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Patronage and Corporate Welfare

If you think public financing of elections costs taxpayers money, take a look at the system we have now

Webster’s Dictionary defines “unanimous” as: “being of one mind, having the agreement and consent of all.” When it comes to corporate welfare and patronage, our local elected officials unanimously agree.

Let’s look, as a first example of this unanimity, at the Erie County Water Authority.

The Erie County Water Authority has 248 employees and a budget of $45 million all controlled by the politically connected commissioners, who are selected by the Erie County Legislature. By state law the three commissioners of the Erie County Water Authority cannot consist of more than two members of the same political party. Typically the Democrats and Republicans take turns appointing the commissioners, who serve for staggered three-year terms. When it is the Democrats’ turn, the Democratic legislators appoint whomever the Erie County Democratic Party chair wants for the position. When it is the Republicans’ turn, they also appoint whomever the Erie County Republican chair wants. The most important criterion for legislators and political party chairs is that the 248 jobs at the Erie County Water Authority are doled out to the friends and families of the politically connected.

I applied for the most recent commissioner vacancy, knowing full well that I would not be selected. Several individuals applied knowing how the game is played and some openly referred to the interview process as a “charade.” It is truly sad when legislators publicly state that the process is open to all and that no decisions have been made in advance, when it is so obviously not true.

As was speculated and reported in the news media prior to the vote, the Legislature unanimously selected Jerry Schad to become the next Erie County Water Authority commissioner. Schad is the Town of Amherst Democratic Party chair and serves as the attorney for the Erie County Legislature. Schad has also over the past several years made $10,000 in political contributions to local candidates and political party committees.

From my review of the resumes submitted, others were just as qualified as Schad. Sadly not one legislator had the guts to nominate someone else or to vote against Schad’s appointment. Not one legislator was willing to cast an independent vote against their party boss.

Delaware North & Uniland

By a unanimous vote, a committee of the Erie County Industrial Development Agency recommended approval of sales tax abatements of more than $807,000 for Delaware North’s new corporate headquarters. Both Buffalo Mayor Byron Brown and Erie County Executive Poloncarz have publicly expressed support for assisting Delaware North. According to an analysis done by Jim Heaney of Investigative Post and published two weeks ago in this newspaper, Delaware North—which is owned by Buffalo’s wealthiest family (with a net worth of $2.8 billion)—has received $4.1 million in public assistance since 2000. Delaware North is now seeking $4.8 million in tax credits and abatements to move their headquarters two blocks in downtown Buffalo. In addition to the $4.1 million, the City of Buffalo provided the company with an $11.6 million line of credit in 2000. The four percent interest rate was a little less than half the commercial lending rate at the time. As Heaney reported: “The loan involved the use of federal block grant funds awarded the city to combat poverty and blight. Federal officials objected to the loan as an inappropriate use of anti-poverty funds and it was subsequently recalled.”

Heaney quoted State Assemblyman Sean Ryan’s response: “When is enough enough? It should have been when the original tax abatement ran out…Essentially, we made our investment in this company 15 years ago. We made our deal. You can’t be coming back to the table for seconds.”

Uniland Development, the company building the new Delaware North headquarters, is also seeking $10.6 million in tax breaks and credits.

Buffalo Bills lease

All it took for the Erie County Legislature to unanimously approve spending $103 million over 10 years in county funds for the Buffalo Bills lease was one committee meeting and one meeting of the full Legislature. When all public dollars are factored in from the state, the Bills as a private business are being subsidized to the tune of $200 million. In addition to stadium improvements paid for by taxpayers, government is also going to cover ongoing capital costs and operating expenses—public assistance for a team that is worth an estimated $800 million.

For each of these items—the Erie County Water Authority commissioner’s appointment, Delaware North subsidies, the Buffalo Bills lease—there was extensive discussion and debate in the community as evidenced by comments posted to newspaper articles, media reports, blogs, Facebook, etc., yet there was no public debate whatsoever among our elected leaders, who unanimously approved each item. All it typically takes to get patronage appointments and corporate welfare approved is one quick meeting.

Billionaires don’t wait for assistance but poor people do

While billionaires and the politically connected can get public dollars quickly, if you are a person of limited income seeking assistance to repair your home in the City of Buffalo, the process takes years. Thousands of people are on a waiting list to obtain public housing through the Buffalo Municipal Housing Authority, yet BMHA typically has vacant apartments that take many months to become occupied due to a bureaucracy that cannot seem to get out of its own way.

In 2012 alone, New York State handed out $1.8 billion in tax credits to businesses, a figure that has doubled since 2010, according to a tax reform commission appointed by Governor Cuomo. It is estimated that New York spends $7 billion per year on tax breaks and subsidies to private businesses.

A recent study by Donald Boyd of the Rockefeller Institute of Government and Marilyn Marks Rubin of John Jay College found:

• Many of the tax credits are “refundable,” meaning they go beyond merely reducing or eliminating a company’s tax bill to actually cutting a check from the state treasury—sometimes for tens of millions of dollars.

• Only about one percent of companies doing business in New York see any benefit from these tax credits at all. Many are highly profitable real estate developers and film and TV production companies.

The link between campaign contributions and corporate welfare

How is it possible that Governor Andrew Cuomo has a campaign war chest of $28 million, almost three times more than any other governor in the nation? The next largest campaign war chest among governors is California’s Jerry Brown with $10 million.

To answer the question of how Cuomo has been able to raise $28 million, one simply needs to look at who has contributed to Cuomo and what people get for their campaign contributions.

An analysis of donations to Cuomo by the New York Public Interest Research Group reveals some interesting facts.

• Over the last two years, only one percent of the money raised by Cuomo’s campaign came from donors who gave him less than $1,000.

• Only about five percent of donations to the governor came from donors who gave less than $2,500.

• Nearly 40 percent of money raised by Cuomo for his campaign fund came in donations of $40,000 or more.

• 79 percent of the money raised by Cuomo since he took office has come from entities and individuals who have given him $10,000 or more apiece. One hundred forty-two corporations, unions, or individuals have donated at least $40,000 apiece, and seven contributed between $100,000 and $500,000.

The people donating to Cuomo are people who can afford to write a check of $2,500 or more. Such contributions do not come from your average New Yorker; they come from wealthy individuals and corporations who expect something in return. What many contributors and corporations receive in return for their contributions are tax breaks and subsidies for their business ventures. As stated previously, $7 billion per year in public subsidies are provided to private corporations.

Catering to wealthy business interests trickles down to the local level as well. When the billionaire Jacobs family wants more public assistance, everyone falls in line to deliver. When big campaign contributor and developer Mark Hamister threw a fit and threatened to walk away from a Niagara Falls hotel development project unless he got everything he asked for, he was assisted by a media-stoked hysteria that painted Niagara Falls City Council members with the courage to ask questions as obstructionists to development.

In 2012 alone, Mark Hamister made $85,500 in political contributions. Hamister in the past has contributed $10,000 to Cuomo. Jeremy Jacobs in 2012 made $127,285 in political contributions. In 2010, Jacobs and his wife contributed $100,000 to Andrew Cuomo. Delaware North as a corporation in 2012 alone has contributed $40,000 to New York State elected officials and political parties.

It takes a lot of money to run for public office statewide. Politicians need campaign cash to achieve the power they desperately seek. Wealthy people know how to make money, and clearly one of the investments they make is donating large sums of money to politicians. Their payoff comes in public dollars.

Public financing of elections needed

The reality is that money talks in politics, and the voices of average, hard-working people are not heard. The only way to level the playing field a little is to implement public financing of elections at the state and local level. In 1989, New York City implemented public financing of elections for city council and city-wide elected offices. New York’s public financing system has changed over the years and is considered by many to be an effective model for others to follow.

Currently in New York City, individual contributions up to $175 are matched on a six-to-one basis. Meaning that if an individual contributes $20 to a candidate, that $20 becomes $140 through a public financing match of $120. If an individual contributes $175, that amount receives matching funds of $1,050. By providing a six-to-one match, public financing makes small donors important, causing candidates to focus on their issues and concerns. Providing public matching funds also encourages people more people to run for public office resulting in a wider diversity of candidates and ideas.

Public financing of elections costs money that has to be budgeted for. Allowing a small number of wealthy individuals and corporations to buy the support of government officials has a huge cost as well, in terms of legislation that is adopted and how public dollars are spent. Money matters to politicians but so should the voices of people who are not wealthy.

Paul Wolf is an attorney and the founder of the Center For Reinventing Government, Inc. (www.reinventinggov.org).

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