constituted about 25 percent of total New York revenue. Most of that money is attributable to Wall Street, including its absurdly outsized bonuses and salaries, but also all the money that got spent on the 300,000 people in the financial services sector. As New York State Comptroller Thomas DiNapoli warned in an October 2011 report, that sector is shrinking—and with it, the tax revenue it produces. Undergraduate students of public economics learn that when a state budget has to be balanced, there are approximately four tools available: cuts, taxes, loans, or sales. Andrew Cuomo presented a budget this past spring that cut significantly, avoided tax increases (most notably on Wall Streeters), pulled back on loans, and divested the state of some property. Now, in the middle of his budget year, he has a problem: how to balance a budget that relies so very heavily on Wall Street.

Wall Street speculators have been amassing enormous wealth from steering investment capital away from companies that make things in New York State. Returns to capital have long been higher from goods-producers in China, and from boondoggle housing schemes here, than from investments made here. But the rest of New York State has been receiving services and investments paid for by the taxes collected from the people who, every day, put on their designer suits and Swiss watches and drive their foreign-made luxury cars down to Wall Street to do it to us some more.

The sad irony is that tax collections on the Wall Street wreckers are down just as the Tripathi-Zemsky committee delivers its well-reasoned, smart, and positive recommendations on how to get Western New York off Wall Street’s dole.

Governor Cuomo needs to find the money to get the Tripathi-Zemsky process from document to action. The $74.4 million project list is reality-based, in sharp contrast to Erie Canal Harbor Development Corporation’s $153 million agenda, which is focused on a fantasy of rich or at least employed people willingly parting with large chunks of discretionary disposable income in taxpayer-subsidized restaurants and retail stores. The proper place to go for the revenue to fund the Tripathi-Zemsky plan is Wall Street, because Wall Street speculators are not “job-creators,” in the current Republican consultant-speak—they are speculators, and their actions have injured the American heartland’s ability to become sustainable, self-funding communities.

But Cuomo has reiterated that it won’t be he who tries to claw back their gains, for fear that they will leave New York. If not he, then who? If not now, then when? Upstate’s long-overdue plans for economic sustainability and renewal depend on someone from Albany meeting the challenge.

Bruce Fisher is visiting professor of economics and finance at Buffalo State College, where he directs the Center for Economic and Policy Studies.

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