Dec 5
2012
Good plan off to bad start
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by Jim Heaney, editor of Investigative Post
There’s a lot to like about the blueprint for spending $1 billion in state aid to revitalize the Western New York economy that was released Tuesday. I’d feel better about the plan’s prospects, however, if Gov. Andrew Cuomo hadn’t used its release to announce a heavily subsidized deal to bring 250 jobs here that smacks of the business-as-usual, smokestack-chasing approach that has failed us in the past.
Let me get my skepticism out of the way up front. The state has agreed to spend $50 million on a biomedical facility and equipment to accommodate an expansion of Albany Molecular Research to the Buffalo Niagara Medical Campus. State officials are quick to point out that, technically speaking, it will retain ownership of its investment, but let’s face it, the building construction and equipment purchases are intended to accommodate the company. For its part, Albany Molecular Research will invest $200 million and hire 250 employees.
That works out to $200,000 per job, which makes it one of the most subsidized deals in Western New York history. Not as rich as the $2.1 million per job thrown at the Yahoo! data center in Lockport, the mother of all local subsidy deals. But a lot costlier than just about any other deal. Consider the package used to lure GEICO to Amherst. It’s a whopper of a subsidy deal, but at $92,000 per job, almost looks like a bargain compared to the Albany Molecular Research deal. Almost.
(Update: Albany Molecular Research has lost $122 million the past three years. Stock prices have tumbled over time, prompting the company to shed workers and facilities.)
Cuomo and Co. envision Albany Molecular Research sparking development at the medical campus the same way state subsidies of nano-electronic research and development did in the Albany region. No mention of how obscenely expensive those subsidies were. Or the fact that government, primarily state government, has already poured some $500 million into Buffalo’s medical campus.
How many subsidized sparks does the medical campus require?
As it now stands, the medical campus is kind of a dud generating new jobs, about 1,000 after 10 years. Officials like to talk about the 12,000 jobs on the campus, or the projected addition of 5,000 others. But what they don’t mention is that many of the jobs were there before the campus took shape—witness the Roswell Park Cancer Institute, among others—or were poached from other sections of the region.
Do the math: $500 million divided by 1,000 jobs equals $500,000 per job. That is extremely expensive by any economic development standard. The key federal subsidy programs generally cap government help at $35,000 per job. Get the picture?
Despite the medical campus’s track record, health and life sciences are one of three industry sectors the blueprint has targeted for investment, the other two being advanced manufacturing and tourism. All three make sense.
In the case of the life sciences, the blueprint, perhaps in recognition of sluggish job growth at the medical campus, calls for the creation of the awkardly phrased Science Productivity and Research Catalyzer, which will, among other things, help translate research and development into business opportunities. Makes sense, because there’s a big upside if more of that R&D can be commercialized. We’re talking business startups and expansions and, with it, the addition of good-paying jobs.
That said, the Cuomo crowd had better get life sciences right, or we could have the makings of a billion dollar bust on our hands.
I like the focus on advanced manufacturing, as well, because it helps protect the 50,000 mostly good-paying jobs in the region by helping to drag some of the companies, if not out of the dark ages, at least into the modern age.
The blueprint calls for the creation of an industry-supported Institute for Advanced Manufacturing Competitiveness charged with helping manufacturers improve their operational efficiencies and market competitiveness, make better use of technology and secure the necessary skilled workers. We’re losing manufacturing jobs at a faster clip than the national average in part because too many of the companies operating in our backyard haven’t sufficiently gotten with the times. The institute ought to help.
The third industry cluster, tourism, won’t generate a lot of good-paying jobs, but it would bring new dollars into the region and provide employment for those with lesser skills, no small consideration given high poverty rates and low education attainment among a significant portion of the population.
There will be an effort to better market Buffalo’s considerable architectural and cultural assets to bring in more tourists, but the major focus is on Niagara Falls. By revitalizing the now decrepit state park that overlooks the falls and redeveloping the weathered section of downtown that serves as a gateway to the park, Mayor Paul Dyster and his crew will have more of a fighting chance against their Canadian counterparts. And if there’s a politician in Western New York who deserves a fighting chance, it’s Paul Dyster.
The blueprint, developed by the Western New York Regional Economic Development Council, led by man-for-all-seasons Howard Zemsky, includes three other priorities: promoting entrepreneurs, training and placing employees with the jobs of the future that many companies are finding difficult to hire today, and revitalizing impoverished neighborhoods in Buffalo.
Zemsky and Co. are batting two-for-three on these initiatives.
The entrepreneurial piece is the most promising element of the entire blueprint. The state will sponsor annual competitions to solicit business plans from around the world from entrepreneurs willing to set up shop in Western New York. Ten winners will be selected, each eligible for up to $500,000 in state grants. While officials would like to keep a focus on industries targeted in the blueprint, the competition will not be limited to those sectors. The plan is to select at least two business plans advanced by women- or minority-owned firms, which is good, given how few WMBE firms we have in the community.
The blueprint also would establish an incubator to help startups—and, as head of a startup, I can tell you this town screams for incubator services.
It also seeks to attract venture capital to the region, which is now very hard to come by. It’s good that the need for an infusion of VC has been recognized, but the blueprint anticipates it will come from private sources that to this point have been unwilling to ante up. A number of states, most notably neighboring Pennsylvania, have found success seeding their own venture capital funds to complement private sources. It’s disappointing the state intends to take a pass here in Western New York.
I also like the initiative on workforce development. We’ve got a number of such programs already, but they don’t work very well. The blueprint takes a different tact, with a focus on retrofitting the skills of the local workforce and matching them to a new generation of jobs, and providing more vocational training for low-skill workers. It makes sense, and represents another way the blueprint attempts to address pervasive poverty in Buffalo and Niagara Falls.
Which brings me to what I consider the blueprint’s weak link—investment in several impoverished Buffalo neighborhoods.
Don’t get me wrong, it’s a worthy cause. But is our pot of economic development gold the way to pay for it?
I mean, $1 billion seems like a lot of money, but it’s nevertheless a finite resource earmarked to solve the region’s economic problems. Should we really be giving money to Byron Brown to demolish buildings and redevelop Central Park Plaza, as the mayor said he’d like to do with some of the funds?
Central Park Plaza? Really?
Then again, the Regional Economic Development Council’s first round of funding included money for such projects as a traffic circle in Olean. Sorry, that’s a public works project. Not the best and highest use of economic development dollars.
What’s missing from the blueprint?
I’d like to see at least ballpark costs associated with each of the major initiatives. More detail, too.
In addition, the Regional Economic Development Council’s original plan identified eight industry clusters that could benefit from attention. Only three were selected for attention in the blueprint. I’d like to see what, if anything, the powers-that-be have in mind to help them.
Notably absent, even from the original eight industry sectors, is renewable energy and green jobs, which a study commissioned several years ago by Buffalo Niagara Enterprise identified as a prime economic development opportunity.
On a different front, how about some leadership regarding other economic development programs that operate in the area? Cuomo and the Regional Economic Development Council have been silent on the use of discounted hydropower doled out to more than 125 local manufacturing concerns. I reported this to death while with The Buffalo News and, in summary, too much of the power is being squandered.
There’s also a deafening silence on the multitude of competing industrial development agencies operating in Erie and Niagara counties. They’ve bred like rabbits, yet the political establishment doesn’t want to touch them.
How crazy is it? The Town of Concord, population 8,495, has its own IDA. The City of Buffalo, meanwhile, hasn’t had a functioning economic development agency since shortly after Leonard Stokes shuttered One Sunset.
Then again, I understand that Zemsky and his crew have their hands full as it is. I mean, $1 billion is a lot of money to spend, and allocating it wisely is going to take time and energy. I’ll give them credit for coming up with a pretty good plan, but the key is execution, and, again, the Albany Molecular Research deal concerns me. If it’s the template for other deals, we’re in for a letdown.
Take that $1 billion and divide it by $200,000 per job and we’re talking 5,000 jobs. That’s certainly better than the stagnant job growth we’ve experienced of late. But when you consider there’s 520,300 jobs in the Buffalo market, 5,000 new position would not amount to a game-changer. And we need a game-changer.
