The Kessel NYPA Watch, June 7, 2009 – By George J. Marlin

Notes and Asides

“Numbers matter less than jobs. We’ve just got to create jobs in Western New York.”

 – Richie Kessel

Late last month, Richie Kessel announced a typically cocked up subsidy deal with Yahoo! Here’s the background on the richest subsidy deal ever offered by NYPA: Since David Paterson has been absent from pursuing economic development in the State, Kessel has tried to fill the gap in order to generate precious press coverage for himself. As reported by Jonathan Epstein in The Buffalo News, our accidental Governor and his accidental appointee, Richie Kessel, announced that Yahoo! would spend $150 million to set up a new regional data center in Western New York with about 125 new jobs in return for low cost hydropower from NYPA, specifically 15 megawatts of New York hydropower. Except that’s not true.

The problems with Richie’s deal are many. First, as befits Richie’s focus on press over substance, Yahoo! hasn’t agreed to locate the new data center in New York. Indeed, Yahoo! said that it wouldn’t comment on “ongoing discussions” and Paterson and Richie conceded that the company was looking at Southern States, including North Carolina. So, Richie and his patron, the unpopular Paterson, have compromised Yahoo’s request for confidentiality, announced prematurely a deal that may never happen and by pursuing premature press rather than substance empowered Yahoo! if it wishes to come to New York to demand additional cheap hydropower or other state financial assistance. North Carolina economic development officials were too smart and experienced to make such rookie mistakes.

Worse, as reported by Jim Heaney in The Buffalo News, is that despite Kessel’s claims to the contrary, data centers, which are voracious consumers of electricity to power large and numerous data servers, don’t create tech clusters. Data centers for companies like Google, Yahoo!, E-bay and other consumers of cheap power are usually stand-alone centers in remote areas supported by cheap, subsidized power. Heaney’s piece quoted a tech expert who refuted Kessel’s unsupported assertion that Yahoo! (which remember hasn’t agreed to move to New York) would be a magnet for other high tech businesses. As Heaney reported “Data centers usually don’t act as a catalyst to other high-tech development, however, said Rob Atkinson, president of the Information Technology Innovation Foundation, a technology policy think tank in Washington, D.C. ‘They tend to be relative stand-along entities,’ he said. ‘They don’t generally have a lot of spinoff.'”

Even worse is that Richie’s own words expose his innumeracy and why he shouldn’t be running anything involving public money. Richie is wrong, the “numbers” do matter; in fact, they matter more than these 125 jobs which are not yet in hand. Here’s why: State money is limited; NYPA funds are limited. God knows that the ability of State taxpayers to fund Kessel’s Follies is limited. Since State resources are finite, serious policymakers and decision makers are required to invest in projects that generate the greatest benefit to the State, in this case the greatest job creation and wealth creation upstate. The megawatts that Kessel blithely committed to a company that hasn’t itself committed to Western New York could have been used to cut NYPA rates generally, to support 1,000 jobs somewhere in upstate New York or in some other smart, accretive, wealth-creating manner. Heaney analyzed the cost of the possible Yahoo! deal and concluded that it is one of the richest ever offered by NYPA. In fact, Richie “Numbers Don’t Matter” Kessel has offered Yahoo! over $800,000 in hydropower discounts for every $50,000 job created or four times the average NYPA subsidy in recent years. Thus, had Richie maintained that average, NYPA would have offered not 15 megawatts but only 3.75 MW and saved the rest for the next deal. But his primal impulse to get cheap and easy press coverage was irresistible and if the deal comes to pass NYPA and the State will pay the price for such waste for years to come.

Finally, history tells us that the next corporation looking for cheap NYPA hydropower will cite the Yahoo! precedent in its negotiations. For Richie has established a new floor for the grant of cheap hydropower, a floor that will last only until the next rent-seeker sweet talks Kessel. You see, the “numbers” mean a lot.

THE KESSEL COUNTDOWN: ­573 DAYS UNTIL RICHIE KESSEL IS FIRED BY THE NEW GOVERNOR OF NEW YORK.

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3 Comments on “The Kessel NYPA Watch, June 7, 2009 – By George J. Marlin”

  1. PASNYNYC Says:

    Someone should investigate the speculation in the office that one or more of the trustees receives health coverage in some side deal. Thought that was prohibited but word has it that at least some of our trustees get it.

  2. PASNYActiveDuty Says:

    Kessel is working on another deal with another name brand company that will make Yahoo look like the mother of fiscal probity

  3. PASNYRetiree Says:

    Kessel is going to bankrupt PASNY. By giving hundreds of millions to the State, by appeasing Congressman Higgins and rebating tens of millions of dollars, by doling out PASNY grants like they were candy, by pursing the Yahoo deal and windmills in Lake Erie and dropping the small rate increase required by law, Kessel will first see a negative watch from the rating agencies, then a downgrade, then another downgrade to LIPA’s rating level and ultimately impairment of PASNY’s ability to pursue its mission. Upstate will rue the day Paterson appointed this guy. My colleagues still in the shop tell me that they are disgusted with Kessel’s sole focus on Long Island politics and press.


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