Job claims inflated for Billion To Buffalo project

Reporting, analysis and commentary
by Jim Heaney, editor of Investigative Post

Governor Andrew Cuomo summoned hundreds of muckety-mucks to the Buffalo Niagara Convention Center two weeks ago to make the kind of announcement that politicians live for: government aid to bring jobs to an economically struggling region.

In this instance, Cuomo told the assembled that the first $50 million of his $1 billion in promised state economic development funds had leveraged a commitment from Albany Molecular Research Inc. to bring 250 jobs and up to $250 million in private investment to the Buffalo Niagara Medical Campus.

Reads the headline on the governor’s press release: “Governor and (Western New York Regional Economic Development Council) Announce Public Private Partnership with AMRI to Create 250 new jobs.”

There’s one small problem with the governor’s announcement: It’s not true. At least not according to two out-of-town press reports.

The Albany Business Review, in a December 4 story that quoted AMRI’s vice president of business development Louis Garguilo, reported: “Garguilo, in a follow-up email, said AMRI itself would only account for a fraction of the 250 jobs Cuomo projected.”

Meanwhile, the Syracuse Post-Standard reported on December 6: “Cuomo said the state’s investment in the campus will leverage $200 million in private investments and create 250 jobs, though Albany Molecular has said only a fraction of those jobs will be at its new research facility.”

This begs a rather large question—a $50 million question, you might say: What, exactly, is the plan?

Or, as I put it in a December 7 email to Sam Hoyt and Christina Orsi, the top two officials in the Western New York operation of the Empire State Development Corporation:

It has been brought to my attention that AMRI officials have made statements to the press in Albany and Syracuse the past few days to the effect that they do not expect to create 250 jobs as part of the deal announced by the governor Tuesday, but rather a fraction of them. I’m looking for clarification as to what precisely the understanding is between the company and state in terms of jobs, investment and timing. If there is an agreement in writing, I’d like a copy.

Nearly two weeks later, I’m still awaiting a response. Which, I suppose, speaks for itself.

I did hear, however, from Gina Monari of AMRI, who I had contacted with a request for an interview with company executives. In a December 10 email, she responded:

With regard to the announcement, which was released by the Governor’s Press Office, please direct all inquiries to the Governor’s office. Contact information is listed below for your convenience.

Gee, thanks, Gina. I had no idea how to contact the governor’s office. It’s in the 518 area code, you say?

So, it’s apparent the folks at Empire State Development and Albany Molecular Research have decided to circle the wagons. But why the secrecy, the defensiveness?

There is one, possibly two reasons, so far as I can tell.

I have it on good authority—several of them, actually—that the Cuomo crowd in Albany is furious with Investigative Post about our story two weeks ago that reported AMRI has lost $112 million the past three years and that the value of its stock has tumbled to the point where some analysts are advising not to buy it. This story called into question the wisdom of using state dollars to assist a company in such a financial condition.

If there’s one thing I have learned—what many people have learned—is that Cuomo and his crowd don’t like to be crossed. Or challenged. Or criticized. One political operative the other day described them to me as “control freaks.” No argument here.

But you as a reader shouldn’t care all that much if a reporter isn’t getting access. That’s my problem, not yours.

But you ought to be concerned that the governor and his people are refusing to answer questions, right from the get-go, about how they are spending your tax dollars—the first of $1 billion over the next five years.

I’m surmising they are hoping to ride out the storm in the hopes other local media, aside from our partners at WGRZ and Artvoice, don’t pick up on the story or start asking questions. And, indeed, since Cuomo announced his billion dollar initiative a year ago, the local press for the most part has done little more than show up for meetings and press conferences and dutifully report on the pronouncements of officials.

But I can think of a billion reasons why my counterparts in the press ought to get more aggressive, and it’s likely they will. How can they not? This is the biggest story going.

There’s a lot to look into, starting with what, exactly, is going on with AMRI.

The fact that state officials aren’t responding to questions prompted by the statements by company officials that they’re only bringing a fraction of the 250 jobs mentioned by Cuomo tells me the Syracuse and Albany press reports are accurate. So, how do we get to 250 jobs?

One could surmise that the plan no one wants to talk about involves AMRI opening shop with a much smaller core of employees—one source suggested to me the actual number is 25 to 50—with the anticipation that other companies will follow suit. That would be in line with what the state did to help launch the nanotech industry in Albany, and officials have said that’s a model they intend to follow here to help grow life and health sciences at the Buffalo Niagara Medical Campus.

That model is reason for pause, however, as it is predicated on subsidies and secrecy.

The state has invested heavily in the Albany NanoTech center at the College of Nanoscale Science and Engineering at SUNY Albany. An audit by the state comptroller found that the state, from 2000 to 2009, provided the center and university $876 million to construct and equip research facilities and underwrite research conducted there.

The center has attracted a number of companies, but I’m told officials are unwilling to provide details on the number of private-sector jobs that have been created. Perhaps 400, which, divided into $876 million works out to nearly $2.2 million per job.

Ouch.

The Albany NanoTech center helped the Capital Region attract GlobalFoundries, which manufactures computer chips. Along with $1.4 billion in state subsidies. Yes, billion. The subsidies work out to about $1 million per job, making it the second richest subsidy deal ever involving a single company. Not in New York, but the entire country.

GlobalFoundries is one of numerous nanotech companies that have located to the Capital Region, but they’re all scooping up subsidies in exchange for setting up shop.

Is that really a model we want to follow here?

There’s also the issue of transparency.

Much of the state investment is being channeled through the New York State Research Foundation, and that’s the plan for the initial project in Buffalo at the medical campus. The Research Foundation steadfastly contended that it was  not subject to the state Freedom of Information Law and rebuffed information requests from the press, which has prompted a lawsuit by the Albany Times Union. The Research Foundation relented early this year in the face of that lawsuit.

So, perhaps the Cuomo administration’s refusal to answer questions about the AMRI deal is the shape of things to come. Already, the economic development council for this region has sidestepped a final public discussion about the blueprint Cuomo announced on December 4.

The council was scheduled to meet in public November 27, in part to discuss the blueprint before it was submitted to the governor. That meeting was canceled, we were told, because Cuomo was too preoccupied by the aftermath of Hurricane Sandy to focus on the plan. Which I found curious, as you’d think the locals would want to approve the plan before it went to the governor.

What I found out after the fact, when I asked why Cuomo announced a plan that had not been first reviewed by the council, was that the council had, in fact, met and discussed the blueprint. But, instead of meeting in open session, the council met in private at an unspecified date and location where, it was explained to me, officials were more comfortable airing out issues.

Hey, it’s not like our economy or our tax dollars were up for discussion.

The blueprint did not detail how the $1 billion would be spent, but Howard Zemsky, the council’s co-chairman, told me in an interview that aired last week on WGRZ that about one-third of the money is likely to be spent on recruiting companies to the region in deals similar to AMRI.

By contrast, the competition to attract entrepreneurs to the region with grants of up to $500,000 per company anticipates getting only $25 million over five years. That works out to half of what’s been earmarked for AMRI alone.

Which brings me to two final questions.

First, given the math I shared above, does the blueprint commit sufficient resources to promoting entrepreneurs and small businesses?

Second, who is really calling the shots on what gets funded?

As I wrote a couple of weeks ago, there’s a lot to like about the blueprint that Zemsky and others at the local level produced. But anyone who pays attention to how Cuomo does business recognizes that the governor and his inner circle are, well, control freaks. It’s probably unrealistic to think he’s going to leave the decisions on how to spend the $1 billion in local hands, or even in the hands of professional economic development types.

This is the guy who couldn’t even keep his hands off the chairmanship of the Erie County Democratic Party. No detail is too small to escape his attention. And there are a billion awaiting marching orders.