September 1, 2016 by

Cuomo’s Yahoo Deal Shows How New York Picks Winners and Losers, With more losers by far

Yahoo Center in Lockport got $30 million in tax breaks, which means, with the savings, that it will pay what it would have paid in many other low taxed states.

In New York State, if the governor doesn’t pick you as a winner, you’re a loser.

This is well demonstrated by the Yahoo! deal in Lockport.

In 2013, the $45 billion Yahoo Inc. negotiated an incentives package with Gov. Andrew Cuomo worth about $30 million in county, state, sales and property tax breaks, credits against state income taxes, and 7,200 kilowatts of half-priced electricity from the New York Power Authority.

In return, Yahoo promised to expand its data center in the Town of Lockport’s IDA Park, add a customer call center and employ 192 employees by 2019.

The $30 million in incentives –subsidized by taxpayers – who will have to pay what Yahoo will not – were said to be needed to encourage Yahoo’s expansion and create jobs.

Before blaming the giant multinational technology company for seeking a package at the cost of taxpayers here, one should consider the economic climate in New York.

For instance, while half-price New York Power Authority hydroelectricity sounds like a deal for Yahoo, it only means Yahoo will pay about the same rates for electricity that much of America pays without breaks.

According to Electric Power Monthly, in February, 2013, when Yahoo struck the deal, New Yorkers paid 18.89 cents per kilowatt hour for residential electrical use and 15.50 for commercial.

The national average was 11.61 and 10.04.

Since Yahoo, like many companies, uses a lot of electricity, a clue to the problems facing Western New York job development are revealed by this.

It is an irony, but, despite the fact that 70 percent of the profit the New York Power Authority earns comes from hydropower generated from the Niagara, local residents do not use locally produced inexpensive hydropower.

The governor does not allow it.

Neither do businesses here use local hydropower, unless the governor, who controls all of Niagara’s hydropower by the fact that he controls the appointments to the board of directors of the New York Power Authority, decides to give a business “low priced electricity” which, as explained above, is just normally priced electricity almost anywhere else.

Without special intervention from the governor, new businesses dependent on high electricity usage cannot expand in Western New York because of high electricity rates.

This is ironic, since low-cost hydroelectricity is generated here.

It is ironic because before New York State took control of Niagara’s hydropower in 1957, the region had abundant inexpensive hydropower generated locally.

The region was prosperous, industry flocked here to take advantage of low cost power and Niagara Falls was dubbed the “Power City.”

Within a few years of State took control of hydropower, locals no longer used local hydropower, and the governor decided which business would get hydropower. Most of it was delivered to New York City and eight other states.

Not surprisingly, State management of the hydropower resulted in the creation of patronage jobs and there was no longer low cost hydroelectricity for anyone in the state.

Unless of course the governor decided to simply reduce the price for some companies he choose as his winners.

The region and particularly Niagara Falls went broke. It lost 35,000 industrial jobs that were dependent on low cost power which they could no longer depend on. But that is another story for another day.

The governor bought back 115 jobs by giving some half price power to Yahoo.

He had to do more for his winner: On top of high electrical rates, New York State residents and businesses pay the highest state taxes in the USA, and Niagara County property owners pay among the highest property taxes in the U.S. in proportion to the value of their property, according to the Tax Foundation of Washington, D.C.

By giving Yahoo $2 million off their state income tax, and 10 years of zero property taxes, the giant internet corporation will not have to pay the highest taxes that the average small business and homeowner pay in the region.

But, the argument is, (since taxes are so high) if New York State government didn’t give tax breaks, why would a business choose to locate or expand here? They could go to any other state and pay less taxes and lower electricity rates.

In New York, economic development is simply the governor picking the winners and the rest of the state’s overburdened taxpayers remain as losers.

This may be why New York is the fastest shrinking state in the nation.

In Yahoo’s case, what the governor did was reduce taxes and electricity rates enough so that Yahoo will pay what it would pay in most other states without tax and other incentives.

At some point the people will elect a new breed of government officials who will not pick winners and losers but will know that lowering taxes is the best form of economic development – and is fairest to all.

Still, when government picks winners and losers, there is yet another winner: the government officials who get to claim credit for the successes of the winners while ignoring the losers who fail or leave the state.

By keeping taxes and electricity rates high for the masses, the governor gets to choose who is beholden to him.

In a low taxed state, a governor has no such power.

This right to pick winners in New York has become our version of economic development;

It is a special privilege of the governor – since, by state law, the governor has a uniquely powerful role, one rivaling in power that of a third world dictator: He controls the hydroelectricity in the state – and through a variety of state entities – and complicated programs, he controls vast amounts of taxpayer money he can hand out to winners and the authority to offer tax breaks to other winners who might otherwise have to pay the oppressive taxes the masses and most businesses have to pay.

The governor of New York can unilaterally reward his winners with bounties from the crown.

And that my friends is power.

And who but an honest man would give that up and advocate for tax decreases?

But we have digressed from the Yahoo deal.

Emblematic of the governor as dictator in New York, after agreeing to grant Yahoo a $30 million incentives package in 2013, Gov. Cuomo required Yahoo to ‘tithe’ back $500,000 a year for seven years (total $3.5 million) which would go to various not for profits in the area.

But who gets to pick the winners and losers?

Cuomo appointed Sam Hoyt, regional president of his Empire State Development agency (which gives subsidies and tax breaks to developers the governor chooses to be winners), to oversee the Yahoo charity money.

The Community Foundation of Greater Buffalo was designated to monitor the money.

Just last week Governor Cuomo announced to great fanfare the grant recipients of the Yahoo Community Benefit Fund for the year.

But who did the actual choosing of the winners?

According the website of the Community Foundation of Greater Buffalo, grant awards are determined by the Yahoo Community Benefit Fund Resident Advisory Council, whose members are not named on the website.

It specifies that organizations must be non-profit entities and that funds are not be used for partisan political activity or for “propaganda or otherwise attempting to influence legislation (lobbying).”

Ironically, team Cuomo had a major hand in doling out the awards to local non-profit organizations, which are composed, by the way, of sincere and grateful members who don’t forget to vote.

Lieutenant Governor Kathy Hochul announced the awards at an event attended by the press at the Yahoo Data Center in Lockport for Stella Niagara, the Cornell Cooperative Extension, the YWCA, NCCC, the Lumber City Development Corporation and others.

Governor Cuomo declared triumphantly for the media, “The most successful investments support the growth of the community as well as businesses, and the state’s partnership with Yahoo does exactly that… The recent revitalization of Western New York is sustained by locally-developed, innovative ideas.”

Cuomo appointee, Howard Zemsky, President of Empire State Development, added inspiring words about the relatively small amounts (compared to the $30 million Yahoo got) doled out to various not for profits, “With the Yahoo Community Fund for Niagara County, ESD has forged a partnership with Yahoo to give back to the region where Yahoo’s facilities are located. The projects awarded today were specifically chosen because they align with the WNYREDC’s economic development strategies in the region and will benefit community organizations that work in Niagara County.”

The Cuomo administration’s role in allocating the hand-outs, which were explicitly said to not be used for political purposes, became political purpose for the governor who the money as a media, public relations and community relations opportunity.

Paul Bonaro, the Senior Director of Yahoo Data Center Operations, whose company had no role in the selection of the winners, spoke of team Cuomo and the community:

“At Yahoo, we know that our success in Western New York is a direct result of the talented workforce, business-friendly environment and access to renewable energy resources. That’s why we’re proud to give back to help keep the region strong. We welcome the announcement today from Lt. Governor Hochul and Empire State.”

The next round of annual funding with its picking of winners will begin in the spring of 2017, with $250,000 available.

Below are some of the past winners:

A review of these will show that Cuomo has picked his winners well as he converted this Yahoo fund into a virtual pork fund to offer small sums to practically every major not for profit in the area, all of whom need money and all of whom know it was not Yahoo but Cuomo and his team that got the job done.

Buffalo Federation of Neighborhood Centers $38,000

Back on Track CLC of ONE $15,658;

Friends of the Lockport Public Library $10,166

Heart of Niagara Animal Rescue, Inc. $14,431.55

Historic Lockport Mill Race Corporation $14,000

Isaiah 61 Project, Inc. $25,000

Lockport Expansion Pilot Lockport Main Street, Inc. $35,000

New Directions Youth and Family Services, Inc. $40,000

Elks Camp Happiness $15,000

St. John the Baptist Parish $14,500

Western New York Land Conservancy $26,000

Dale Association, Inc. $5,000