STOP KESSEL BEFORE HE WASTES MILLIONS MORE

Congressman Brian Higgins (D-Buffalo) is to be commended for the public service he has performed by highlighting waste at Richie Kessel’s NYPA and for proposing that Western New York receive directly the benefits of the regions’ hydropower patrimony.  Last month, Higgins proposed that about 36% of the net revenue from the Niagara Power Project’s sale of hydropower be taken from Kessel’s control and directed to WNY economic development.  It’s about time.  NYPA itself has confessed that less than half that percentage remains in Western New York.

State Senator Darrell Aubertine (D), Chairman of the Senate Energy Committee, also deserves kudos for his proposal to create a North Country Power Authority and replace NYPA in St. Lawrence and Franklin counties in Senator Aubertine’s district.

After less than a year of Kessel’s “leadership” marked by an unprecedented divided vote on his selection as CEO, a stinging public rebuke from Governor Paterson, more coverage of Long Island by NYPA, an upstate utility, than by Macy’s and a growing Dump Kessel Movement—leading members of Kessel’s own Democratic party in Congress and the State Senate are moving to emasculate NYPA.

Thanks to our correspondents who pointed out Higgins’ cool, detached non-endorsement of the grossly wasteful Yahoo! Deal announced by Kessel on June 30.  In the Yahoo! Press release, Higgins did not speak to the Yahoo! giveaway but rather reiterated his belief that Western New York’s energy patrimony be kept in the region and not controlled by a NYPA run by a Long Islander.

Specifically, thanks to the intrepid reporting of The Buffalo News, we know that NYPA is paying Yahoo! as much as $800,000 per job which is multiples higher than the average NYPA subsidy and wealth destructive to the State and the region in every respect.  The sole beneficiaries are Kessel’s growing press apparatus and Yahoo! senior management who pulled one over on Kessel.  One can only assume that when Yahoo! googled Kessel’s history of rolling over for LILCO and energy companies and vendors on Long Island, the company was heartened and encouraged to ask for the moon.

As reported in The Buffalo News and Street Corner Conservative, energy hungry data centers in remote areas don’t generate Silicon Valley-type spinoffs but are sited in undeveloped areas with cheap, subsidized power for geographic diversification to protect the integrity of the Yahoo! System and receive the public subsidy to power and cool power hungry servers.

Finally, Street Corner Conservative notes that, as it predicted, Kessel’s premature announcement of the Yahoo! deal resulted in a loss of the State’s leverage and the bestowing of additional State and local subsidies on Yahoo!  Street Corner Conservative estimates that additional subsidy at about $40 million.  So, if additional evidence were needed, Congressman Higgins’ proposal is spot on and taking NYPA profits away from the innumerate and media hungry Kessel is sound policy.  Street Corner Conservative will be tracking the progress of the proposals by Higgins and Aubertine.

THE KESSEL COUNTDOWN: ­539 DAYS UNTIL RICHIE KESSEL IS FIRED BY THE NEW GOVERNOR OF NEW YORK.

Notes and Asides

Did Richie Kessel Violate State Law and NIFA’s Code of Ethics by Making Local Campaign Contributions?

Sections 73 and 74 of State Public Officers Law as well as the Code of Ethics of the Nassau Interim Finance Authority require minimum standards of conduct by appointed public officers, such as Richie Kessel.  The law proscribes the actions of public officers to avoid actual and perceived conflicts of interest.  Richie’s NYPA resume boasts that he served as Chairman for a number of years and a Board Member of NIFA from 2000 until his resignation from NIFA on December 31, 2007.  Over that period, Kessel was responsible for the State agency that was charged with overseeing Nassau County’s budgets, taxes, finances, borrowing and financial plans.  So, one would expect that Richie would avoid political entanglements in the County during service on the NIFA Board.  In fact, contrary to sound practice, good public policy and perhaps State law and NIFA’s Code of Ethics—that he himself voted to approve—Kessel made multiple political contributions during his NIFA service to Democratic members of the County Legislature, the very body charged with approving the County budget that NIFA would annually review, critique and possibly reject.

The facts are these: Kessel made eight separate contributions to six Democratic members of the majority party in Nassau County Legislature while serving on the NIFA Board, in each case in the months leading up to the election of the County Legislature.  Legislators Roger Corbin, David Denenberg (one contribution while Richie was at NIFA and another weeks later), Judy Jacobs, former Presiding Officer (three contributions).  Joe Scannell, Wayne Wink and Diane Yaturo (the current Presiding Officer) were also beneficiaries of Richie’s political largesse. Inappropriate and unseemly?  Definitely.  Illegal?  Street Corner Conservative will leave that determination to the appropriate authorities.  Violative of NIFA’s Code of Ethics?  Street Corner Conservative’s read of the Code suggests that there is a real question as to whether Kessel’s multiple political contributions directed solely to majority members of the County Legislature in an election year was permissible under the NIFA Code.

But these questionable political contributions raise many questions:  Did Kessel exert pressure on these Legislators? Did the past Chairman of NIFA and LIPA extract any concessions with respect to NIFA business and perhaps other matters, public or private? What message did Kessel’s contributions, including to the current and past Presiding Officer of the Legislature, send to other Democratic members of the Legislature who were not similarly funded by Richie?  What message did Kessel intend to send to minority members of the Legislature?  Ultimately, was the County’s relationship with NIFA on budgetary and the County’s sky-high taxes affected by these contributions?  These questions demand investigation.

NOTE TO READERS:  Starting this week, The Kessel NYPA Watch will be on a fortnightly summer schedule.

THE KESSEL COUNTDOWN: ­559 DAYS UNTIL RICHIE KESSEL IS FIRED BY THE NEW GOVERNOR OF NEW YORK.

This article I wrote appears in Newsday on June 18, 2009.

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.

Richie Kessel: BIG Republican Political Donor

“I lost contact with Richie Kessel, who somehow was able to swim the political rapids from the Democratic side to the Republican side.”

                                                                                                           – Mario Cuomo

While a professed life-long Democrat, Kessel’s State political contributions, all a matter of public record on the State Board of Elections web site, belie his protestations.  Kessel in fact donated a total of $1,600 to Republican George Pataki and did not donate personally to his successor, Governor Eliot Spitzer or then-Lieutenant Governor David Paterson or now Governor Paterson.  While press reports stated that Kessel attended Attorney General Cuomo’s recent Long Island fundraiser, there is no record of Kessel contributing to AG Cuomo then, prior to or in the past three years since the AG’s 2006 election.  (Street Corner Conservative will be following any political giving by Kessel this year and next.)  To be complete, Kessel has donated to appointed Comptroller DiNapoli, now a State-wide official, on multiple occasions.

Some speculate that Kessel’s multiple contributions to Pataki were to curry favor with the GOP Governor who said the following in 1994: “I think they’ve [LILCO] been poorly run.  But on the other hand, I think if there is anybody who could run it worse, it would be Richie Kessel.”  In 1995, however, Pataki reversed himself and hired Kessel as LIPA Chair and CEO in 1997, confident that in an effort to keep his LIPA job, Kessel would do as directed.  In addition, Pataki surely knew that Kessel’s closest political friends and patrons were three powerful Long Island Republicans, Al D’Amato, Joe Mondello and Dean Skelos, who would have a direct pipeline to Kessel.  In 2008, lobbyist D’Amato and then Majority Leader Skelos intervened with the hapless Paterson Administration to secure Richie his latest political sinecure at NYPA.

Specifically, based on Board of Elections records, Richie has given to Republican Governor Pataki, then-Republican Senator Mike Balboni and current Republican Senator Ken LaValle and Republican Assemblyman McDonough.  Richie’s friendship with former Republican Senate Majority Leader Skelos may explain why Richie has not donated to any Democratic candidate for State Senate, a top priority of State and Long Island Dems.  On the other side of the aisle, Richie has donated to some Democrats in addition to DiNapoli, including Democrat Roger Corbin who was recently arrested by the FBI for accepting over $200,000 from a Nassau County housing developer and forgetting to declare it on his income taxes.  Corbin is, of course, entitled to the presumption of innocence.  Newsday reports that the Corbin investigation continues.  We find it interesting that Richie has not contributed to either County Executive Tom Suozzi or Nassau Comptroller Weitzman in either of their races.  Given his long-standing interest in the County Executive’s seat, Richie may have wanted to avoid supporting someone he might one day oppose in a Democratic primary for County Executive, a race Kessel lost to Ben Zwirn a number of years ago.

Lastly, we note Mrs. Richie Kessel donated to Town of Hempstead Republican Supervisor Kate Murray in her last re-election campaign in 2007.  Street Corner Conservative understands that Kessel’s spouse works for the Town of Hempstead in a patronage position.  Supervisor Murray, of course, is the official who many believe is holding up approvals on the Lighthouse Project at the Nassau Coliseum.  Those wishing to follow this from home can go to the Board of Elections web site at www.elections.state.ny.us.

THE KESSEL COUNTDOWN: ­579 DAYS UNTIL RICHIE KESSEL IS FIRED BY THE NEW GOVERNOR OF NEW YORK.