BUFFALO, NY - Early this year, not long after NY Gov. Andrew Cuomo announced that he was committing up to $1 billion in incentives to try and lure businesses to the Buffalo area, an editorial was published in The Wall Street Journal, concluding that New York is "one of the least desirable states in which to open or expand a business" and that, "another billion dollars in government subsidies for Buffalo won't change that."
Written by Steven Malanga, a Senior Fellow with the conservative minded Manhattan Institute for Policy Research, the piece was titled: "How Stimulus Spending Ruined Buffalo", although he admits it was the Journal's editors who penned the headline.
"Well, stimulus spending certainly hasn't helped Buffalo, let's put it that way," Malanga told WGRZ-TV during a satellite interview from New York City.
"I think he is somewhat right," said Andrew Rudnick, who has served as President of the Buffalo Niagara Partnership for the past 20 years.
Rudnick's office in downtown Buffalo overlooks Main Street, perhaps the most subsidized strip of real estate in all of Western New York.
From the First Niagara Center at the foot of Main Street, all the way through where it bisects the city's central business district, much -if not most of what is seen today- was built with the help of government subsidies over the past three decades totaling well in excess of $1 Billion.
Yet, over the course of those years, Buffalo's population and job base has fallen steadily.
"And when you put it all together it comes to an awful lot of money that's been invested in outside government in Buffalo with very little result," said Malanga.
Main Street downtown, upon which cars have not driven since the early days of Ronald Reagan's presidency, features the above ground portion of a light rail system which cost $583 million to complete in 1985; a figure which adjusted for inflation would amount to nearly $1.3 billion today.
And now, tens of millions more dollars are being spent to restore vehicular traffic there.
"We are spending public money to undo the public investment made a generation ago," Rudnick conceded.
But he insists the Governor's proposal is different in one very critical sense from those of the past.
"It's not for public works initiatives, which a lot of that past money went to. It's all going to businesses that are going to make a job commitment here, and it's all going to businesses once they've made their business decision. This leverages that in order to kind of be the thing that seals the deal...we call it 'last money in'," Rudnick said.
Now all you have to do is get companies to take the bait. However, unless there are other whole scale changes on a statewide level, Malanga has his doubts.
"New York State is consistently voted by business executives across the county as one of the two worst states in which to do business in the nation. New York State has among the highest business taxes and the worst regulatory environment of any state in the country," said Malanga, adding that unless those things change, the state's prospects remain far less than stellar. "It's more important to have good government and a reasonable cost of doing business first," he said.
"Historically, the biggest barrier to business investment in New York State has been New York State itself," he said.
Recently, when he traveled to Buffalo to tout his incentive program, 2 On Your Side asked Cuomo what was being done to get to the root of the problem which businesses say are inhibiting them from investing here, namely high business taxes, and the mandates on counties that cause high property taxes.
"On a statewide level we're doing exactly that," the Governor replied. "We call it 'New York Open for Business' ,and we're trying to change the culture and the attitude of the state by reducing taxes, regulations, and just making us more business friendly...and we've made good progress on that level."
"I think Governor Cuomo's first year in office has been a better first year, certainly, than some previous Governors, and I think there's some hope here," said Malanga, citing Cuomo's efforts to get pension costs in line as one example.
Cuomo says he's leaving the deployment of the incentives in local hands, through the appointment of a 30 member Western New York Regional Economic Development Council. It is stocked with notable business, education, labor, and civic leaders.
"I'm looking to the business community here to come up with a long term plan to attract businesses and bring back jobs," Cuomo said.
But here again, Malanga wonders about the effectiveness of such councils.
"One of the fundamental flaws of this kind of a program is essentially you're asking people to spend other people's money. And it doesn't matter whether you're business people or developers, you are much less likely to make the right decision if it's somebody else's money as opposed to your money," he said.
Rudnick, besides being head of the Partnership, is also a member of the board tasked by Cuomo to find solutions, and he admits the group is still finding its way in terms of just what kind of decision making authority it will have in terms of who gets what.
"I think that some of this will be specified as time goes on. It's a work in progress, much like the creation of the councils is a work in progress. I think (decisions will be based on) some interaction among and between the council, Empire State Development Corporation, and the Governor's Office."
However, Rudnick says the council has already come to some conclusions as to the types of businesses to target.
"We happen to think it's going to grow existing centers of business," he said.
"That's the absolute right strategy," agreed Mangala. "Typically states and cities gain more jobs from the expansion of existing businesses than they do from what's known as 'migration'."
That's especially true in today's economy, according to Rudnick.
"Money is very tight and business outlooks are still very uncertain. That's as true in San Diego as it is in Buffalo," he said.
That's also why Rudnick believes that Buffalo won't attract one huge, game changing development.
"We all want a 'big thing', ...but the reality of business economics in the world today, suggests that a single big thing with thousands of jobs, which is what people envision, is very unlikely. Businesses are investing today to become more efficient which often means reducing the number of jobs that they have," Rudnick said.
And he also notes there's evidence that pinning one's hopes on a single big ticket item has backfired.
"The case study of that recently is Wichita, Kansas. Where Wichita gave millions and millions of dollars for a huge Boeing facility which has now announced it is shutting down. The more you rely on a single project the more vulnerable you are to the dynamics of the company in that project. Mom wasn't wrong one bit when she advised, 'don't put all your eggs in one basket'," Rudnick said.
Rudnick believes that by channeling the focus to a core of industries that are already doing well in Western New York, the area could have a chance at enjoying the success exhibited in New York's Hudson Valley region ...where the state has invested roughly $1 billion over the past 25 years, to help create a burgeoning nanotechnology industry which now involves 250 companies employing 8,000 workers and counting.
Rudnick reasons we already have a good start of our own, in the growing downtown Buffalo medical corridor.
"We need to go back to those projects which we've already done, work with the people who are the principles in those projects, and say, 'okay, the opportunity now is both bigger and has some additional considerations to it. How is it that we might work with you so we can generate more from our public-private sector partnership'?"
As the Cuomo administration envisions things, businesses hoping to take advantage of what's being offered would invest five dollars of their own for every dollar in state backed incentives they receive.
"The rhetoric is saying exactly that (but) that's a challenge in a business climate...where business investment is very scarce around the world." said Rudnick, which brought Malanga back to his original point. "The only way to fight that battle is to make sure that this state is essentially hospitable for business," he said.
There's an old saying that goes: "it's tough to steer the ship of state", essentially meaning that the government, much like an ocean liner, can't spin on a dime.
Asked if he had confidence in the current "captain" of the state (Cuomo) Rudnick replied, "so far it's hard to bet against him. Everything he says he wants to do, so far, he's done."
And some believe that if Buffalo's fortunes are to be turned around through his plan, then Cuomo may have more skin in the game than anyone else...especially if he has aspirations beyond the Governor's mansion.
"One of the motivations the Governor has is to be able to tell the world that if his leadership can turn around a notoriously depressed metropolitan area like Buffalo, then he's a leader who can turn around other communities...and we sure need elected officials who can deliver at all levels of government," Rudnick said.
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