ALBANY – The state’s economic-development agency, spread across two main offices in Albany and Manhattan and 12 regional offices, boasts a staff of 481 responsible for cutting financial deals to lure and retain businesses across dozens of sectors of the economy.
Now, a new task has been dumped into the lap of Empire State Development, and it includes high stakes for both the state and taxpayers: serving as project manager for more than a dozen construction projects, some tainted by a pay-for-play scandal that has rocked the Cuomo administration.
Since Gov. Andrew M. Cuomo handed him the new portfolio, Empire State Development chief Howard A. Zemsky has huddled with top advisers at both his agency and at SUNY Polytechnic Institute, which was stripped of the day-to-day handling of the projects.
“This will come together in the very near future in terms of a path forward,” Zemsky said in an interview. “We’re obviously sensitive to completing these things on a timely basis wherever possible, and we’re not approaching this casually, I can assure you. This is rapidly changing to a very high priority for Empire State Development, obviously.”
There’s much to be done and challenges that go along with the new task. For starters, it means that an agency with a different kind of job description will have to get involved in the day-to-day dealings with construction contractors and vendors of expensive high-tech equipment.
It also means understanding precisely what has and hasn’t been done on various upstate projects.
And it means lining up legal steps that need to be taken, such as whether contracts negotiated previously need to be amended and whether there might be a role for the State Legislature.
In Buffalo, the immediate question is a simple one: Can the SolarCity factory project at RiverBend in South Buffalo be completed on time and start producing solar panels sometime next spring as promised?
Zemsky is adamant that SolarCity is moving ahead and on schedule.
“I can assure you the transformation from Fort Schuyler to Empire State Development will not, in any way, slow down the RiverBend SolarCity project,” he said, referring to the Fort Schuyler entity tied to SUNY Polytechnic.
His economic-development agency’s new role in the SolarCity project within the governor’s Buffalo Billion “is very consistent with what we do” as far as interacting with companies, business strategic work and due diligence, Zemsky said.
“I see this as very tightly aligned with ESD’s mission and experience, so we’re not overwhelmed,” he said. “I wouldn’t use the word ‘herculean.’ We’re very excited about our engagement with this.”
Indeed, it’s been an open secret in some circles at the State Capitol that Empire State Development and SUNY Polytechnic – and, more precisely Zemsky and Alain E. Kaloyeros, who was relieved of his executive duties at SUNY Poly last month after he and eight others were charged in the federal corruption case – had little love for each other over at least the last year or so.
Looking to make changes
Both agencies and both men were directly involved in the SolarCity and other projects. Kaloyeros’ shop worked with SolarCity to make the facility a reality, while Zemsky’s agency considered and approved spending for the projects.
But Zemsky’s agency now must step in and take over a dozen or more projects, not just in Buffalo, but across upstate. All are in various states of completion. In the case of the biotech company Athenex and its plans for a Dunkirk plant with 900 jobs, nothing more than design drawings are completed. Zemsky said he believes that “we have a path forward that we’re finalizing” for the Dunkirk project, although he did not elaborate.
The agency did not, as requested, turn over a list of those dozen or more upstate projects – and details about their precise status – that Zemsky will now be running.
Out amid the scandal are Kaloyeros and SUNY Poly, which created the not-for-profit entity called Fort Schuyler Management Corp. to develop, construct and manage the SolarCity work and other upstate projects.
In comes Zemsky, a Buffalo businessman who works as Cuomo’s chief economic-development official for a salary of $1 per year and is now in charge of getting the project completed.
Besides zeroing in on the staff that will oversee RiverBend and other projects, Zemsky has to complete a number of legal steps, too. All of the contracts for all of the work across upstate were signed between the participating companies and Fort Schuyler. It was Fort Schuyler that cut the checks to LPCiminelli, the Buffalo general contractor for SolarCity that, in turn, paid the other vendors. That all needs to either get changed so that the economic-development agency can make payments and approvals.
Zemsky was noncommittal when asked if contracts that Fort Schuyler made with companies involved in the SolarCity and other Buffalo Billion projects need to be amended.
“Not necessarily” was all he would say.
The SolarCity project is costing the state $750 million for both the building and much of the equipment that will make the solar panels. California-based SolarCity is buying equipment, too, but it gets use of the building and all state purchased equipment for the next 10 years for $1 per year, under the terms of the deal Cuomo made.
An open-minded approach
The economic-development chief said he has a team looking at how to change the governance structure over SolarCity and the other upstate projects. That means possibly keeping Fort Schuyler alive and involved, but with different board members.
Zemsky also suggested a change is coming soon in who appoints members of Fort Schuyler. That selection process now involves the SUNY Polytechnic Research Foundation. He said he does not believe that the Legislature is needed for any changes.
He did not rule out keeping some of the team at SUNY Poly onboard with the projects.
“Like any merger, some people are going to stay and some aren’t going to stay. … We’re approaching it with an open mind,” Zemsky said.
People with experience in large construction projects say it is unusual that the “build phase” of the SolarCity factory is ending while installation of hundreds of millions of dollars’ worth of equipment has yet to get started. Typically, they say, the two phases bump up against each other, with those in the build phase being rushed to complete their work while trucks are lined up waiting to begin the final phase of installation.
That isn’t happening with SolarCity. Although the state recently handed the “keys” to the building to SolarCity, Zemsky said he expects an additional four to six weeks to complete construction.
In August, a state financial oversight panel in Albany was presented with an update from Zemsky’s agency about SolarCity’s timetable and work. That brief document noted that two German-based firms – Singulus Technologies and Von Ardenne – were to be paid a total of $8.2 million within weeks of that mid-August meeting. Both companies are among the suppliers of equipment going into the factory.
Those payments did not happen, and the same two companies turned up on the Sept. 19 memo on SolarCity from Zemsky’s agency to the same oversight board. In that memo, the agency said it expected the two companies to be paid a total of $7.4 million sometime within 30 days.
Both companies were asked last week if they were seeing delays in their work with the SolarCity project because of fallout from the federal corruption case. The companies also were asked for context about payments the state had expected to pay to them sometime in August.
Singulus President and CEO Neil R. Brokenshire declined to comment, while a Von Ardenne executive did not return phone calls.
No vendor has been implicated in the federal probe, which centers on how the general contractor and developer awards were made to LPCiminelli in Buffalo and COR Development in Syracuse.
SolarCity officials previously had said that about two-thirds of the equipment due to be installed at RiverBend already had been ordered. Moreover, there have been design changes to the factory’s interior layout that will boost efficiency of the solar panel production. Those changes also led to changes in equipment being delivered to the site.
SolarCity envisions no delay
SolarCity was asked last week whether the federal probe would affect the factory timetable, whether Zemsky’s agency taking over the project would affect the company’s relationship with the state and whether vendors are ready to deliver their equipment on time.
“SolarCity has not experienced any delays in equipment order and delivery,” said Kady Cooper, a spokeswoman for the company. “The installation and manufacturing schedule could change due to reconfiguration of the floor plan, but is unrelated to the charges or shift to Empire State Development management of the project moving forward.”
Cooper did not elaborate on how much the schedule could change.
The governor’s new point man for SolarCity also said he sees no delays.
“RiverBend is basically complete, so that project does not get slowed down,” Zemsky said.
He predicted a “pretty quick transition” from the end of the build phase in about four to six weeks to the installation of equipment.