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Zemsky defends Start-Up NY before Assembly panel

ALBANY – The Cuomo administration’s economic development czar tangled with a bipartisan group of Assembly members Wednesday who raised questions about job creation programs, including Start-Up NY.

Howard Zemsky, head of the Empire State Development Corp., alternated between being pointed and diplomatic as lawmakers questioned how his agency spent money and whether job creation claims have been inflated.

“We have achieved way too much success and results to sort of go through the grandstanding and politicization of some of this,” Zemsky said after a two-hour grilling before an Assembly oversight panel.

Much of the hearing was focused on Start-Up NY, a program that offers tax-free zones to businesses that locate within them. The program created 408 jobs across the state in its first two years. Among the program’s costs has been a $50 million marketing effort, much of it spent in 2014.

Lawmakers questioned whether the 408 job count number was even accurate. Assemblyman Robin Schimminger, a Kenmore Democrat who chairs the Assembly economic development committee that held the daylong hearing in Albany, said the agency incorrectly reported 319 jobs were created in 2015 for Start-Up, while giving 10 years’ worth of tax breaks for participating companies. The progress report for the program was released on a Friday night at the start of the July 4 weekend and contained less information than the prior year’s inaugural report, lawmakers noted.

Schimminger said it appeared that Zemsky’s agency inflated its claim of 319 jobs by as many as 80 positions.

“This is a significant number of over-counts in the compilation that I’m looking at,” Schimminger said.

At one point, Schimminger raised a magnifying glass to the report, drawing attention to the footnotes and small-print spreadsheets that Zemsky’s agency used in the report.

“I don’t acknowledge that there were any inaccurate numbers,” Zemsky responded.

Gov. Andrew M. Cuomo discounted Schimminger’s criticism during an appearance Wednesday at the University at Buffalo North Campus in Amherst.

“For an assemblyman from Buffalo to question whether or not the state’s economic development efforts are working, he better walk through his own district, he better leave Albany and come back to Buffalo,” Cuomo said. “Because, walk down any block in Buffalo and put your microphone in the face of a person from Buffalo and say, ‘Do you think the economy in Buffalo is getting better or not?’

“Unless they are from a different planet, they are going to say the economy is getting better. And then say, ‘Do you think the state was helpful in that effort?.’ Then they are going to say, ‘Yes, the state was helpful.’ So, my advice to the Albany politicians: go home, get in touch with reality, talk to your neighbors, visit Buffalo. You clearly haven’t been there in a long time.”

While defending the job count, Zemsky repeatedly said he takes responsibility for any reports coming out of his agency and that critics have lost sight of the impact Start-Up has had in improving the perception that New York is open for business. And he seemed to chide lawmakers for their line of questioning. “We’re making too much of running to the top of the hill and pointing fingers and crying foul or crying failure,” Zemsky told lawmakers.

Assemblywoman Addie Russell, a Democrat who represents a large North Country district that stretches along the St. Lawrence River, raised questions about the costs of Start-Up. Under questioning, Zemsky told her the state spent $50 million marketing Start-Up, with most of that in 2014 and 60 percent on out-of-state advertisements.

Russell noted that while the program envisions the State University of New York being a partner in helping to create Start-Up jobs, the state has provided no funding to SUNY to make that happen.

Zemsky acknowledged the ability of a SUNY campus to participate in attracting businesses to locate in the Start-Up tax-free zones depends on the “capacity” of the individual campuses; he said SUNY’s four major research campuses have been able to dedicate staff to Start-Up.

Russell was underwhelmed.

“I’m not seeing a whole lot of return on investment,” she told Zemsky, adding that it needs to be “significantly revamped” before she can support more state money going to Start-Up. “I’m not interested in throwing good money after bad money when we have such paltry results,” the lawmaker added.

Assemblyman Raymond Walter, R-Amherst, said he worried that Start-Up NY will become like many economic development programs: narrowly constructed for specific recipients to start off with but then broadened to go far beyond its original intent.“If by per job, (it’s) nowhere near cost-effective at this point,” Walter said of Start-Up, which he said has cost taxpayers $130,000 per job just to cover the marketing costs for a program he said is off to “a very, very slow start.”

Zemsky responded the program has seen $45 million in “economic investment,” which he said includes payroll of new workers. He sought to convince Walter, unsuccessfully, that the marketing costs should not be included when calculating the per job costs of Start-Up.

Over and over, Zemsky tried to beat back criticism of Start-Up and other state job creation programs, saying the state’s unemployment rate has been trimmed almost in half since Cuomo took office. He also sought to put Start-Up in the context of just one of many economic development programs the state offers.

“The big picture here is we have a lot to celebrate,” Zemsky told lawmakers.

With reporters later, Zemsky acknowledged to being a bit defensive, but appeared weary over people who “no matter what we do” who will say “we don’t like this and we don’t like that.” Asked how many years before Start-Up NY can be judged a success or failure, Zemsky said: “I declare it a success.”

The University at Buffalo’s Karen Utz, program director in the Center of Excellence in Bioinformatics & Life Sciences, said the UB-sponsored Start-Up program in Buffalo has 48 companies up and operating. She said the companies have hired 47 UB graduates and 20 interns. She called the program “a catalyst” for much of the economic activities at UB and the medical campus.

But lawmakers weren’t concerned just about Start-Up. There were questions about the Buffalo Billion program and about New York losing to Massachusetts in the incentives arms race for a new corporate headquarters for General Electric. Zemsky was also questioned about a recent audit by state Comptroller Thomas DiNapoli about the Excelsior tax credit program, a fiscal review he called unfair. And he was questioned about the status of the investigation of the Buffalo Billion and other programs by U.S. Attorney Preet Bharara, who over the past year has spread subpoenas to a number of Cuomo and SUNY agencies, including the governor’s office, as well as private companies.

Zemsky said he hopes the probe is coming to an end and he expressed “100 percent” confidence in his agency.

Three groups with varying interests – Citizens Budget Commission, Fiscal Policy Institute and Reinvent Albany – called on lawmakers to create a “database of deals” to better track the state’s more than $4 billion economic development funding.

Ronald Deutsch, of the labor-backed Fiscal Policy Institute, raised questions about the state’s SolarCity investments in Buffalo. “We’re gambling that SolarCity is going to be a successful company…We have no business being landlords and buying and building a factory for a private company,” he said.

“Start-Up NY is an economic development tactic presented as grand strategy – surrounded by excessive expectations created by promotional hype,” said E.J. McMahon of the Empire Center for Public Policy. But he told lawmakers that “far more troubling” – because of its size and scope – is the model used to develop the SolarCity project. At an event about an hour south of Albany, Gov. Andrew Cuomo was asked about the hearing taking place at the same time across the street from the Capitol. He pointed to private sector job gains and declining unemployment rates. “You can’t argue with success,” he said.

email: tprecious@buffnews.com

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