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Increases in costs at Buffalo’s RiverBend site reach $50 million

ALBANY – The site work for Buffalo’s RiverBend project is running $50 million higher than the $159 million estimate made before the work started two years ago.

The original price tag for preparing the sprawling site in South Buffalo where the SolarCity solar panel factory complex is being built was based on the property being “certified as clean” by the state Department of Environmental Conservation.

But that turned out not to be the case, according to officials at SUNY Polytechnic Institute, which administers the RiverBend project.

A SUNY official revealed the cost overruns to The Buffalo News on Monday. The Cuomo administration at least twice in April declined to answer questions posed by The News about whether the newly enacted state budget included funding increases for the RiverBend project. The revelation comes as the Cuomo administration this week prepares to ask a largely unknown but critical state oversight board to approve $485 million in a final round of financing for the RiverBend project. The request will include money to cover what remains to be paid in cost overruns at RiverBend. Most of the $485 million request would cover future expenses for completing the SolarCity project.

Included in the site work’s original budget was a $20 million contingency line item – for a total of $179 million – in the event that expenses exceeded estimates. That budget is now at $209 million.

The $30 million not yet paid for the site work is now part of the overall $485 million funding request set to go before the state Public Authorities Control Board this week.

State officials said an array of unexpected work on the 202 acres – where the Republic Steel plant once stood – drove up the costs in preparing the site. Discoveries included everything from an old rail boxcar to radioactive materials in the soil that raise questions how the site was declared “shovel-ready” when the state took over the property several years ago.

Last week, David Doyle, a spokesman for SUNY Polytechnic, said the RiverBend site was “certified as environmentally clean” by the DEC. The certification came in 2007 during the administration of then-Gov. Eliot L. Spitzer – long before a specific RiverBend project was envisioned, officials said.

“Once shovels went into the ground, a number of unforeseen issues arose, which is not uncommon on large, urban construction projects,” Doyle said in an email.

The SUNY Polytechnic spokesman said an array of large debris was uncovered during site work, including old drill bits, train carts and building foundations that forced additional pre-drilling work before contractors could drive hundreds of pylons into the ground. The radioactive slag found in the soil forced contractors to have each bucket of excavated soil tested, with tons of soil having to be shipped to out-of-state locations for disposal.

“Numerous other unknowns were discovered, as well … including unmarked utilities and failing retaining walls. These issues were encountered over the entire factor input and required additional resources to manage accordingly,” Doyle said.

On Monday, in a separate email exchange, Doyle said it became evident that the site work would cost more than expected when excavation and construction began in 2014. He said the earlier estimates were based on costs of the large plant “on an urban site formerly home to a steel plant that was certified as clear by DEC.”

The Legislature’s two top leaders – Assembly Speaker Carl E. Heastie, D-Bronx, and Senate Majority Leader John J. Flanagan Jr., R-Huntington – said last week that they needed more information from the Cuomo administration before they could commit to backing the full $485 million. The control board meeting scheduled for last week was abruptly postponed.

The control board now has a meeting on the funding request set for this Wednesday at the State Capitol. Representatives of Cuomo, Heastie and Flanagan must unanimously agree to approve any funding requests that go before the board.

In an interview Monday, Heastie said that there are ongoing conversations about the $485 million request among the Legislature, the Cuomo administration and State Comptroller Thomas P. DiNapoli.

Asked whether the control board’s meeting will happen Wednesday, Heastie said, “I don’t know, (but) I think we’re in a very good place.”

SolarCity executives were at the Capitol on Monday to discuss the project and its funding.

The matter comes as Preet Bharara, the Manhattan-based U.S. attorney for the Southern District of New York, has stepped up his investigation into the Buffalo Billion and other economic-development initiatives across the state by the Cuomo administration. Cuomo’s office last month received a subpoena in the case demanding information, including on the SolarCity project, which is the largest component of the Buffalo Billion.

On the day that the Governor’s Office was subpoenaed last month, Cuomo announced that his office had hired a private lawyer, Bart M. Schwartz, to look at all spending decisions involving the Buffalo Billion, including the SolarCity project. Schwartz met with state officials in Manhattan last week to review details of the $485 million request going before the control board.

Schwartz, a former federal prosecutor, has promoted his hiring by Cuomo on the website of the firm he heads called Guidepost Solutions. On the site, he notes Cuomo retained his firm to review all grants and approvals related to Buffalo Billion and other projects administered by SUNY Polytechnic related to possible “improper conduct, lobbying and undisclosed conflicts of interest and to make recommendations for improvements in its operations.” Inquiries about Schwartz’s contract and his rate of pay were first posed to the Cuomo administration April 29, the day Cuomo announced that he was retained. The administration has so far declined to provide any information about the hiring arrangement, and there has been no contract submitted for review with the State Comptroller’s Office.

Cuomo has described Schwartz’s role as conducting an “investigation,” even as federal prosecutors run their own. But the private lawyer’s job is also to serve as a major check on every dollar spent in the future on the SolarCity project.

SUNY officials said Monday that costs for the site work are to be paid after invoices are submitted by contractors and then reviewed by two levels: Schwartz and then the governor’s economic-development agency. After the state budget was adopted in early April, the $485 million funding request was given preliminary approval by the Empire State Development Corp. board April 21.

The subpoena sent to the Governor’s Office was on April 29, and since then, a number of other state agencies, individuals in and out of government and private companies have received subpoenas about projects statewide.

When spending by all government agencies are included, the total RiverBend project, including the SolarCity plant, will cost taxpayers $959 million, according to a document presented to the Empire State Development board at its April meeting.

Of that, there is a $750 million ceiling that state officials say has not changed for the SolarCity facility: $350 million for construction of the building and $400 million for the purchase of various equipment and tools inside the building.

The total reservoir of funding also includes $209 million approved for various site preparation and remediation work at RiverBend, which includes land for the SolarCity factory, as well as nearby land for future, unknown development that might occur at the site.

Last month, the Empire State Development board tapped that fund to approve the purchase, for $756,000, of 23 acres at RiverBend that is presently owned by Norfolk Southern Railway Corp. Officials say the land is needed to complete an electrical substation on-site.

In response to questions posed last week, Empire State Development, which is the funding agency for most of the RiverBend project, said the site work’s funding, including the cost overruns, were approved to “address below-grade conditions from the site’s legacy of steel manufacturing and (to) meet additional infrastructure needs at the site.”

It blamed “conditions discovered during construction” for the higher costs, and referred questions about the specifics to SUNY Polytechnic.