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Albany eases cash-flow problem on late pay for SolarCity workers

ALBANY – Cuomo administration officials have worked furiously since last Thursday evening trying to find a funding source to pay SolarCity contractors who have not been paid since late October and are owed more than $82.5 million.

On Tuesday, they found the money, though a key question nagged the Capitol all day: Why, on something that Gov. Andrew M. Cuomo describes as one of his signature projects statewide, did this occur in the first place?

State officials chalked it up to a simple problem: cash flow.

Sources say Cuomo administration officials were warned of the looming problem back in December, and Tuesday, more than 110 workers remained off the job at the SolarCity project at RiverBend in South Buffalo.

Empire State Development Corp., the governor’s main economic-development agency, had been funding the SolarCity project, but inexplicably in February pulled back on its commitment to provide another $100 million for construction costs at RiverBend.

State development aggency officials objected to the characterization that the money allocation was inexplicably pulled from the Feb. 18 meeting, pointing to comments Zemsky made last week that the vote didn’t occur because no funding source for the money had been identified prior to the meeting. Precisely why there was no funding source at the time of that meeting has not been fully explained.

The Cuomo administration last week considered pushing the funding responsibility – at least in the short term – onto the Research Foundation for the State University of New York.

That idea faded, though, and a new funding target was zeroed in on and finally selected Tuesday afternoon: the state Dormitory Authority. That agency, created during World War II, has seen its mission morph over the years to include providing financing for everything from college buildings to courthouses to Superstorm Sandy relief efforts. It has been a favorite funding source of governor after governor for a whole range of politically popular projects.

Now, the next task is getting private-sector construction workers back on the job at the sprawling Buffalo facility that will be home to SolarCity’s manufacturing arm for solar panels.

Officials with the Dormitory Authority and Empire State Development did not return calls or emails seeking comment Tuesday.

On Tuesday afternoon, the Dormitory Authority made it official with a request put into State Comptroller Thomas P. DiNapoli’s office to transfer $82,401,698.48 for the SolarCity project. The money was expected to be wired Wednesday morning by the comptroller to the State University of New York entity overseeing the SolarCity project.

For days, the Cuomo administration has been reluctant to discuss why the problem – which affected the jobs of 200 construction workers – could happen on a project that is one of the governor’s top economic-development priorities and one that he has cited across the state as a beacon of Buffalo’s renaissance.

On Tuesday, Lt. Gov. Kathy Hochul sought to soften the public embarrassment.

Asked why the funding problem occurred, Hochul said, “I will simply say this was a very complex transaction. We’ve not seen anything of this scale in our lifetime – all at once, an infusion of money from a variety of sources in the State of New York. And so there are complications involved, but we’re going to put this chapter behind us, get the workers back on the job, and we’re going to look back and say that this was a glitch and we’re moving forward and we’re excited about the permanent jobs with SolarCity.”

Hochul said the situation Tuesday was “being worked on literally hour by hour,” though she said she did not know about the Dormitory Authority being the solution that officials were considering.

In a brief appearance with reporters after an event outside the Senate Chamber, Hochul was asked whether the problem had anything to do with the Buffalo Billion investigation by Manhattan-based U.S. Attorney Preet Bharara. “Not that I’m aware of,” she said, adding that she never comments on any ongoing investigation.

That such a high-profile project pushed by the hands-on Cuomo could fall victim to a funding foul-up also has raised questions in Albany about the overall project and whether SolarCity’s own financial problems played any role in what became an embarrassing story starting Friday.

Hochul insisted Tuesday that there is no problem with the SolarCity project beyond what Cuomo administration officials have said will be a one-time mistake. “In the short term, it’s being resolved,” she said, adding that the overall project has “never been delayed, and it’s actually on schedule.”

Later in the day, state officials, speaking on condition of anonymity, said the funding problem developed because of a change in construction plans. The state set aside $350 million for construction of the factory, with an additional $400 million to pay for the various equipment that SolarCity is set to use in its manufacturing process. That $400 million for costs of equipment – called “tools” in these projects – was going to come through an array of state agencies, including the Dormitory Authority and the New York Power Authority.

However, while the building is under construction, it turns out that between $60 million and $80 million had to be spent from the construction pot of funds on various equipment that the Cuomo administration thought was not needed until down the road, according to the officials.

“That created the hole we have today,” one of the officials said.

The official acknowledged that signals were sent in December that more money needed to come for the project through the Buffalo Billion program, but that it was not clear whether the funding would be spent on machinery and not just construction costs.

The official said that the invoices for work done in November were received in mid-December and that the state had 30 days to pay the bills, making the bills ordinarily payable in that case sometime in mid-January. The Empire State Development vote on the $100 million was set to fund those bills and others coming in the future, until the agenda item was suddenly pulled off just prior to the meeting.

The state official who spoke to The Buffalo News on Tuesday said the Dormitory Authority became the easiest way to deal with the cash-flow problem, in part, because it is one of the construction arms of the state. Also, the official said, the agency had cash on hand.

In January, Howard A. Zemsky, president of Empire State Development, let it be known that his agency was going to bring up an additional $100 million funding request to the agency’s board at its Feb. 18 meeting. The state has pledged $750 million for the SolarCity project, which includes the state’s ownership of both the building and much of the equipment that will be used to make the company’s solar products.

Empire State Development has been the state’s main funding source for the initial phases of the project, which is run through SUNY Polytechnic Institute, the public college with campuses in Albany and the Utica area that is connected to the nonprofit entity called Fort Schuyler Management Corp., which helps run all or part of a number of upstate economic-development efforts, including Cuomo’s Buffalo Billion program.

A spokeswoman at SolarCity’s headquarters did not return an email seeking comment Tuesday.

On Tuesday, some contractors on the SolarCity job were still awaiting payment, forcing them to keep more than 110 workers off the job. The workers who remain on layoff belong to Local 22, United Association of Plumbers & Steamfitters.

“No one has been recalled yet,” said Michael W. McNally, business manager for the local.

About 70 union carpenters who belong to Local 276, United Brotherhood of Carpenters, were called back to work Monday.

News Business Reporter David Robinson contributed to this report. email: