Update On Ridiculous New York Crony Capitalism

I don't watch a lot of television, and most of that is news shows.  But in the little television that I watch, it seems like far and away the biggest advertiser is the State of New York, on behalf of a program called "Start-Up New York."  Watch a half hour of news in the evening in New York, and you can easily see three of these ads.  The message is, we're creating lots of great new jobs in upstate New York by handing out tax exemptions for exciting new start-ups!  The videos show attractive young people in obviously new and clean facilities, wearing some kinds of trendy clothes or lab coats and looking very, very high tech.  Of course the cynic in me cannot help thinking, why are they spending all this money on advertising for this?

You don't have to be a genius to predict that this program will inevitably be a disaster -- at least for the taxpayers.  Thankfully, the Legal Insurrection website over the weekend put out a compilation of the latest information.  That post in turn relies substantially on this article from the Ithaca Journal.  It seems that the state put out a report on the program -- late on Friday afternoon going into the July 4 weekend.  Really, that already tells you all you need to know.  No matter how bad you thought it might have been, it's worse.  The Legal Insurrection headline is "Much-touted Start-Up New York programs spent over $53 million to create just 441 jobs."  And the sub-headline is "And it's only going to get worse."  Excerpt:

Governor Andrew Cuomo’s “tax-free” plan to bring technology jobs to New York has long been considered a failure, and buried in Friday afternoon’s holiday weekend document dump is a report that demonstrates the degree of the latest NY boondoggle’s failure.  

The Ithaca Journal has this to say about the timing of the state report:

The report from Empire State Development, the Cuomo administration's economic-development branch, was released Friday evening ahead of the holiday weekend, a time notorious for government agencies to release unflattering news.  It was more than 90 days late: By law, the report was due March 31.

So what has the $53 million gone for?  Again, from the Ithaca Journal:

The state has spent tens of millions of dollars promoting the program, including $53 million from late 2013 to early 2015. The bulk of that cost was spent on seemingly ubiquitous television advertisements.

Yes, basically all the state money has gone for the ads.  And the (pitiful) results:

In some regions, the report showed few results in the first two years, including the Southern Tier, which saw nine companies in the Start-Up program create seven total jobs. The six Start-Up companies at Binghamton University combined to create a single job in 2015.  In the mid-Hudson region, which stretches from Westchester County north to Sullivan County, Start-Up businesses created five jobs last year — all in Kingston.

And the amount of private investment?

So far, 159 companies have been approved for the program, including 102 that are new businesses. Together, they invested $11.4 million in New York in 2015 and received $1.2 million in tax benefits.

Of course the tax benefits will go on for years, so it's impossible to calculate how much the taxpayers will pay for each job "created."  But it's already around $125,000 per job before the tax benefits really even get going.

Well, there's one thing that can be said about this program, and that is, it's not as big a disaster as the "Buffalo Billion."  That's the program under which Governor Cuomo proposes to "invest" $1 billion or so of state taxpayer funds in Buffalo to turn around that long-struggling city.  Oh, it seems that the lion's share of the billion is going to just one company, SolarCity, a company (supposedly) engaged in manufacturing and installing solar panels on people's houses.  I say "supposedly" because the factory -- basically built at taxpayer expense for the Elon Musk-led company -- is still not finished, and the smart money is betting that it never will go into operation.  In this post in February I noted that SolarCity was near bankruptcy.

But wait!  A couple of weeks ago, Tesla (another Musk company) announced that it was buying SolarCity!  Huh?  The Wall Street Journal "Heard on the Street" column immediately said that the deal "defies common sense" -- why would a cash-hungry money-losing electric car manufacturer want to buy an even more cash-hungry money-losing solar panel manufacturer?  From the WSJ:

Both businesses, for different reasons, are cash hungry. In the past four quarters  alone, Tesla burned up nearly 50 cents of cash for every dollar of sales it made. But it was practically the U.S. Mint compared with SolarCity which burned nearly $6 for each dollar of sales.

Of course the obvious answer is that, with SolarCity looking like it was about to go bust, the State of New York was getting skittish about paying off the remainder of its $750 million investment in the factory.  Tesla continues to be a market darling, and now, with Tesla in the loop, presumably the state investment in SolarCity's factory will go through.  Of course Tesla is also totally dependent on government subsidies and handouts to have a viable business model.  It's just one form of wealth destruction versus another.  The wealth destruction, of course, is for the taxpayers.  Not for Musk.  And not for the construction contractor on the factory, LP Ciminelli, which, as the New York Times points out in this article from May, was a major Cuomo campaign contributor.  Oh, and the bidding documents for the construction project seem to have been written so that the only contractor who could qualify for the job was Ciminelli.