‘Businesses don’t come to New York state without government incentives.’ Really?
Yesterday’s editorial said that, as state grant plans go, Saranac Lake’s proposal on how to use a $10 million Downtown Revitalization Initiative award was pretty solid.
But that doesn’t mean we agree with New York’s trend toward reliance on the state government to grow local economies. We don’t.
Gov. Andrew Cuomo was remarkably candid about this approach in his speech announcing the Saranac Lake grant Tuesday. Speaking in the ballroom of the Hotel Saranac, he said, “Hotel Saranac does not rebuild without government assistance. It does not happen. … Businesses don’t come to New York state without government incentives. Why? Because they can get them from any other state. Businesses literally shop states.”
First off, that’s misleading. Other states may compete with New York for gigantic car manufacturing plants, but not for the kind of smaller business the state gives grants for. Hotel developers, to use Cuomo’s example, look at where people want to stay overnight. Lake Placid is a good example; look at all the hotels built without state aid. And of all hotel developers, the Roedel family, based in New Hampshire but whose roots in Saranac Lake go back generations, was not pondering whether to invest in a historic hotel in Saranac Lake or South Carolina, seeing which would offer the best deal. They took on the Hotel Saranac because it was the Hotel Saranac: It meant a lot to them, and they saw a unique opportunity here. The cost of the project doubled, from $18 million to $37 million, yet they persisted. They still haven’t received the $5 million the state pledged in 2013.
Yet the governor is trying to convince people that no new business is possible without going through him. That’s untrue and kind of scary.
Channeling business projects through government gives more power to public leaders who already have more than enough, and it enables a lot of corrupt pay-to-play intervention down the chain. Several of the governor’s close allies have recently been convicted of arranging schemes to steer state economic development money toward people in return for donations to the governor’s campaign fund. So far, Cuomo himself has not been personally implicated.
In the governor’s defense, his model for economic development funding replaced one in which people cozied up to state legislators, hoping for “member item” grants the lawmakers could distribute at will. Now much of the decision making is in the hands of Regional Economic Development Councils made up of people from those regions, in both public and private nonprofit sectors. On one level, that’s an improvement.
There are downsides, however:
¯ Cuomo took the legislators’ grant-giving glory unto himself. He takes credit for it all, presiding over the award ceremony, posing for pictures with the winners and making sure all announcements for anything involving state government come from him. Every arts event that receives a state decentralized arts grant is required to personally thank Cuomo on posters and on stage. It hasn’t just taken gubernatorial egotism to a new level; it builds the impression that people owe him gratitude for everything done by the state of New York and its 180,000 employees (source: Governing.com, based on 2014 U.S. Census Bureau data).
¯ The legislature and governor took oversight of economic development funds away from the state comptroller’s office, leaving obvious accountability lapses.
¯ Cuomo’s campaign fundraising and the REDC process have intersected in ways that raise concern. In December 2014, Capital NY’s Jimmy Vielkind described how Cuomo mingles with REDC members and grant applicants in settings like cocktail parties, and how they contribute to his campaign. Capital NY found that “council members and their institutions have contributed at least $1 million to the governor’s re-election efforts in the past four years.” New Yorkers gave that report a collective shrug back then. Now some of the governor’s closest allies face prison time for pay-to-play schemes.
Cuomo once promised to clean up the pay-to-play culture in Albany, but the reforms he backed did little and were also aimed at the legislative rather than his own executive branch. The infamous example will always be the Moreland Commission he appointed and then disbanded when it started investigating his own fundraising.
Whether or not Cuomo is guilty of the sins he once condemned, he ought to at least try to reform his economic development grant system in light of the corruption cases. Instead, he’s reinforcing the message that “Businesses don’t come to New York state without government incentives.”
We think state grants can be good, when done right, but with proof of corruption and little willingness by the governor and Legislature to rein it in, we sometimes wish New York would eliminate all its economic development programs for a while, and instead help the business environment by returning that money to taxpayers.
Sorry, but alarm bells go off for us when we hear a politician say business is impossible without going through him.