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Corporate Capture at Canal Side
by Kevin Connor and Andrew Stecker
The Bass Pro taxpayer-ripoff scheme is out of the picture at long last, and the vast majority of Erie County residents are relieved. But the conditions that allowed a sporting goods retail company to hold Buffalo’s waterfront hostage for the past nine years persist in ways that we must begin to reckon with as a community.
In early June, the Public Accountability Initiative (PAI) released a report on Bass Pro’s record as a subsidized economic development anchor in cities across the country. We found that Bass Pro often received significant public funding, but consistently failed to deliver on the economic promises used to justify these subsidies. The report proved a formidable counter to the claims put forward by Bass Pro and its supporters in Buffalo, and helped bring this chapter of Buffalo’s history to a close.
This week, PAI is releasing new research showing that the leadership of the Erie Canal Harbor Development Corporation (ECHDC)—charged with developing Canal Side—is deeply conflicted by its ties to various private interests. It was the ties between ECHDC board members and the CEO of Bass Pro that led to the obsession with subsidizing this particular retailer, and so long as these types of relationships remain at the center of ECHDC, the agency’s decisions will likely favor private interests over those of the public.
Given that economists and policymakers universally criticize subsidies for retail, the decision to throw tens of millions of dollars at one particular retail company was inexplicable from the beginning. Why did Buffalo’s political elites cling to the Bass Pro plan so desperately?
The answer is that a basic conflict of interest lies at the heart of this misguided project.
Bob and Mindy Rich’s friendship with Bass Pro founder Johnny Morris is often credited with sparking Bass Pro’s interest in Buffalo. Besides being Florida neighbors, Bob Rich and Johnny Morris sit on a charitable board together. Bob Rich wrote an entire chapter on Morris in one of his books on sport fishing, and Rich’s writings mention that he and Mindy have traveled and vacationed with Morris and his wife.
ECHDC was created in 2005 at the behest of Bob and Mindy Rich for the express purpose of bringing Bass Pro to Buffalo. In previous iterations of the project, talks between the company and the state had broken down, according to media reports. Mindy Rich, along with Bob Rich’s friend Larry Quinn, had been managing the Buffalo Bass Pro project since the beginning. When ECHDC was created in 2005 to help push things forward, Mindy Rich and Quinn both took seats on the board. (A special non-voting seat was created for Mindy Rich, as her Florida residency prevents her from holding a full voting seat.) Maureen Hurley, a Rich Products executive, also joined the board.
During the first years of ECHDC, the project was referred to as Bass Pro, not Canal Side. ECHDC never implemented a formal process to determine the best anchor tenant or plan. Other retailers, developers, urban planners, and organizations were locked out from the subsidy package; ECHDC did not ask businesses to compete for the public dollars it had to offer.
In December 2009, 10 days before Governor David Paterson came to Buffalo to announce state funding for Canal Side, he received campaign donations of $5,000 each from Bob and Mindy Rich of Islamorada, Florida. The Buffalo News article on the press conference credited the Riches with helping pull the funding together.
Another expression of ECHDC’s subservience to outside interests is a 60-page report the agency composed but never released in response to PAI’s report on Bass Pro subsidies. Rather than commission and release an independent market study to show that the subsidization of this particular Bass Pro store would be a good investment for the public, ECHDC sought to discredit PAI’s report by finding alternative sources that would testify to Bass Pro’s successes as a subsidized anchor tenant. So while ECHDC’s negotiations with Bass Pro were on the verge of collapse, and during one of the state’s worst budget crises in modern history, ECHDC used New York State tax dollars and manpower to conduct public relations and marketing work for Bass Pro.
ECHDC was created and designed to privilege the interests of a private, out-of-state corporation over those of the public, and it is likely that this agency will remain dysfunctional even after the scrapping of the Bass Pro plan. The question now is which private interests will fill the post-Bass Pro vacuum.
The following is a catalogue of additional ECHDC conflicts of interest explored in PAI’s research:
Jordan Levy, Seneca Holdings
ECHDC chairman Jordan Levy was recently named to the board of Seneca Holdings, the private investment arm of the Seneca Nation of Indians. The Seneca Nation owns several properties in close proximity to ECHDC’s Canal Side project area, either directly or through the Seneca Gaming Corporation. Levy’s position on the board of Seneca Holdings, for which he will receive a stipend of an undisclosed amount, presents a conflict of interest with his position as the unpaid chairman of ECHDC; Levy’s actions on behalf of New York State could easily affect the Seneca Nation’s investments.
This potential conflict was underscored shortly after Levy’s appointment to Seneca Holdings, when the local media began reporting that HSBC was considering relocating its downtown offices to part of the Canal Side project and parcels extending eastward from the project footprint. This proposed move would transform parcels close to Seneca-owned properties from vacant lots and surface parking into office space for a multi-national bank.
Larry Quinn, Buffalo Sabres
Quinn’s role as managing partner and minority owner of the Buffalo Sabres represents an additional conflict of interest for this close friend of Bob Rich. The proximity of HSBC Arena to Canal Side is obvious, and the company that owns and operates the team—Hockey Western New York, LLC—owns additional properties near the proposed site for HSBC Bank’s new downtown campus.
Kenneth Schoetz, Empire State Development Corporation
The approval of New York Power Authority funding for Canal Side involved a particularly egregious conflict of interest: Ken Schoetz, in his capacity as chairman of NYPA’s Economic Development Power Allocation Board, approved a large, unorthodox NYPA grant to ECHDC via its parent agency Empire State Development Corporation, where Schoetz is a salaried employee. Schoetz noted the conflict in a meeting, but said that he had gotten clearance from ESDC counsel, when in fact he should have been cleared by counsel for NYPA, which was granting the funds. This conflict was described as “impermissible” in the Goldman v. Bass Pro lawsuit filed last week.
Phillips Lytle, LLP
Phillips Lytle has secured generous contracts from the Erie Canal Harbor Development Corporation for legal work on the Canal Side project. In 2010, Phillips Lytle, which is considering moving the location of its Buffalo office, floated the proposal that it would move to the Donovan block, part of the Canal Side project. While it is unclear whether Phillips Lytle will actually relocate to the Donovan block, the mere mention of the move potentially benefits the firm in its lease negotiations with its current landlord. Both the possible relocation of the firm to Canal Side, as well as its publication of this possibility, are inappropriate given the firm’s contract with ECHDC.
Ciminelli Development Corporation
Ciminelli Development Corporation has been mentioned in connection with the Phillips Lytle move to the Donovan block. There is a conflict, however, in that the company’s CEO, Paul Ciminelli, serves on the board of directors of Empire State Development Corporation, ECHDC’s parent corporation. In this capacity, he has oversight over ECHDC’s projects, including Canal Side.
The culture of corporate capture at ECHDC is also signified by the ongoing role of Benderson Development, which is shaping the Canal Side project post-Bass Pro. Benderson’s involvement makes little sense on the surface; the company is primarily a suburban strip mall developer, and there is little evidence that it is qualified to redevelop an urban waterfront area. Why should it be allowed to determine our waterfront’s destiny behind closed doors, with no community involvement?
Benderson Development’s dominance of Canal Side plans post-Bass Pro may be just another case of country club connections trumping common sense. For instance, ECHDC chairman Jordan Levy was a close friend of Randy Benderson growing up, and appears to have been steeped in the ways of Benderson Development.
The conditions that gave rise to the Bass Pro debacle remain in place for the next chapter in this sorry tale. As long as it is not held accountable for this failure, ECHDC’s leadership will continue to pursue development strategies that deliver for cronies and fail for everyone else. Since it was created for the purpose of bringing Bass Pro to Buffalo, and has failed in that mission, the most sensible course for ECHDC would be its dissolution. Barring that, it is time to force significant leadership changes at ECHDC, including the removal of the chairman, vice chairman, and members most closely associated with the Bass Pro failure.
After all, they work for us.
Kevin Connor and Andrew Stecker of the Public Accountability Initiative are the authors of “Fishing for Taxpayer Cash: Bass Pro’s Big-League Subsidies, Failed Promises, and the Consequences for Cities Across America.”
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