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| How Cuomo’s Signature Economic Growth Project Fell Apart in Utica | How Cuomo’s Signature Economic Growth Project Fell Apart in Utica |
| (35 minutes later) | |
| In Utica, a former industrial hub in upstate New York where the near collapse of manufacturing has made for a scarcity of jobs and a rarity of good news, the announcement in August 2015 that an Austrian chip maker had decided to put down roots in a fabrication plant built by the state was cause for jubilation. | In Utica, a former industrial hub in upstate New York where the near collapse of manufacturing has made for a scarcity of jobs and a rarity of good news, the announcement in August 2015 that an Austrian chip maker had decided to put down roots in a fabrication plant built by the state was cause for jubilation. |
| Gov. Andrew M. Cuomo celebrated with an appearance in Utica, promising $585 million in state funds to cement the public-private partnership, which was to create 1,000 jobs. Some in the crowd wept with emotion. | Gov. Andrew M. Cuomo celebrated with an appearance in Utica, promising $585 million in state funds to cement the public-private partnership, which was to create 1,000 jobs. Some in the crowd wept with emotion. |
| But last week, after months of delays and mismanagement that culminated in September with federal prosecutors revealing a far-reaching bribery and bid-rigging scheme, state and local officials said that the Austrian chip maker, AMS, had abandoned the project. | But last week, after months of delays and mismanagement that culminated in September with federal prosecutors revealing a far-reaching bribery and bid-rigging scheme, state and local officials said that the Austrian chip maker, AMS, had abandoned the project. |
| The Utica project was merely one chunk of the multibillion-dollar investment with which the Cuomo administration has pledged to seed nanotechnology and high-tech industries in upstate cities starved for economic growth. | The Utica project was merely one chunk of the multibillion-dollar investment with which the Cuomo administration has pledged to seed nanotechnology and high-tech industries in upstate cities starved for economic growth. |
| But the corruption scheme outlined by federal prosecutors has strained the entire nanotechnology program, threatening to knock economic progress off course in places like Utica, where growth was never certain in the best of times. | |
| The state is now scrambling to salvage the Utica plant with a new corporate partner and state administrator. Related projects in Syracuse and Buffalo are in varying degrees of limbo. | The state is now scrambling to salvage the Utica plant with a new corporate partner and state administrator. Related projects in Syracuse and Buffalo are in varying degrees of limbo. |
| And the slow-motion unraveling of the Utica deal has raised anew questions about whether the state is spending its millions wisely by trying to engineer New York’s Rust Belt into a can’t-miss destination for solar panel makers and chip fabricators. | And the slow-motion unraveling of the Utica deal has raised anew questions about whether the state is spending its millions wisely by trying to engineer New York’s Rust Belt into a can’t-miss destination for solar panel makers and chip fabricators. |
| The governor’s office has continued to insist on the initiative’s health, both in Utica and across the state. It has promised that the full $585 million in state funds will remain committed to the Utica area. It has replaced the former architect of the nanotechnology program — a physicist turned economic development guru named Alain E. Kaloyeros, the head of the State University of New York Polytechnic Institute, who was indicted in the corruption scheme — with Howard Zemsky, the well-respected head of the state’s economic development agency. | |
| To hear state officials tell it, a simple leadership switch will do the trick. | To hear state officials tell it, a simple leadership switch will do the trick. |
| “People have seen a lot of progress. I think people continue to be optimistic about the future, and I think for good reason,” Mr. Zemsky said in an interview, adding that he has had “active” conversations with other chip makers about moving into the Utica plant. “The problem will turn out to be an opportunity. I’m comfortable, all in all, that we’re moving in the right direction. We’re making up for lost time in many cases.” | “People have seen a lot of progress. I think people continue to be optimistic about the future, and I think for good reason,” Mr. Zemsky said in an interview, adding that he has had “active” conversations with other chip makers about moving into the Utica plant. “The problem will turn out to be an opportunity. I’m comfortable, all in all, that we’re moving in the right direction. We’re making up for lost time in many cases.” |
| For the state, it seems, the strategy developed by Mr. Kaloyeros and trumpeted by Mr. Cuomo — to lavish hundreds of millions of dollars in state subsidies on corporate partners to create high-tech jobs — is unblemished. Yet the model has come in for repeated criticism from government watchdogs, who say an economic policy that tries to create risky new industries virtually from scratch, and that spends millions in taxpayer dollars to create every new job, is folly. | |
| “We’re incredibly skeptical of the economic logic behind these projects because they’re too expensive,” said John Kaehny, the executive director of Reinvent Albany, a good-government group. “There is no economic logic to this, really. But there’s a huge political logic to it. The governor desperately needs for this to be a success for his political legacy in New York.” | “We’re incredibly skeptical of the economic logic behind these projects because they’re too expensive,” said John Kaehny, the executive director of Reinvent Albany, a good-government group. “There is no economic logic to this, really. But there’s a huge political logic to it. The governor desperately needs for this to be a success for his political legacy in New York.” |
| Local officials have praised Mr. Zemsky as an inclusive and open manager. For those who watched the Utica deal crumble, however, his involvement was a belated acknowledgment that the state could have done better from the beginning — and been better attuned to signs that the program was ailing months before the indictments made it obvious. | Local officials have praised Mr. Zemsky as an inclusive and open manager. For those who watched the Utica deal crumble, however, his involvement was a belated acknowledgment that the state could have done better from the beginning — and been better attuned to signs that the program was ailing months before the indictments made it obvious. |
| “Shifting blame to the procurement process at SUNY Poly is drawing attention away from all the missed opportunities the governor’s office had to step in and make sure the AMS project was moving forward,” said Assemblyman Anthony Brindisi, a Democrat from Utica. “I think the governor’s office, essentially, when it came to economic development upstate, turned the keys over to Alain Kaloyeros, and unfortunately in the case of Utica, Alain drove the bus right off the cliff.” | “Shifting blame to the procurement process at SUNY Poly is drawing attention away from all the missed opportunities the governor’s office had to step in and make sure the AMS project was moving forward,” said Assemblyman Anthony Brindisi, a Democrat from Utica. “I think the governor’s office, essentially, when it came to economic development upstate, turned the keys over to Alain Kaloyeros, and unfortunately in the case of Utica, Alain drove the bus right off the cliff.” |
| Mr. Cuomo’s aides reject the idea that the state has lost credibility in its efforts to revive the upstate economy, saying their economic development efforts were always much bigger than the ones Mr. Kaloyeros oversaw. | Mr. Cuomo’s aides reject the idea that the state has lost credibility in its efforts to revive the upstate economy, saying their economic development efforts were always much bigger than the ones Mr. Kaloyeros oversaw. |
| “SUNY Poly’s narrowly focused on some very high-profile tech projects, but for someone to say economic development, broadly speaking, has been turned over to to someone at SUNY Poly is just incorrect,” Mr. Zemsky said, citing the governor’s efforts to involve regional officials in economic planning and to spread state funds across thousands of smaller economic development projects. | |
| He said he was confident that they would ultimately bring the nanotechnology projects to fruition. | He said he was confident that they would ultimately bring the nanotechnology projects to fruition. |
| “That is the only thing, at the end of the day, that can change that taste in people’s mouths,” he said. | “That is the only thing, at the end of the day, that can change that taste in people’s mouths,” he said. |
| The chip fabrication project had been mired in stop-and-go traffic for more than a year, local officials said, beginning in November 2015, when the state missed a deadline to begin soliciting bids for a developer to oversee construction of the chip plant. Local officials and the company had expected $585 million in state funding to be included in the governor’s proposed state budget in January; it failed to materialize. | The chip fabrication project had been mired in stop-and-go traffic for more than a year, local officials said, beginning in November 2015, when the state missed a deadline to begin soliciting bids for a developer to oversee construction of the chip plant. Local officials and the company had expected $585 million in state funding to be included in the governor’s proposed state budget in January; it failed to materialize. |
| Weeks and months went by without updates. The chip maker was on edge, frustrated and incredulous that the process had stalled. | Weeks and months went by without updates. The chip maker was on edge, frustrated and incredulous that the process had stalled. |
| After two months of asking, local officials were granted a meeting in March with the governor’s top aides, Mr. Kaloyeros and one of Mr. Kaloyeros’s aides, a lobbyist named Todd R. Howe, who had also worked for Mr. Cuomo. | After two months of asking, local officials were granted a meeting in March with the governor’s top aides, Mr. Kaloyeros and one of Mr. Kaloyeros’s aides, a lobbyist named Todd R. Howe, who had also worked for Mr. Cuomo. |
| Mr. Kaloyeros dismissed their concerns. “How many chip fabs have you built?” he asked, according to Mr. Brindisi, who attended the meeting. As the head of SUNY Poly, Mr. Kaloyeros was in charge of all economic development projects related to nanotechnology, overseeing projects including a solar panel factory in Buffalo and a movie production center in Syracuse. | Mr. Kaloyeros dismissed their concerns. “How many chip fabs have you built?” he asked, according to Mr. Brindisi, who attended the meeting. As the head of SUNY Poly, Mr. Kaloyeros was in charge of all economic development projects related to nanotechnology, overseeing projects including a solar panel factory in Buffalo and a movie production center in Syracuse. |
| Andrew Kennedy, who was then the governor’s deputy director of state operations, told the members of the Utica group that Mr. Howe would act as their liaison to the governor’s office, Mr. Brindisi said. If they needed anything, they were told, they should go through Mr. Howe. | |
| Weeks later, when news leaked that the federal investigation into the state’s economic development contracts had come to center on Mr. Howe and Mr. Kaloyeros, Mr. Kennedy’s instructions ceased to inspire much confidence. | Weeks later, when news leaked that the federal investigation into the state’s economic development contracts had come to center on Mr. Howe and Mr. Kaloyeros, Mr. Kennedy’s instructions ceased to inspire much confidence. |
| For months, Mr. Cuomo’s aides have tried to eke out some distance between his administration and Mr. Howe. “At no time did he represent or speak for the executive chamber,” said Richard Azzopardi, a spokesman for the governor. | |
| The state budget passed at the end of March included the promised $585 million for the Utica project. But throughout the spring and summer, as Utica officials and the company sent increasingly urgent letters to SUNY Poly and the governor’s office, the project was delayed still further. | The state budget passed at the end of March included the promised $585 million for the Utica project. But throughout the spring and summer, as Utica officials and the company sent increasingly urgent letters to SUNY Poly and the governor’s office, the project was delayed still further. |
| In August, Mr. Brindisi and Senator Joseph Griffo, a Republican whose district includes Utica, traveled to the state fair in Syracuse solely to corner Mr. Cuomo, believing the delays warranted his personal attention. The governor promised to call personally the next week, Mr. Brindisi said, but never did. | |
| Mr. Cuomo’s director of state operations, Jim Malatras, said the governor had called him to relay what the legislators had said immediately after leaving the state fair, prompting the governor’s aides to call Mr. Brindisi and Mr. Griffo the same day. | |
| Top economic development officials were in “constant” contact with Utica area officials and AMS after the governor’s office learned of their concerns, even traveling to Utica multiple times, Mr. Malatras said. | |
| Mr. Malatras said he had not been aware that the Utica chip plant was stumbling until late summer, despite what local officials said were repeated attempts to bring the problems to the attention of the governor’s office throughout the winter, spring and summer. Not until the federal investigation prompted Mr. Malatras and Mr. Zemsky to delve into Mr. Kaloyeros’s projects did they begin to realize that something was off, he said. | Mr. Malatras said he had not been aware that the Utica chip plant was stumbling until late summer, despite what local officials said were repeated attempts to bring the problems to the attention of the governor’s office throughout the winter, spring and summer. Not until the federal investigation prompted Mr. Malatras and Mr. Zemsky to delve into Mr. Kaloyeros’s projects did they begin to realize that something was off, he said. |
| Finally, in September, the governor’s office sent word that the Utica project was being transferred from Mr. Kaloyeros’s domain to Empire State Development, the agency led by Mr. Zemsky. | |
| A few weeks later, the United States attorney in Manhattan, Preet Bharara, released a criminal complaint charging Mr. Kaloyeros; Mr. Howe; Joseph Percoco, another former aide to the governor; and several upstate developers in a yearslong bribery scheme. The complaint described a pattern of misconduct, mismanagement and corruption in the governor’s signature economic development program. | A few weeks later, the United States attorney in Manhattan, Preet Bharara, released a criminal complaint charging Mr. Kaloyeros; Mr. Howe; Joseph Percoco, another former aide to the governor; and several upstate developers in a yearslong bribery scheme. The complaint described a pattern of misconduct, mismanagement and corruption in the governor’s signature economic development program. |
| Smarting from the scandal, Mr. Cuomo announced a set of changes last month to the way the state would handle contracts. | |
| It was too late for AMS: The company withdrew around Thanksgiving, telling local officials that the delays had made it impossible for the company to begin producing its chip technology on schedule. | It was too late for AMS: The company withdrew around Thanksgiving, telling local officials that the delays had made it impossible for the company to begin producing its chip technology on schedule. |
| “I’m very frustrated,” Mr. Griffo said. “Obviously, it was a setback.” | “I’m very frustrated,” Mr. Griffo said. “Obviously, it was a setback.” |
| He said he hoped the state would develop a process for regularly reviewing how effective its economic development programs were, but, like Mr. Brindisi and Mr. Zemsky, said he still believed a public-private partnership with a chip maker was the best option for the Utica site. | He said he hoped the state would develop a process for regularly reviewing how effective its economic development programs were, but, like Mr. Brindisi and Mr. Zemsky, said he still believed a public-private partnership with a chip maker was the best option for the Utica site. |
| Anthony J. Picente Jr., the Oneida County executive, recalled how the initial announcement of the hub had used the term “game-changing,” which “created an even greater sense of optimism.” | |
| “We’ve gone through some tough times here in Oneida County over the years,” Mr. Picente said. The collapse of the agreement, he said, “dealt a blow.” | “We’ve gone through some tough times here in Oneida County over the years,” Mr. Picente said. The collapse of the agreement, he said, “dealt a blow.” |
| He added, “If this had been in the hands of the right people from the beginning, I don’t think we’d be sitting here right now.” | He added, “If this had been in the hands of the right people from the beginning, I don’t think we’d be sitting here right now.” |
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