Joint Legislative Public Hearing on 2017-2018 Executive Budget Proposal: Topic "Economic Development" - Testimonies

12 Senator Catharine M. Young
Chair, Senate Finance Committee
13
Assemblyman Herman D. Farrell, Jr.
14 Chair, Assembly Ways & Means Committee

15 PRESENT:

16 Senator Liz Krueger
Senate Finance Committee (RM)
17
Assemblyman Robert Oaks
18 Assembly Ways & Means Committee (RM)

19 Senator Phil Boyle
Chair, Senate Committee on Commerce,
20 Economic Development and Small Business

21 Assemblyman Robin Schimminger
Chair, Assembly Committee on Economic
22 Development, Job Creation, Commerce
and Industry
23
Senator Diane Savino
24 Vice Chair, Senate Finance Committee

1 2017-2018 Executive Budget
Economic Development
2 2-1-17

3 PRESENT: (Continued)

4 Assemblyman Daniel O'Donnell
Chair, Assembly Committee on Tourism,
5 Parks, Arts and Sports Development

6 Senator Rich Funke
Chair, Senate Committee on Cultural
7 Affairs, Tourism, Parks and Recreation

8 Assemblyman Fred W. Thiele
Chair, Assembly Committee on Small Business
9
Senator John DeFrancisco
10
Assemblyman Michael Cusick
11
Senator Roxanne Persaud
12
Assemblyman Harry B. Bronson
13
Senator Elaine Phillips
14
Assemblywoman Addie Jenne
15
Senator Timothy Kennedy
16
Assemblyman J. Gary Pretlow
17
Assemblyman Raymond W. Walter
18
Assemblyman Billy Jones
19
Assemblywoman Carrie Woerner
20
Senator Thomas D. Croci
21
Assemblywoman Rodneyse Bichotte
22
Assemblyman L. Dean Murray
23
Assemblyman Steven F. McLaughlin
24

1 2017-2018 Executive Budget
Economic Development
2 2-1-17

3 PRESENT: (Continued)

4 Senator Terrence P. Murphy

5 Assemblyman David Weprin

6 Assemblywoman Deborah Glick

7 Senator James Sanders, Jr.

8 Assemblyman N. Nick Perry

9 Senator Leroy Comrie

10 Assemblywoman Alicia Hyndman

11 Assemblyman Clifford W. Crouch

12

13 LIST OF SPEAKERS

14 STATEMENT QUESTIONS

15 Howard Zemsky
President, CEO & Commissioner
16 Empire State Development
New York State Department of
17 Economic Development 7 17

18 RoAnn Destito
Commissioner
19 NYS Office of General Services
(OGS) 187 194
20
Brian T. McMahon
21 Executive Director
Alison Lands
22 Executive Director-Designate
New York State Economic
23 Development Council 223 234

24

1 2017-2018 Executive Budget
Economic Development
2 2-1-17

3 LIST OF SPEAKERS, Cont.

4 STATEMENT QUESTIONS

5 Jo Wiederhorn
President and CEO
6 Associated Medical Schools
of New York 242
7
Melinda Mack
8 Executive Director
NY Association of Training
9 and Employment Professionals 251 257

10 Michael Burridge
Director, Government Affairs
11 Randolph Collins
CSArch, Pres./Founding Principal
12 American Institute of Architects
(AIA) New York State 264
13
Daniel Walczyk
14 Professor, RPI, and Director,
NYS Center for Automation
15 Technologies and Systems
-and-
16 Casey Hoffman
Professor, RPI, and
17 Cofounder, Vistex Composites
-on behalf of-
18 NYSTAR Centers of Excellence
and Centers for Advanced
19 Technologies 271 278

20 Tristram Coffin
Board Chair
21 Community Development Financial
Institution (CDFI) Coalition 288 304
22

23

1 2017-2018 Executive Budget
Economic Development
2 2-1-17

3 LIST OF SPEAKERS, Cont.

4 STATEMENT QUESTIONS

5 Thomas O'Donnell
President, Teamster Local 817
6 -on behalf of-
Teamster Local 817,
7 Screen Actors Guild-American
Federation of Television and
8 Radio Artists, Directors
Guild of America, and
9 Local 52 IATSE
-and-
10 Yana Collins Lehman
Board Chair
11 Post New York Alliance
-on behalf of-
12 Post New York Alliance and
Motion Picture Editors
13 Guild, IATSE Local 700 314 324

14 Kristen McManus
Senior Program Specialist
15 AARP New York 328

16 Rose Marie Cantanno
Associate Director,
17 Consumer Protection Unit
New York Legal Assistance
18 Group (NYLAG) 333

19 Lara Kasper-Buckareff
Director, Foreclosure
20 Prevention
Legal Services of the
21 Hudson Valley 339 346

22 Jay Flemma
Staff Attorney
23 Legal Aid Society of
Mid-New York 348
24

1 CHAIRWOMAN YOUNG: Good morning, and

2 welcome to the hearing on Economic

3 Development.

4 I'm Senator Catharine Young, chair of

5 the Senate Finance Committee. I'm joined by

6 my colleague Assemblyman Denny Farrell, who

7 is chair of the Ways and Means Committee.

8 We also are joined by several of our

9 members. We have Diane Savino, Liz Krueger,

10 Phil Boyle, Rich Funke, Terrence Murphy,

11 Roxanne Persaud, John DeFrancisco, and Elaine

12 Phillips.

13 CHAIRMAN FARRELL: I have been joined

14 by Assemblyman Cusick, Assemblyman Bronson,

15 Assemblywoman Hooper, Assemblyman O'Donnell,

16 Assemblyman Jones, and Assemblyman Thiele.

17 And Mr. Oaks too.

18 ASSEMBLYMAN OAKS: Yes, we've also

19 been joined by Assemblyman Walter.

20 CHAIRWOMAN YOUNG: Thank you.

21 Pursuant to the State Constitution and

22 the Legislative Law, the fiscal committees of

23 the State Legislature are authorized to hold

24 hearings on the Executive Budget proposal.

1 Today's hearing will be limited to a

2 discussion of the Governor's proposed budget

3 for economic development.

4 Following each presentation, there

5 will be some time allowed for questions from

6 the chairs of the fiscal committees and other

7 legislators.

8 First of all, I'd like to welcome

9 Mr. Howard Zemsky, chairman and CEO of the

10 Empire State Development Corporation, and the

11 rest of the speakers who are joining us here

12 today. Testimony will be followed by a

13 question and answer period by members of the

14 Legislature.

15 So, Mr. Zemsky, we're looking forward

16 to your testimony.

17 COMMISSIONER ZEMSKY: Great. Thank

18 you.

19 CHAIRMAN FARRELL: Good morning.

20 COMMISSIONER ZEMSKY: Chairwoman

21 Young, Chairman Farrell, and distinguished

22 members of the Senate and Assembly, good

23 morning. I'm honored to have the opportunity

24 to appear before you today to discuss

1 Governor Cuomo's 2017-2018 Executive Budget

2 and its proposals for Empire State

3 Development. This year's budget focuses on

4 strategies and investments that will create

5 new jobs while continuing to strengthen and

6 diversify New York's state and regional

7 economies.

8 By building upon the Governor's

9 inclusive, regionally focused approach to

10 economic development and leveraging state

11 funding and community assets with private

12 investments, we will continue to create

13 economic opportunities for all New Yorkers.

14 With support from the Legislature,

15 New York State has achieved the lowest

16 middle-class tax rate since 1947, the lowest

17 corporate tax rate since 1968, and the lowest

18 tax rate for manufacturers since 1917.

19 Additionally, unemployment is down in all

20 regions of the state -- falling from

21 8.9 percent in 2010 to 4.9 percent today --

22 while job creation is up. There are

23 7.96 million private-sector jobs in New York

24 State, an all-time high, with 869,600 added

1 since 2011, a number that continues to grow.

2 This year Governor Cuomo has proposed

3 $750 million for another round of the

4 Regional Economic Development Council

5 initiative. Since being established in 2011,

6 the Regional Council's bottom-up process,

7 which includes collaboration with

8 legislators, has guided the state to invest

9 approximately $4.6 billion into more than

10 5200 infrastructure, community development,

11 and job creation projects statewide,

12 leveraging more than $20 billion in private

13 and other investments. This has resulted in

14 commitments to create and retain more than

15 210,000 jobs throughout the state.

16 The Governor recently announced nearly

17 $40 million in awards through Round 4 of the

18 RESTORE NY program, which provides funding to

19 municipalities for revitalization efforts.

20 This funding, obtained with your support and

21 approval, will help to reinvigorate downtowns

22 and generate economic activity through

23 rehabilitation of vacant and surplus

24 properties.

1 Thanks to the Buffalo Billion and

2 investments based on the region's strategic

3 planning, Western New York is a region that

4 has experienced a true economic

5 revitalization. Instead of leaving Buffalo,

6 young professionals are putting down roots in

7 the Queen City at rates we haven't seen for

8 many decades.

9 In order to capitalize on and sustain

10 the economic progress stemming from the

11 Buffalo Billion's success, Governor Cuomo has

12 introduced Buffalo Billion Phase 2, a

13 proposed $500 million investment focusing on

14 improving workforce development while

15 expanding investments in downtown

16 revitalization, life sciences, advanced

17 manufacturing, and promoting continued growth

18 of the innovation economy.

19 Access to high-speed internet is

20 critical to running a business in 2017, and

21 the New NY broadband program intends to

22 connect every New Yorker to high-speed

23 broadband by the end of 2018. In 2015, the

24 Governor and Legislature made a $500 million

1 commitment to broadband deployment, which is

2 the largest and most ambitious state

3 investment in the nation. To date,

4 $54 million has been awarded to 25 projects

5 through Phase 1 of the program, and

6 significantly more committed through Phase 2,

7 which is expected soon.

8 The tourism industry has been booming

9 in recent years, and the Governor has

10 proposed a commitment of more than

11 $55 million for tourism initiatives to ensure

12 this growth continues. In 2015, the

13 statewide economic impact of the tourism

14 industry exceeded $100 billion for a second

15 straight year. This amounts to more than

16 $63 billion in direct visitor spending and an

17 estimated $8 billion in state and local tax

18 revenue. We expect to exceed those numbers

19 once again in 2016.

20 The Excelsior Jobs Program has issued

21 nearly $92 million in tax credits to 102

22 businesses since 2010, resulting in the

23 creation of more than 10,000 jobs statewide.

24 Through this performance-based program, we

1 are able to stimulate job creation while

2 maintaining oversight, ensuring that

3 companies reach milestones before receiving

4 incentives. The program has been critical to

5 successfully attracting many companies and

6 major projects and the jobs they generate.

7 As outlined in the Governor's

8 Executive Budget, we are proposing to refine

9 the focus of the program currently known as

10 START-UP NY, while continuing to promote

11 partnerships between business and academia.

12 In a few short years, the program has already

13 received commitments from more than 200

14 companies to create nearly 4500 new jobs

15 throughout the state and invest approximately

16 $250 million.

17 The Excelsior Business Program, as

18 proposed, would admit early and

19 formative-stage companies in targeted

20 high-growth industries while continuing to

21 incentivize business growth and job creation

22 for participating companies.

23 Furthering our investments in

24 public/private partnerships, Governor Cuomo

1 has introduced a $650 million investment to

2 spur growth in the life science industry.

3 This comprehensive initiative includes

4 $250 million in tax incentives for new and

5 existing life science companies, $200 million

6 to support the infrastructure needs of life

7 science entities, and $200 million of new

8 investment capital for early-stage life

9 science firms.

10 The first investment under this

11 initiative will provide $15 million to

12 support the buildout of the JLABS Innovation

13 Center, a collaboration between Johnson &

14 Johnson and the New York Genome center, with

15 capacity for up to 30 life science startups.

16 Governor Cuomo has also proposed the

17 Photonics Venture Challenge, a $10 million

18 multiyear competition and business

19 accelerator program designed to support

20 startup companies that commercialize rapidly

21 developing technologies.

22 In recent years, Governor Cuomo and

23 the Legislature have cut taxes significantly

24 for manufacturers, and we're taking our

1 support for American manufacturing a step

2 further with the Governor's Buy American

3 proposal. Under the plan, state entities

4 will give preference to American-made goods

5 and products for procurements over $100,000.

6 New York's commitment to minority- and

7 women-owned business enterprises has

8 established the state as a national leader in

9 MWBE business development. The number of

10 certified MWBEs currently stands at nearly

11 8,000, with more than 5,000 certified since

12 2011. Key to the success of this program is

13 the utilization of MWBE firms in state

14 contracting, which most recently increased to

15 over 25 percent, totaling nearly $2 billion

16 in contracts awarded to MWBEs in the

17 2015-2016 fiscal year. This year's budget

18 will extend the program through 2018.

19 The Executive Budget also includes a

20 three-year extension of the New York State

21 Film Tax Credit Program at the existing

22 funding level. Since 2011, more than 1,000

23 film and television projects have submitted

24 applications to the program, generating an

1 estimated $15 billion in spending and

2 approximately 934,000 new hires in New York

3 State. The number of qualified production

4 facilities across the state has increased to

5 77, with more than 270 sound stages. The

6 program continues to generate a positive

7 return on investment while providing a boost

8 to local small businesses.

9 Last September Governor Cuomo directed

10 ESD to oversee and manage SUNY Polytechnic

11 Institute's portfolio of economic development

12 projects. We immediately went to work on the

13 process of assessing each project, engaging

14 with the businesses and project stakeholders

15 and reviewing related contracts and

16 documentation. We have been managing myriad

17 projects statewide and also achieved

18 substantial reforms at SUNY Poly's economic

19 development entities Fort Schuyler and Fuller

20 Road Management, which established greater

21 transparency, accountability, and integrity.

22 ESD remains committed to ensuring that

23 ongoing economic development projects

24 continue to move forward, create new jobs,

1 and generate opportunities without

2 unnecessary delays.

3 In closing, we've had a very busy

4 start to the new year, and ESD has a lot of

5 work ahead. But that is when this agency

6 thrives. And I want to say I'm joined today

7 by many members of the ESD team, and we have

8 over 500 people who work at Empire State

9 Development doing an amazing job across the

10 state, and I'm extremely proud to be

11 associated with all of them.

12 We do look forward to these new

13 opportunities and working with you, our

14 legislative partners, to move our economy

15 ever upward. I want to thank you again for

16 this opportunity to testify and close with a

17 quote from the great football coach and

18 philosopher Marv Levy, who said: "Where else

19 would you rather be but right here and right

20 now?"

21 CHAIRWOMAN YOUNG: Thank you,

22 Mr. Zemsky, for that testimony.

23 And we have several members who have

24 questions. We would like to start with

1 Senator Phil Boyle, who is chair of the

2 Senate Standing Committee on Commerce,

3 Economic Development and Small Business.

4 Chairman?

5 SENATOR BOYLE: Thank you, Madam

6 Chairwoman.

7 And thank you, Commissioner, for

8 joining us and for your testimony.

9 I just wanted to touch on -- well, you

10 painted a rosy picture of our economic

11 development in New York State, but obviously

12 anybody who reads the newspaper and sees the

13 media knows that there's true problems. And

14 I'm going to leave it to some of my upstate

15 colleagues perhaps to talk about some of the

16 projects up there. I'd like to focus on the

17 Regional Economic Development Council, about

18 what I'm concerned about, a lack of

19 transparency and openness.

20 I'll tell you a quick comment before

21 my question. Senator Flanagan, the Senate

22 leader, recently appointed me as Long Island

23 Regional Economic Development Council Senate

24 representative. Before our first meeting, I

1 went and met with the executive director.

2 And I was excited about being there. This

3 was a new thing. I'd read about all the

4 ribbon cuttings and the big promotion up here

5 and the naming of the projects. So I simply

6 asked, "Can I have copies of the previous

7 four years of votes?" I wanted to know which

8 of my new colleagues on the Long Island

9 Council liked high-tech, which liked tourism,

10 just to get a feel. And I was told, "You

11 can't have them."

12 I was a little shocked by that, and I

13 said, "Well, I'm just trying to find out -- I

14 really" -- "You can't have the votes." I

15 said, "We're talking about hundreds of

16 millions of dollars in taxpayer money. But I

17 just want to see the votes myself." I was

18 told no.

19 And I said, "Wait a minute. I'm a

20 State Senator. I'm a new member of the

21 Long Island Regional Economic Development

22 Council, and I also have happen to be

23 chairman of the Economic Development

24 Committee in the Senate -- and I can't see

1 them?" And she said, "Well, I guess you

2 could FOIL for them if you really wanted

3 them."

4 That is our taxpayers' money. And as

5 a government official, asking for votes to

6 see who voted how with our taxpayer money --

7 and it was not permitted for me to have. So

8 I can't imagine the average New York citizen

9 who wants to know how their taxpayer money is

10 being spent and voted on.

11 Now, as you know, as state

12 legislators, Assemblymembers and Senators,

13 our votes are up there, public, on the

14 Internet. Everyone can see them.

15 My question to you, quite simply, is

16 why are not the votes and the scoring of the

17 Economic Development Councils made public, as

18 well as the conflict of interest forms that

19 they fill out? They go around the table,

20 fill out the form, it's handed in -- I don't

21 think anybody ever sees them. Why are those

22 not made public in a true effort to make it

23 transparent, so we know what's going on with

24 our economic development money?

1 COMMISSIONER ZEMSKY: Right, yeah.

2 So, you know, they -- I understand you're an

3 elected official and you're held to a

4 standard and a transparency standard. Every

5 one of these projects has a score associated

6 with it. You could actually look up the

7 scores on the different projects. You've got

8 a group of people who I think are doing a

9 fabulous job on these regional councils.

10 They're volunteering their time, and they've

11 both developed strategic plans and they're

12 helping to analyze and assess how different

13 projects align with the plans.

14 So the council in total has a score.

15 But you're right, every individual score is

16 not -- I'm not even sure every individual

17 score is necessarily logged. But they are

18 not -- they have no statutory responsibility.

19 They act as an advisory board. So they make

20 recommendations without, I think, the

21 unnecessary pressures of who is supporting

22 this project and who's supporting that

23 project. They're trying to be as objective

24 and independent as possible.

1 And I think without having to have --

2 they're not elected officers. They're doing,

3 I think, a tremendous service. And, you

4 know, the Long Island Regional Council has

5 been one of the most successful councils in

6 the state. I think they've done a remarkable

7 job. But they recommend projects

8 collectively. They go to the state agencies

9 that review them further. But they are not,

10 you know, establishing a public record that

11 they're running on, and they haven't been

12 elected. But they are, I think, doing an

13 amazing job advancing projects to state

14 agencies for consideration, and I think

15 that's the distinguishing characteristic.

16 SENATOR BOYLE: If I could just

17 follow up on that. And I am not trashing the

18 members of these councils all over the state.

19 They volunteer their time, businesspeople,

20 big people from the community -- there's no

21 question about it, they do a great job.

22 However, we don't know if there's

23 potential conflicts of interest because it's

24 not made public. How are we to know that?

1 And I'll give you an example. In Suffolk

2 County, we have a big case going on right now

3 where an assistant district attorney fills

4 out a financial disclosure form -- and no one

5 is allowed to see it -- to say they don't

6 know about potential conflicts of interest

7 for his or her position. Okay?

8 And the same is true here. I don't

9 care if they're volunteers, we still need to

10 know. Because we don't know if some of the

11 people on these councils -- and I'm not

12 talking about Long Island in particular, all

13 around the state -- are being paid, are

14 consultants for some of the very groups and

15 companies that are getting this taxpayer

16 money. They might be getting paid on the

17 side and we don't even know it.

18 If they filled out the form -- and

19 they volunteer their time, I appreciate that.

20 But it would not take much time to say where

21 did they get their income from potential

22 conflicts so we can see what's going on.

23 COMMISSIONER ZEMSKY: I mean, they do

24 sign a code of conduct, they do sign

1 conflicts of interest, they do provide us

2 with, you know, information that remains

3 confidential, but we're able to ascertain

4 whether there's any conflict of interest.

5 But I've served on a regional council.

6 I'm familiar with all the regional councils.

7 I would say over 5,000 projects have been

8 evaluated and scored. And it's not just true

9 of Long Island, it's true across the state.

10 I think these have been -- people have really

11 followed -- I've lived in those regional

12 councils for four years before joining ESD,

13 and for two years since. You know, people

14 take that responsibility very seriously. A

15 lot of time is spent on explaining the

16 importance and conduct, and those have only

17 been enhanced over time.

18 I think these councils operate, you

19 know, with great professionalism. And I

20 think people do recuse themselves when

21 appropriate, and they do understand the code

22 of conduct and the conflict of interest.

23 SENATOR BOYLE: Thank you,

24 Commissioner.

1 CHAIRWOMAN YOUNG: Thank you.

2 We've been joined by Senator Tim

3 Kennedy.

4 Chairman?

5 CHAIRMAN FARRELL: We've been joined

6 by Assemblywomen Woerner, Bichotte, Hyndman,

7 and Glick.

8 Mr. O'Donnell, Danny O'Donnell.

9 ASSEMBLYMAN O'DONNELL: Good morning.

10 Please bear with me, I'm new to this

11 committee. I believe the happiest man in

12 state government is Tony Annucci; he no

13 longer has to respond to my letters.

14 I want to focus a little bit on the

15 tourism budget and the I Love New York.

16 That's you, right, I Love New York? You do

17 that?

18 COMMISSIONER ZEMSKY: Yup. Yup.

19 That's part of the agency.

20 ASSEMBLY O'DONNELL: So are you or

21 your people responsible for the signs on the

22 highway?

23 COMMISSIONER ZEMSKY: It's not run out

24 of ESD specifically, but we are responsible

1 for tourism promotion and we do look to raise

2 people's awareness of our many tourism

3 products, be it Pathways through History,

4 State Parks, and many other -- Taste NY and

5 other tourism promotion projects.

6 ASSEMBLYMAN O'DONNELL: So it's your

7 people who designed and approved those signs;

8 correct?

9 COMMISSIONER ZEMSKY: It's not -- the

10 signage -- we oftentimes are involved in

11 helping with the aesthetics or the design

12 characteristics. But we're not involved in,

13 you know, implementing or placing the signs

14 as such.

15 ASSEMBLYMAN O'DONNELL: I didn't think

16 that you dug the holes, sir. But what I want

17 to know is who designed what they look like

18 and who let the contract out for the people

19 who made the signs. Is that you or is that

20 somebody else?

21 COMMISSIONER ZEMSKY: I honestly don't

22 know exactly who let the contract out for the

23 people who designed the signs, if we used an

24 ad agency or we did it internally or some of

1 the state agencies did it.

2 ASSEMBLYMAN O'DONNELL: And did

3 someone in your agency review what they were

4 to see whether or not they were compliant

5 with federal law?

6 COMMISSIONER ZEMSKY: Again, we're not

7 involved in the placement of signs on the

8 roadways. So we're involved in tourism

9 promotion. And so the design element of it

10 really doesn't connect to, you know, what the

11 laws are for roadway signs.

12 ASSEMBLYMAN O'DONNELL: So somebody in

13 the I Love New York program not involved in

14 designing the I Love NY signs, is that what

15 you're telling me?

16 COMMISSIONER ZEMSKY: You asked me if

17 we were involved in placing the signs on the

18 road --

19 ASSEMBLYMAN O'DONNELL: No, I didn't.

20 I acknowledged that you don't do that.

21 COMMISSIONER ZEMSKY: -- and my answer

22 is we are not involved.

23 ASSEMBLYMAN O'DONNELL: I'm asking you

24 whether or not your agency was involved in

1 designing what the signs looked like. Not

2 did they dig the holes on the highway and put

3 them in.

4 COMMISSIONER ZEMSKY: Yes, either

5 directly or through an ad agency, I'm sure we

6 were involved in the tourism promotion

7 aspects of the signage.

8 ASSEMBLYMAN O'DONNELL: Could you tell

9 me what the Cultural Arts and Public Space

10 Fund is? And how will that be administered?

11 COMMISSIONER ZEMSKY: It's intended to

12 enhance public art in downtown areas in the

13 state. And I'm sure it will be handled, in

14 all likelihood, either through REDC or, you

15 know, appropriate arts organizations.

16 ASSEMBLYMAN O'DONNELL: And so how

17 would someone become aware that this fund

18 existed, how would they know -- or what are

19 the eligibility requirements to get that

20 money, and who do they apply to?

21 COMMISSIONER ZEMSKY: Well, once the

22 budget is approved and all the details are

23 ironed out, we typically are communicating

24 that regionally. And so people have the

1 opportunity to apply, make a presentation to

2 get funding, like happens with so many of our

3 other projects and programs.

4 ASSEMBLYMAN O'DONNELL: The Executive

5 has proposed construction of additional

6 Welcome Centers like the one on Long Island.

7 Where will that come from, that funding? And

8 what do you expect the economic impact of

9 Welcome Centers to be?

10 COMMISSIONER ZEMSKY: The Welcome

11 Centers so far have been well-received. And

12 again, they're just a component of promoting

13 the state's tourism industry, which has been

14 growing dramatically.

15 So I think it's to be determined

16 exactly what the source of funding for those

17 Welcome Centers are. But, you know, it's

18 something that I believe is one of our goals

19 over the next year or so, is to design and

20 build, construct more Welcome Centers, at

21 some point hopefully in every region of the

22 state.

23 ASSEMBLYMAN O'DONNELL: Have you

24 chosen where you think they should go?

1 COMMISSIONER ZEMSKY: We have not in

2 all cases chosen where they should go.

3 ASSEMBLYMAN O'DONNELL: And who from

4 the Legislature would you consult with about

5 where you should put those Welcome Centers?

6 COMMISSIONER ZEMSKY: You know, it's

7 not just an ESD function where Welcome

8 Centers go. We work with state agencies, we

9 work with DOT, we work with local

10 municipalities. We're, you know, engaged

11 with local legislators through the REDC

12 process. So it's not really a -- I don't

13 think it would be a mystery where the

14 potential signs would go. But you'd have the

15 appropriate state agencies working together

16 to advance potential sites.

17 ASSEMBLYMAN O'DONNELL: One final

18 question. You have some information about an

19 LGBT memorial for the massacre in Orlando.

20 Have you consulted with local legislators

21 about that project, and what is the status of

22 that project?

23 COMMISSIONER ZEMSKY: I'm sorry, can

24 you say that again?

1 ASSEMBLYMAN O'DONNELL: There is a --

2 the Governor proposed an LGBT memorial

3 relating to the massacre that occurred in

4 Orlando, Florida. The two-part question is

5 is, one, have you included consultation with

6 state legislators about that project? And B,

7 what is the status of that project?

8 COMMISSIONER ZEMSKY: Yeah, that

9 would, in all likelihood, be worked out with

10 Parks.

11 ASSEMBLYMAN O'DONNELL: I'm sorry?

12 COMMISSIONER ZEMSKY: I believe that

13 would be led by Parks.

14 ASSEMBLYMAN O'DONNELL: Led by Parks.

15 Thank you very much.

16 CHAIRWOMAN YOUNG: Thank you.

17 Senator DeFrancisco.

18 SENATOR DeFRANCISCO: Yes, I noticed

19 that there were changes in the program this

20 year as far as people that would be eligible

21 for assistance from the Economic Development

22 office. Can you just state as briefly and

23 succinctly as you possibly can what those

24 changes are?

1 COMMISSIONER ZEMSKY: Which program is

2 particularly --

3 SENATOR DeFRANCISCO: The Excelsior,

4 it's called now.

5 COMMISSIONER ZEMSKY: Yeah, the

6 Excelsior Business Program?

7 SENATOR DeFRANCISCO: Right.

8 COMMISSIONER ZEMSKY: Yeah. So it's

9 really for -- it's more narrowly focused on

10 early-stage companies.

11 SENATOR DeFRANCISCO: Smaller

12 companies or just early -- is there a

13 critical mass that the company has to be at

14 before they start being looked at for various

15 benefits?

16 COMMISSIONER ZEMSKY: It would be

17 generally earlier stage, pre-income, in

18 development, R&D-related companies.

19 SENATOR DeFRANCISCO: And other than

20 R&D-related companies, is there any specific

21 categories that it's limited to?

22 COMMISSIONER ZEMSKY: I mean, it

23 wouldn't apply to retail and some of the

24 other nontradable sectors of the economy.

1 But it would be very similar to START-UP,

2 upstate's version of START-UP, in that many

3 of those industries would apply.

4 SENATOR DeFRANCISCO: And if I

5 understand it correctly, even the creation of

6 just one job would make them eligible if it's

7 the proper type business that's likely to

8 grow, is that the idea?

9 COMMISSIONER ZEMSKY: Yes. That's

10 exactly the same as it is in the current

11 program.

12 SENATOR DEFRANCISCO: Okay. Now I'm

13 going out to left field here because I want

14 to talk a little bit about one of the main

15 problems that these small businesses have in

16 the State of New York, and I want to -- I'm

17 not going to read all the facts and all the

18 difficulties, but we have this discussion, at

19 least in the Republican Conference,

20 frequently about the high cost of doing

21 business in the State of New York.

22 And one of the big problems -- and I

23 know this isn't quite your area, but in your

24 bag of tools, I think this is important to

1 really focus on -- that's workers' comp. And

2 I just want to -- it's my understanding --

3 there was reforms done in 2007, and the

4 reforms haven't quite worked out well. And

5 let me tell you what's being found.

6 In classifying the type of injury the

7 person has and the type of recovery they're

8 entitled to, the classifications, since the

9 so-called reforms in 2007 -- I'm asking you

10 to use the weight of your office to try to

11 get something moving, and I'll tell you what

12 I'd like to see moving -- the time it takes,

13 the average time to classify a worker to see

14 what their grant is going to be is four times

15 as long as it was before 2007.

16 And there's reasons for that, but I

17 won't go into them. But they're not valid

18 reasons, in my mind.

19 And it's resulted in the average cost

20 of a claim of over $60,000. Now, some of

21 that has to do with how the classification

22 process take place and the length and time it

23 takes. Clearly, people have to be classified

24 correctly. But there's no reason, after

1 reforms, it should take four times as long,

2 which increases the ultimate recovery.

3 The other thing -- and this I'd really

4 like to get an answer on and then I'll be

5 quiet. Back in 2007 -- excuse me, recently

6 the Workers' Comp Board has developed new

7 guidelines as to what your impairments are

8 and how you classify individuals. And these

9 have been in effect, the new regulations have

10 been in existence -- not effective -- for

11 over a year. And many businesses, small and

12 large, have come to me and said, One of my

13 problems in trying to grow is that if these

14 guidelines went into effect, it would help

15 the process -- because some have reviewed

16 these guidelines.

17 So a very simple ask, and I'll leave

18 all the other hard questions for the other

19 people. A simple ask. Can you find out, as

20 head of Economic Development, wanting to grow

21 businesses in this state, big and small, why

22 those guidelines have not been released and

23 why they're not effective at this point in

24 time? Because I think it would help all

1 businesses, large and small.

2 COMMISSIONER ZEMSKY: Okay.

3 SENATOR DeFRANCISCO: Okay? That's

4 all I'm asking. Sorry to take the time. But

5 I think it's just as important as giving

6 money to people, helping businesses to grow

7 to make it more -- less costly to grow those

8 businesses. Thank you.

9 COMMISSIONER ZEMSKY: I mean, as you

10 know, I don't have an answer to exactly why

11 certain regulations around workers' comp have

12 or haven't been adopted or implemented.

13 But I will say that very obviously

14 we're sensitive to the cost of doing

15 business. And I think we have a lot to be

16 proud of collectively, both the Legislature

17 and the Governor, in terms of bringing down

18 the cost of doing business in New York State,

19 in terms of the tax burdens -- property tax

20 burdens, income tax burdens, things of that

21 nature.

22 So I think New York has become a lot

23 more competitive. That's one of the reasons

24 I think we're seeing so much economic growth

1 in New York State. And I know workers' comp

2 is certainly one component of the cost of

3 doing business.

4 SENATOR DeFRANCISCO: The reason I'm

5 bringing this up is I want you to be even

6 more proud of what's going on in the State of

7 New York as far as businesses.

8 COMMISSIONER ZEMSKY: You got it.

9 SENATOR DEFRANCISCO: Okay, thank you.

10 CHAIRWOMAN YOUNG: Thank you, Senator.

11 We've been joined by Senator Tom

12 Croci.

13 Chairman?

14 CHAIRMAN FARRELL: Next, Assemblyman

15 Schimminger.

16 ASSEMBLYMAN SCHIMMINGER: Thank you

17 very much, Mr. Chairman.

18 Mr. Zemsky, I read in your testimony

19 that you've spoken highly of the initiative

20 by the Governor to assist the life sciences

21 industry here in New York State. This is one

22 of the highlights of his budget. Elsewhere

23 in his budget, however, he proposes to give

24 the state the authority to impose price

1 ceilings on the products that these

2 pharmaceutical companies make, a variety of

3 changes which impede their ability to

4 successfully, I think, do business here in

5 New York State.

6 How do you relate these two phenomena?

7 On the one hand, an initiative to encourage

8 them to locate here; on the other hand, an

9 initiative to compromise their ability to

10 succeed.

11 COMMISSIONER ZEMSKY: Well, I mean,

12 whether we compromise their ability to

13 succeed or not is probably a matter of a

14 judgment and opinion. I don't think the

15 intention is to create a pricing structure

16 that actually limits the ability of life

17 science companies to succeed. That's a

18 pretty broad statement.

19 So I think it's a concern, obviously,

20 for the cost of some of these medicines that

21 have gotten very broad attention and I think

22 offends some people's sensibility. So I

23 think having a look at that and having a role

24 in pricing is something that should

1 definitely be considered. It's not something

2 that comes out of ESD.

3 ASSEMBLYMAN SCHIMMINGER: But it comes

4 out of our State Budget.

5 Earlier last week I was -- my

6 sensibilities were offended. But later in

7 the week, the Governor announced some grants

8 under the RESTORE NY program. It's not a

9 program that he created. It existed before

10 he became the Governor. I was happy to see

11 that he moved forward with that funding,

12 $40 million in RESTORE NY grants, including

13 one in my Assembly district. I was elated.

14 The question is, would the Governor be

15 receptive to additional funding for this

16 RESTORE NY program, a program which benefits

17 potentially all communities across New York

18 State?

19 COMMISSIONER ZEMSKY: I believe he has

20 been supportive of RESTORE NY funding. And I

21 think you're right, I think it has had a

22 tremendous impact across all the regions of

23 the state.

24 ASSEMBLYMAN SCHIMMINGER: Thank you

1 very much.

2 In regard to the REDCs, I've read in

3 the Governor's budget narrative much about

4 the success of the REDCs. They have awarded

5 nearly $4.6 billion, and they are credited

6 with creating or retaining over 210,000 jobs.

7 The REDCs have existed over the past

8 six years. The REDCs do not exist in

9 regulation -- that's right, right -- they do

10 not exist in executive order, they do not

11 exist in statute. They exist. Okay?

12 This is a question, now, not about

13 giving me control over the REDCs, this is a

14 question about whether or not the REDCs

15 should be bound by some of the same ethical

16 governance as other entities in New York

17 State. We've seen the problems that occurred

18 with Fort Schuyler. The Governor tasked your

19 agency with assuming a lead role, and your

20 agency has stepped forward and made some

21 changes. Included in those changes are

22 various kinds of ethical disclosure for

23 members of the REDC board, and so on.

24 Also, in his budget the Governor

1 proposes that we legislators -- he does this

2 in his capital projects appropriation bill --

3 we legislators file written declarations of

4 no financial interest and an absence of any

5 financial benefit if we are involved in

6 pushing a program. The latter change would

7 be in statute. Okay?

8 The changes you made at Fort Schuyler

9 are in your internal operations.

10 The question is given the success of

11 the REDCs and the fact that they have

12 continued for six years, is it not now time

13 to codify the REDCs, the Regional Economic

14 Development Councils?

15 COMMISSIONER ZEMSKY: You know, we

16 talked about this earlier. The REDCs have a

17 code of conduct, the members are volunteers,

18 and they are -- they have no statutory

19 authority. So they're an advisory board.

20 They make recommendations, they score

21 projects, they advance those scores and

22 recommendations to one of a dozen state

23 agencies. Sometimes those projects are

24 funded, sometimes they are not funded. It's

1 a recommendation. It's not an edict, and

2 they don't have any statutory responsibility.

3 They sign a code of conduct, they're

4 trained on a code of conduct, they follow the

5 code of conduct, and the same for a conflict

6 of interest.

7 I think the REDCs have done an amazing

8 job. I think it is virtually impossible to

9 dispute the tremendous impact it's had on the

10 economy across the State of New York. And it

11 is so dramatically different -- and you and I

12 live in the same region of the state, and we

13 have seen dramatic transformation -- I've

14 only been there for 35 years; you have been

15 there even longer.

16 ASSEMBLYMAN SCHIMMINGER: Twice,

17 almost.

18 (Laughter.)

19 COMMISSIONER ZEMSKY: Okay. So we

20 have seen the type of economic growth that we

21 couldn't have imagined six years ago. And in

22 fairness, we've seen the type of economic

23 growth that we hadn't experienced in that

24 region for many decades previously. I think

1 that's a fair statement, and it needs to be

2 pointed out.

3 We turned the tide in Western New York

4 and across the state by being -- and I have

5 every one of those plans here. I think one

6 of the things we should be incredibly proud

7 of, and I think that leads the country, are

8 how robust these 10 strategic plans are

9 across the State of New York. They're an

10 amazing 180-degree change in direction of

11 economic development that has had a

12 tremendously positive impact.

13 So we have codes of conduct, we have

14 conflicts of interest, but we also have an

15 economy now that is firing on nearly every

16 cylinder, whose regions, like Western

17 New York, have $19.2 billion of investment

18 lined up -- we couldn't have ever imagined

19 anything like this -- who have young people

20 growing, who have wages growing, have job

21 creation. Housing values are up. Optimism

22 is off the charts. We've done more in six

23 years in Western New York and many regions of

24 the state than, I mean, honestly any of us

1 could have imagined or any of us who were

2 involved over a long period of time had ever

3 really previously experienced.

4 ASSEMBLYMAN SCHIMMINGER: All of that

5 being said, might it not now be the time to

6 crown these achievements by codifying the

7 REDCs?

8 COMMISSIONER ZEMSKY: Again, I hope

9 the REDCs are in place 20 years from now. I

10 think the strategic economic development

11 approach has a great impact.

12 And I have from your own Assemblyman

13 website your own favorable comments about the

14 economic impact of REDC, and I appreciate --

15 ASSEMBLYMAN SCHIMMINGER: Good

16 research.

17 COMMISSIONER ZEMSKY: -- and I

18 appreciate that. And many of the projects

19 that you list that have been funded in your

20 district completely, and not coincidentally,

21 align with the strategic plan of Western

22 New York. So Niagara Street Corridor,

23 activating the waterfront, workforce

24 training -- these are all the foundation of

1 our economic strategy and they're playing out

2 in your district and they're playing out

3 throughout Western New York.

4 So, you know, what I really hope is

5 that the REDCs get a really well deserved pat

6 on the back from everyone, because you've got

7 now dozens of people in each of these regions

8 really helping -- economic development went

9 from a spectator sport to an active sport in

10 these regions, and I think it's fabulous.

11 ASSEMBLYMAN SCHIMMINGER: Thank you.

12 And perhaps the crowning achievement can be

13 someday, somehow, a codification of these

14 REDCs.

15 Let me go on to the final subject that

16 I wanted to talk about, and that is one that

17 you have talked about before and you've said

18 a lot of favorable things about it, the

19 START-UP NY program. This is the program

20 which of course was created in 2013, it was

21 heralded by the Governor as being a

22 game-changer, transformational. Got off the

23 ground in 2014. A report was made. In 2015

24 another report was made, albeit a bit late

1 and a bit skimpy.

2 In this budget, though, something

3 surprising happened. In this budget the

4 Governor's Executive Budget proposed a

5 transmogrification of the program from

6 START-UP NY into another program called

7 Excelsior Business Program. Everywhere that

8 START-UP NY was referenced in the law was

9 deleted and changed to Excelsior Business

10 Program. And some of the parameters of the

11 program were also adjusted. Okay?

12 COMMISSIONER ZEMSKY: Right.

13 ASSEMBLYMAN SCHIMMINGER: I don't want

14 to go to that, but I want to go somewhere

15 else. And that was later in the language

16 that the Governor submitted, the Governor

17 completely eliminated the reporting

18 requirement for Empire State Development

19 Corporation in regard to the new program --

20 and the old program, START-UP -- and plugged

21 it into a different section of law which

22 dealt with reporting by the Excelsior Jobs

23 Program, a far less robust set of reporting

24 requirements. Pretty, I would say, vanilla.

1 And even there, for the programs in that

2 category, the frequency of reporting was

3 changed from quarterly to yearly.

4 In addition, the reporting

5 requirements for the businesses that are in

6 START-UP/Excelsior Business Program were

7 significantly truncated.

8 So it strikes me -- and this is

9 something that bothers me. This is a program

10 which is a tax-free program. The highest

11 order of generosity from the state, tax free.

12 And yet we are vanilla-izing and truncating

13 the reporting requirements.

14 How does that jibe with you?

15 COMMISSIONER ZEMSKY: I mean, we

16 are -- ESD is putting -- would put together

17 that report. I mean, I think we do -- would

18 have a robust report. I mean, I think what

19 happened was it got so convoluted -- and

20 sometimes when this legislation comes

21 together there are so many, you know,

22 at-the-last-minute requirements that make it

23 hard to interpret or understand exactly what

24 the reporting is.

1 You and I have -- some might use the

2 word sparred or disagreed on definitions or

3 numbers. It should -- and I've met with 40

4 START-UP NY companies. It shouldn't be so

5 burdensome to report the numbers and provide

6 it to us and to the public.

7 And we'd be very pleased to report in

8 a robust way on these programs. We do that

9 now. Many of our reports are issued

10 quarterly or annually. And if we could do a

11 report that has less consternation and less

12 confusion and less burden on the companies,

13 we'd be very pleased to do that.

14 ASSEMBLYMAN SCHIMMINGER: The chairman

15 tells me my time is up.

16 CHAIRWOMAN YOUNG: Thank you.

17 CHAIRMAN FARRELL: Thank you.

18 We've been joined by Helene Weinstein.

19 And Mr. Oaks has got --

20 ASSEMBLYMAN OAKS: Yes, we've also

21 been joined by Mr. McLaughlin, Mr. Crouch,

22 and Mr. Murray.

23 CHAIRWOMAN YOUNG: Our next speaker is

24 Senator Terrence Murphy.

1 And after that it will be Rich Funke,

2 who is chair of the Tourism Committee.

3 So Senator Murphy?

4 SENATOR MURPHY: Good morning. And

5 thank you for being here, Commissioner.

6 The Tax Foundation's 2016 State

7 Business Tax Climate Index ranked New York's

8 business climate as 49th in the United States

9 out of 50. I think it's our obligation that

10 we must change that around in order to keep

11 people here in New York State. I think we

12 all are in agreement on that.

13 I'd like to talk to you a little bit,

14 and I'll try and be as quick and succinct as

15 I can, about the life science administration/

16 laboratory capital appropriations.

17 The Governor made a massive

18 announcement about the state investing in

19 life sciences, and I couldn't agree with him

20 more. However, he has allocated $450 million

21 in combined capital for life science

22 administration and the life science

23 laboratory, although his initial announcement

24 discussed $650 million investment in the

1 economic development for life sciences.

2 Can you provide me with an explanation

3 for the funds and what they will be used for?

4 COMMISSIONER ZEMSKY: Yeah, the Life

5 Science Initiative is -- there's a few

6 components to it. There's some tax

7 incentives, refundable R&D tax credit

8 program. And an angel investor tax credit

9 program represents about $250 million of it.

10 This is over some years. I think of it as a

11 10-year program.

12 Two hundred million dollars in state

13 capital grants. That's geared toward really

14 increasing the availability of wet lab space

15 and things of that nature, which is really a

16 constraint on life sciences. And

17 $200 million of investment capital or venture

18 capital or early funding between government

19 and private for early-stage life science

20 companies.

21 SENATOR MURPHY: Two hundred million

22 for the venture capital, you said? Okay.

23 Also in the Governor's proposal he

24 appropriates $207 million for the use of

1 strategic project programming. What is that

2 funding being used for?

3 COMMISSIONER ZEMSKY: That would be

4 for projects that are associated with SUNY

5 Poly that -- with companies that we have been

6 partners with, where we to some extent are --

7 you know, one of the things we did when ESD

8 got involved with SUNY Poly was to not only

9 get the myriad of projects back on track but

10 also to meet with so many of our partners and

11 ascertain where commitments were made or

12 obligations were owed or where different

13 opportunities are.

14 And it really connects to SUNY Poly,

15 and it connects to some outstanding

16 obligations that we're negotiating. I think

17 it's extremely important, given what's

18 happened and all the time that ESD has spent

19 and I have spent and our team has spent.

20 One of the things I really think we

21 should put a high priority on this year is to

22 reconcile and in some way square up with some

23 of our partners, because there were times

24 when we were -- we overpromised and

1 underdelivered. And I think we have to

2 reassert and reestablish our credibility, and

3 it connects to that.

4 SENATOR MURPHY: And there will be

5 enough oversight on that?

6 COMMISSIONER ZEMSKY: Yes, that will

7 be PACB. All those monies, when they come

8 forward, will come forward for PACB review.

9 SENATOR MURPHY: It also seems that

10 Johnson & Johnson has already announced the

11 $17 million that they would be receiving to

12 create the JLABS in New York City. Where is

13 that funding coming from?

14 COMMISSIONER ZEMSKY: JLABS would be,

15 you know, ideally from the Life Science

16 Initiative. There's other ways that we can

17 pull money for that if there is no Life

18 Science Initiative. Obviously, we would

19 really like to see that happen. It's the

20 perfect example of, you know, how we can

21 partner. The state is investing the capital,

22 but Johnson & Johnson is paying rent and is

23 providing all the human capital for that

24 program. And when you bring somebody like

1 J&J to the table, that is a major step

2 forward for the life science industry in

3 New York City and New York State. So, I

4 mean --

5 SENATOR MURPHY: I agree with you.

6 COMMISSIONER ZEMSKY: We're confident

7 one way or the other it's just too important,

8 between economic development and Life Science

9 Initiative, that we'll make that happen.

10 SENATOR MURPHY: Some of their biotech

11 stuff that they do is fantastic.

12 Morphing into that, have you ever been

13 to New York Medical College in Valhalla?

14 COMMISSIONER ZEMSKY: In Valhalla, I

15 have not.

16 SENATOR MURPHY: I'd most certainly

17 invite you down. They're doing incredible

18 stuff. Exactly what you're trying to do in

19 New York City is already being done

20 30 minutes right outside. The biotech, they

21 have 10 incubators down there and they're

22 doing tremendous stuff. Phillips just made a

23 massive investment into there, and it is

24 probably going to be more cost-effective.

1 I know Johnson and Johnson down there

2 in New York City, you pay about $78 to $86

3 per square foot. A little bit north is much,

4 much cheaper, and they've already got the

5 footprint in place. So I would most

6 certainly invite you down. I'd love to bring

7 you down and show you exactly what is already

8 being done that you're trying to do in

9 New York City, and it's literally a half-hour

10 right outside.

11 COMMISSIONER ZEMSKY: Yeah. No,

12 that's great, I'd love to see that. That's

13 the best part of the job, frankly.

14 And, you know, the initiative is not

15 geared exclusively to New York City. As you

16 know, we have a lot of amazing life science

17 research institutions, companies. You know,

18 not too far north of New York City you've got

19 a small company called Regeneron --

20 SENATOR MURPHY: It's right there,

21 right next to it. We have the New York

22 Medical College, it's right next to it. And

23 that's what I'm saying. You've got a whole

24 nice little group, you've got a few campuses

1 there that you can have -- you have Ph.D.s

2 and M.D.s all within a few doors down.

3 So some of this stuff is really,

4 really cutting-edge stuff that -- they're

5 doing incredible stuff to try and cure

6 pancreatic cancer, things like that. So

7 it's --

8 COMMISSIONER ZEMSKY: Yup. No, I'd

9 love to see it.

10 SENATOR MURPHY: I most certainly

11 invite you down before we go into spending

12 millions and millions of dollars when we

13 already have a footprint in place.

14 CHAIRWOMAN YOUNG: Thank you. Thanks,

15 Senator Murphy.

16 CHAIRMAN FARRELL: Next, the chairman

17 of Small Business, Assemblyman Thiele.

18 ASSEMBLYMAN THIELE: Thank you.

19 Hi, Howard, how are you?

20 COMMISSIONER ZEMSKY: Good,

21 Assemblyman, how are you?

22 ASSEMBLYMAN THIELE: Would you

23 consider this START-UP NY tax-free program to

24 be a success?

1 COMMISSIONER ZEMSKY: Yeah, I do. And

2 I consider it -- I mean, here's how I think

3 about it. Our whole goal in economic

4 development obviously is around job creation

5 and enhancing the wealth of the state.

6 Anyone's short list of key assets in this

7 state would be our colleges and universities.

8 You know, in the knowledge economy, New York

9 State is really well positioned. Right? I

10 mean, we have an amazing array of both public

11 and private colleges and universities.

12 They operated in a way that wasn't

13 collaborative for a very long time, or wasn't

14 as collaborative as it should be. And when

15 you think about hotbeds of innovation and job

16 growth, you think about Silicon Valley.

17 Silicone Valley is, in fact, and was formed

18 out of that collaboration between research

19 and academia and industry. So good for them.

20 That's a model that we were kind of

21 late to the table at. So I think we've

22 changed that culture. I have seen an amazing

23 change. I spent five hours recently at UB

24 with 30 START-UP NY companies. Half of

1 them -- I spent two and a half hours with

2 tech companies and another two and a half

3 hours with life science companies. And

4 they're all START-UP NY.

5 But that incredible synergy between

6 all of those businesses, who are all helping

7 one another, and the engineering school,

8 which is helping them, and the business

9 school, which is helping them, and the ESD

10 programs at NYSTAR, like Centers of

11 Excellence, Centers of Advanced Technology,

12 all working together, is having a dramatic

13 impact on the ecosystem of innovation. And

14 I'm not -- I'll just -- I won't go on much

15 longer, I know you're getting tired of me

16 talking on this.

17 ASSEMBLYMAN THIELE: Well, here's my

18 question, really. You have an ESCC report

19 that says only 408 jobs have been created.

20 But my real question is, if this is such a

21 successful program, why is this year's budget

22 rebranding this program and changing the name

23 of it? I don't recall anybody ever changing

24 the I Love New York program. It's a great,

1 successful program. People know it near and

2 far, they know it to be a success. If this

3 is such a successful program and it's

4 changing the culture of business in New York,

5 why do we feel the need suddenly, after six

6 years, to change the name?

7 COMMISSIONER ZEMSKY: Well, of course

8 it hasn't been six years. But the -- you

9 know, we've tried to simplify the program in

10 many ways. And in part this came out of my

11 meetings with the START-UP NY companies. you

12 know, we're trying to -- when you see -- if

13 you had spent those five hours that I did,

14 you would see the power of that

15 collaboration. And trying to simplify the

16 program, simplify the requirements --

17 ASSEMBLYMAN THIELE: Do you think we

18 could get collaboration between them without

19 spending $53 million in advertising?

20 COMMISSIONER ZEMSKY: You know, in

21 New York State we advertised the New

22 New York. We advertised New York State. We

23 had developed, for 40 years, a pretty lousy

24 reputation in and out of the state as a place

1 to do business. With all that we have

2 accomplished in the last six years, spending

3 some money against our $1.4 trillion economy

4 I think makes good sense. I think we should

5 continue to promote --

6 ASSEMBLYMAN THIELE: I don't mind

7 spending money. I like to get a return on

8 the investment of the money that I spend.

9 And that's my question. What was the return

10 on the investment of that $53 million?

11 COMMISSIONER ZEMSKY: Well, the return

12 on investment is the way we've changed

13 dramatically the perceptions of New York

14 State as a place to do business. So --

15 ASSEMBLYMAN THIELE: Would that be

16 like the Tax Foundation's report that we're

17 49th out of 50 states as far as tax climate

18 goes? Is that the reputation that we've

19 changed?

20 COMMISSIONER ZEMSKY: The reputation

21 that we've changed is that we now have

22 4.9 percent unemployment. We have an amazing

23 economy --

24 ASSEMBLYMAN THIELE: And how much --

1 how much of that is due to the fact that the

2 national economy and the national

3 unemployment rate has improved, and we're

4 riding that wave, as opposed to --

5 COMMISSIONER ZEMSKY: Some of it. But

6 New York State is doing a lot better than

7 actually many of the states in the Northeast

8 region.

9 So, you know, there's a lot to it. I

10 think we're doing economic development in a

11 very smart way. I think we've become a lot

12 more competitive. I think we are -- we have

13 20 different initiatives that we make

14 tremendous progress on. We are leading the

15 country, leading the country, one, two or

16 three in so many important categories --

17 international visitors, tourism, start-up

18 businesses, venture capital, job growth.

19 We should tell our story. The

20 knowledge economy sets up beautifully for

21 New York State, and we should tell our story.

22 This state has changed so dramatically for

23 the better. What's the point of keeping it

24 to ourselves? We are doing business all

1 around the world. We should let people know

2 this is the place to come, to invest, to grow

3 your business, for tourism. We shouldn't be

4 a secret. We've made enormous progress.

5 ASSEMBLYMAN THIELE: I'd like to move

6 on and talk a little bit about something that

7 Senator Boyle talked about, and that is these

8 Regional Economic Development Councils, which

9 I agree with him really lack transparency,

10 lack openness.

11 And here's really my question. It

12 seems to me that there's a lot of cronyism

13 that goes on with these Regional Economic

14 Development Councils, that people that serve

15 on them as volunteers, their organizations

16 get a lot of the grants or recommendations

17 for grants that are part of this program.

18 And the process, to me, seems to be, well,

19 they abstain on their project, everybody else

20 votes for it, and then somebody else who has

21 a project, they abstain on their project and

22 everybody else votes for it.

23 What do you think the public response

24 would be if on the floor of the legislature,

1 on a regular basis, Mr. Boyle abstained on a

2 project that he was getting a material

3 benefit for and all the other legislators

4 voted for it, and then when somebody else's

5 project came up, they all voted for it?

6 Don't you think there would be calls for the

7 United States Attorney's office to get

8 involved on something like that?

9 COMMISSIONER ZEMSKY: You know, I just

10 think that is so unfair the way -- to

11 characterize the way these Regional Councils

12 operate. I think they're -- they doing an

13 amazing job.

14 We ask leaders to head the councils.

15 If you're going to have somebody who heads

16 the major academic institution, research

17 institution in a region to head the council,

18 you shouldn't be surprised that there are

19 going to be some projects that appropriately

20 and strategically align with that school.

21 ASSEMBLYMAN THIELE: I'm just

22 saying --

23 COMMISSIONER ZEMSKY: Right? And so

24 they --

1 ASSEMBLYMAN THIELE: -- that that

2 creates the appearance of inside dealing.

3 COMMISSIONER ZEMSKY: I think what we

4 really lacked, what we really lacked for a

5 really long time was any economic development

6 plan for any of the regions or for this

7 state. So the fact that we have 10 amazing

8 economic development plans has been such a

9 dramatic step forward, it's indescribable.

10 I'd love to see the economic

11 development plan for the state or any of the

12 regions that any of you are in from 10 years

13 ago. Show me that economic development plan.

14 Show me the one from 15 years ago.

15 ASSEMBLYMAN THIELE: Well, actually, I

16 can show you the one -- I can show you one

17 from Governor Mario Cuomo that the five

18 East End towns that are the area that I

19 represent got together with local officials

20 and industry people and came up a plan, and

21 didn't have to hire a consultant and many of

22 those recommendations got enacted, so --

23 COMMISSIONER ZEMSKY: You know, I

24 lived in one of the regions of the state for

1 a long time. I remember the amazing -- you

2 know, Adelphia was going to be the next

3 savior of Western New York. And then it was

4 going to be Empire Zones, which didn't work

5 out. Then it was the chip fab program in

6 Western New York that never materialized.

7 There was lots of empty promises, and there's

8 a lot that didn't happen.

9 And so if you lived in upstate

10 New York like I did for 35 years, the thing

11 was sinking like a stone. So I have lived

12 through the transformation that was once

13 unimaginable -- excuse me, once

14 unimaginable -- in the last six years.

15 ASSEMBLYMAN THIELE: I was only

16 suggesting that we need more transparency for

17 how that works, that's all.

18 COMMISSIONER ZEMSKY: So I think it is

19 amazing. And any time anybody I think

20 questions the integrity of the people who

21 have now volunteered, in some instances for

22 six years, I think it's fair to push back on

23 that. They do an amazing job.

24 ASSEMBLYMAN THIELE: I'm not

1 challenging their integrity, I'm challenging

2 the system that's been set up. That's all.

3 The last thing I just wanted to ask

4 about was -- it was also mentioned -- were

5 these tourism signs. I live in a town where

6 I was the town attorney where we went to the

7 United States Supreme Court to defend an

8 amortization statute to take down large

9 unsightly billboards because we're trying to

10 sell the aesthetics of our community.

11 In Montauk -- which by the way,

12 Montauk, the bumper sticker says "Montauk:

13 The End, Not the Beginning." And for some

14 reason, at the intersection of two two-lane

15 highways, eight gigantic billboards appeared

16 one day. And seven of them got taken down.

17 There was no consultation with the local town

18 supervisor there or any local government

19 officials or the Chamber of Commerce or

20 anyone else. Subsequently we find out that

21 there's some problems with these signs with

22 the federal government.

23 Could you update us as to what the

24 status is of the negotiations with the

1 federal government on these billboards?

2 COMMISSIONER ZEMSKY: I really can't.

3 I don't know what the status of the

4 negotiations are with the federal government

5 on the billboards. And I think I answered

6 the question earlier, we were involved

7 potentially in some of the design work for

8 the signs, but I couldn't tell you about sign

9 placement.

10 ASSEMBLYMAN THIELE: I didn't ask

11 about sign placement, I asked you about the

12 negotiations with the federal government.

13 COMMISSIONER ZEMSKY: Yeah. Well, if

14 ESD was involved in negotiating with the

15 federal government, I'd be able to tell you.

16 But we're not.

17 ASSEMBLYMAN THIELE: Okay, thank you.

18 COMMISSIONER ZEMSKY: Thank you.

19 CHAIRWOMAN YOUNG: Thank you.

20 Our next speaker is Senator Rich

21 Funke, who is chair of the standing committee

22 in the Senate on tourism.

23 SENATOR FUNKE: Good morning,

24 Commissioner. Thanks for being here. How's

1 it going so far?

2 COMMISSIONER ZEMSKY: Going good. I'm

3 wide awake.

4 (Laughter.)

5 SENATOR FUNKE: Good. Couple of

6 tourism-related questions and then one on

7 photonics in our region.

8 You know, as you know, one out of four

9 jobs is tourism-related in the State of

10 New York. It's our fourth-largest employer.

11 And we appreciate the Governor's commitment

12 to tourism, except his slide presentation

13 indicated $70 million going to be applied to

14 tourism this year. In your remarks, you said

15 $55 million.

16 And I'm wondering where the disparity

17 is and if there is a list of projects and

18 events and promotions lined out in the budget

19 that we could all take a look at.

20 COMMISSIONER ZEMSKY: You know, I'd

21 have to go through the budget line item too.

22 I know -- what I can tell you is

23 tourism spending is proposed to be a bit

24 higher this year than it was last year. And

1 so that's true, I think, for tourism

2 advertising, I believe it's true for matching

3 funds and for Market NY.

4 So, you know, tourism -- what I can

5 tell you is tourism continues to be a big

6 focus of ours. We have over $100 billion now

7 of tourism spending -- I mean, of economic

8 impact from tourism. It's now the fourth, by

9 the way, largest employment sector of the

10 economy. One in 12 people in New York State

11 is employed in tourism, almost a million

12 people in the sector. So, you know, we're

13 not about to start to pull away from tourism

14 investment and spending.

15 SENATOR FUNKE: You mentioned the

16 Market NY program, which is a great

17 complement for tourism interests. But the

18 real value, I think, in the industry is the

19 matching grant program. That was increased a

20 little bit last year. Do you think it should

21 be increased this year?

22 COMMISSIONER ZEMSKY: I believe we are

23 holding it the same or increasing it.

24 It's been a great program. We work

1 with every county in the state. Tourism has

2 been a really strong sector of the economy.

3 And, you know, I can get you more detail.

4 There are so many ways that we spend money on

5 tourism, you know, between events and

6 advertising and promotion and matching funds

7 and, you know, the explosion of digital media

8 and the New York bus. And it goes on and on.

9 We are promoting tourism in such a great way,

10 and craft beverages promotion, and it goes

11 on.

12 So tourism is going to be an

13 important -- once again, I know it's an

14 extremely important component of this year's

15 budget. We have an amazing team at ESD that

16 promotes tourism and I Love New York. And,

17 you know, we love working with the partners

18 around the state. And I'm confident that you

19 won't see a decrease in tourism spending in

20 this year's budget.

21 SENATOR FUNKE: On the economic

22 development side, in Rochester specifically,

23 the state has invested significant dollars in

24 the Photonics Institute. It was announced

1 with great fanfare. The former vice

2 president was there. I think a lot of us

3 expected that there would be -- people would

4 be flocking to Rochester to open businesses

5 and so on.

6 We've had some starts and some stops.

7 All of us are aware of Preet Bharara's

8 investigation into the Buffalo Billion and

9 SUNY Poly. You know, this is a project that

10 also got support from the federal government.

11 So I'm wondering now, you know, where

12 we are in terms of the Photonics Institute

13 and how it's playing out in Rochester right

14 now. We had Photonica, which was going to be

15 a main anchor. We don't have Photonica

16 anymore. And now the state has proposed a

17 Photonics Venture Challenge, dumping another

18 $10 million into a competition to try to

19 inspire these companies to come to Rochester,

20 where in the beginning we really thought that

21 this was a home run. What's the update?

22 COMMISSIONER ZEMSKY: Yup. So, you

23 know, that's one of the projects where I

24 think we've played a constructive role in

1 getting photonics back on track.

2 There's been a site that's been

3 selected through a very open and transparent

4 and thorough process, in the Eastman Business

5 Park at ON. There's been money allocated to

6 build out and equip the facility. We've been

7 in touch with the Department of Defense.

8 Everyone is on board with what we're doing,

9 where we're doing it and how we're doing it.

10 So I think that project, while it was

11 one of the -- I would describe it as one of

12 the projects that was, you know, listing, is

13 very much back on track. And I think we've

14 hit some important milestones, and it's very

15 much headed in the right direction.

16 There are times -- and again, we

17 walked into a number of projects that were,

18 you know, let's say up in the air that were

19 connected to SUNY Poly. You know, there are

20 going to be some instances, and there have

21 been, where they weren't willing to move

22 forward with us. Maybe too much time was

23 taken. Maybe they found an alternative

24 opportunity.

1 And there are times, too, when ESD

2 engages in projects that -- and has to make a

3 determination whether it should go forward or

4 not. And we're better off identifying on the

5 front end what we don't think is necessarily

6 the right type of project for us to advance,

7 reserve that money, as the Governor has

8 always been willing to do, and apply it back

9 into the region with a more robust company.

10 And that case is the, you know, circumstance

11 that -- you know, the second part of your

12 question.

13 So I think it's on track. I think

14 that industry has a great future. I think we

15 are actively in conversations with other

16 photonics businesses. And I think at the end

17 of the day we will have looked back and said,

18 you know, we made a good and responsible

19 decision. Even though it may have been

20 criticized or caused concern initially, I

21 think it will prove more successful over

22 time.

23 SENATOR FUNKE: You wouldn't

24 characterize photonics as overpromising and

1 underdelivering yet.

2 COMMISSIONER ZEMSKY: Photonics? No.

3 I mean, I think -- not at all. I think --

4 you know, when you think about your assets in

5 the Finger Lakes and, you know, the amazing

6 history of imaging and photonics and the

7 opportunity that that has for the new economy

8 where you think about your academic and

9 research institutions, I think it's exactly

10 the type of transformational type of

11 industry. You're playing long ball when

12 you're talking about these types of

13 investments. I mean, here we are in Albany,

14 we played long ball with nanosciences over

15 many years. You've got a ton of counties in

16 this area that have unemployment now below

17 4 percent.

18 I mean, I think it's not an instant

19 hit, but I think it's exactly the kind of

20 investments that, boy, if I was in the

21 Finger Lakes, it's what I would want to see,

22 that type of play to your strength. That

23 plays to our -- not only the legacy strength,

24 but our research, our universities and our

1 cluster of industries. That's a very

2 objective, analytical conclusion for

3 Rochester. I mean, they have real strength

4 in that.

5 SENATOR FUNKE: Thank you.

6 CHAIRWOMAN YOUNG: Thank you.

7 Chairman Farrell.

8 CHAIRMAN FARRELL: Thank you.

9 Assemblywoman Bichotte.

10 ASSEMBLYWOMAN BICHOTTE: Hello,

11 Commissioner. Good to see you again.

12 COMMISSIONER ZEMSKY: Hi.

13 ASSEMBLYWOMAN BICHOTTE: As you know,

14 I am the chair of the Oversight Subcommittee

15 for the Minority and Women-Owned Business

16 Enterprises. So my questions will surround

17 the MWBE program.

18 And I have three questions, one

19 regarding the disparity study, the mentor

20 protege program, and as well as the agencies

21 in compliance to the utilization

22 requirements.

23 As you know, Article 15A of the

24 Executive Law is the participation by

1 minority group members and women with respect

2 to state contracts. That will expire

3 December 31st of this year, 2017. So this

4 statute also provides the framework for the

5 MWBE certification and procurement program

6 and establishes targeted goals for sourcing

7 of services and commodities by certified MWBE

8 businesses.

9 Now, as we know, we are undergoing a

10 disparity study which will justify to extend

11 the program. The question is, what is the

12 status of the disparity study? Why is it

13 taking so long to complete? Will we the

14 legislators expect to receive the study any

15 time soon? Will there be an extension?

16 That's my first question. I'm going to ask

17 all of my questions at the same time.

18 COMMISSIONER ZEMSKY: Okay.

19 ASSEMBLYWOMAN BICHOTTE: The next

20 question around mentor/protege, I know there

21 was a launch where big companies will be

22 mentoring smaller companies and so forth. I

23 did put in a proposal in a new bill where we

24 should conduct a feasibility study on all the

1 agencies to mimic a program very similar of

2 the MTA, Minority and Women-Owned Business

3 Enterprises Mentorship Capacity Program, as

4 well as the SCA. I know that also requires

5 to change the statute.

6 But I think the capacity programs by

7 each of the agencies -- if we do a study, we

8 can then see what kind of real programs we

9 can have available for the MWBEs, not only in

10 the construction field but also in the

11 professional services as well as the goods

12 and services and standard services.

13 And then lastly, I wanted to ask what

14 is the percentage of agencies that aren't in

15 compliance with the utilization requirements

16 in the agencies. One of the things that we

17 also would like the ESD to report on is a

18 more detailed level of who are getting the

19 contracts. Right now it's very high level.

20 We would like to see the ethnic backgrounds

21 of the groups to be more detailed -- by

22 African-Americans, Asian-Americans, women,

23 Hispanic-Americans. We also, in that same

24 frame, would like to see it broken down by

1 prime contractors, subcontractors, what type

2 of contract values, is it large or small, by

3 agencies.

4 So these are some of the things that

5 we are proposing in the budget on a

6 legislative level, and I would like to hear

7 your feedback. So the three things were

8 disparity, mentor/protege versus mentor

9 capacity program, and the utilization

10 requirement reporting.

11 COMMISSIONER ZEMSKY: Okay. We've

12 gotten an extension to mid-2017 on the

13 disparity study. So we applied for and

14 received -- we're working with the OSC and,

15 you know, that study has been extended.

16 I think there was maybe a sense early

17 on that that study was more robust,

18 considerably more robust. There's been a lot

19 more outreach, a lot more participation in

20 all the regions of the state for that study.

21 I think from the early days of my

22 involvement, pretty early days of my

23 involvement with ESD, there's been talk about

24 that study really being more complicated.

1 So I think it's moving. I think it

2 had a very ambitious original schedule.

3 Because I have the sense, in talking to

4 people, that there was -- you know, I think

5 people had a sense that it was going to

6 require an extension, and it has. So it's

7 been received but it's-- that work is, you

8 know, ongoing.

9 ASSEMBLYWOMAN BICHOTTE: And so

10 mid-2017 would be summer or --

11 COMMISSIONER ZEMSKY: Yes, June.

12 ASSEMBLYWOMAN BICHOTTE: June, okay.

13 COMMISSIONER ZEMSKY: So your second

14 part of your question related to --

15 ASSEMBLYWOMAN BICHOTTE: The

16 mentor/protege, how is it doing now, versus a

17 capacity program very similar to MTA, doing a

18 feasibility study.

19 COMMISSIONER ZEMSKY: Right. I mean,

20 we have very active -- for MWBEs we have very

21 active programs. I think that has been one

22 of our most successful programs. You know,

23 not only are we --

24 ASSEMBLYWOMAN BICHOTTE: Like how

1 many? Is there a lot of participation? How

2 many small businesses are participating?

3 COMMISSIONER ZEMSKY: Hold on. There

4 is a lot of participation, actually. I'm not

5 going to be able to call it up. I think we

6 have maybe 5,000 users, 1700 mentor-mentee

7 matches have been made. So I think that's a

8 significant number.

9 ASSEMBLYWOMAN BICHOTTE: Seventeen

10 hundred matches, okay. And 5,000 users,

11 okay.

12 COMMISSIONER ZEMSKY: So we'll get

13 back to you with more detail, but that's my

14 notes to myself. We have a lot going on.

15 ASSEMBLYWOMAN BICHOTTE: And the

16 agencies having a capacity program like MTA,

17 doing a feasibility study?

18 COMMISSIONER ZEMSKY: Have what?

19 ASSEMBLYWOMAN BICHOTTE: How about the

20 thought about the state agencies having a

21 capacity program, doing a feasibility study

22 to see what kind of program -- like real

23 capacity training, thorough programs, eight

24 months, whatever. Very similar to the MTA.

1 On different levels -- construction,

2 professional services, goods and services.

3 For example, let's say OGS has a capacity

4 program for professional services or goods

5 and services. We would like to see a

6 feasibility study done throughout the state

7 agencies to see what kind of programs

8 in-house can be put in place to increase the

9 participation of minority and women-owned

10 business enterprises.

11 COMMISSIONER ZEMSKY: Okay. I mean,

12 we are actively involved with a number of

13 different industries. We do have a lot of

14 programs across different industries for

15 mentoring and business boot camps and other

16 types of programs to build capacity for these

17 companies. But we can certainly look into

18 other studies.

19 ASSEMBLYWOMAN BICHOTTE: And the last

20 one was the reporting. We certainly want

21 more detailed reporting to see where is the

22 participation doing well and where they're

23 not doing well. And we would need to see the

24 breakdown of -- you know, by ethnic groups,

1 again, what kind of values, contract values.

2 COMMISSIONER ZEMSKY: There are laws

3 we follow, obviously, on these types of

4 reporting and what we can and can't provide

5 as a matter of law or as a practical matter.

6 ASSEMBLYWOMAN BICHOTTE: Well, New

7 York City is doing it. They have like a

8 scorecard for each of those little boxes. So

9 it's something that we should really

10 consider. That way we can really see how our

11 actions are doing in terms of their

12 utilization requirements.

13 COMMISSIONER ZEMSKY: Okay.

14 ASSEMBLYWOMAN BICHOTTE: Okay? Thank

15 you.

16 CHAIRMAN FARRELL: Thank you.

17 CHAIRWOMAN YOUNG: Our next speaker is

18 Senator Liz Krueger.

19 SENATOR KRUEGER: Good morning,

20 Howard.

21 COMMISSIONER ZEMSKY: Hi.

22 SENATOR KRUEGER: Happy National Hijab

23 Day to you.

24 So at risk of offending you again, the

1 Regional Economic Development Council plans

2 that you keep pointing to, they might be good

3 plans, but the data shows we're not getting

4 success. When you look at the Bureau of

5 Labor statistics data for the last five years

6 in the various regions of New York State, the

7 regions that you're talking about having been

8 so -- the results are so amazing and you're

9 so happy, they have a far lower increase in

10 employment than not only the rest of the

11 state or the rest of the country, but even

12 the neighboring states around the region.

13 So why should we all be so excited

14 about the outcome of the REDC model when

15 there isn't data that backs up that they're

16 creating jobs or economic success?

17 COMMISSIONER ZEMSKY: Well, I mean, I

18 think there is a lot of data that backs it

19 up. And I think every one of these reports

20 shows you the incredible increase in

21 employment and the incredible decrease in

22 unemployment.

23 SENATOR KRUEGER: Can I ask you to

24 speak up a little? For some reason I'm

1 having trouble hearing.

2 COMMISSIONER ZEMSKY: Yeah, sorry.

3 Yeah, there's a lot of data that backs

4 up the incredible progress that's been made

5 in many of the regions. So every region,

6 obviously, has come a very long way from

7 where it was. And many of the regions of the

8 state were in awful shape not that many years

9 ago. I mean, I don't know if people were --

10 found it offensive for the 20 years prior to

11 REDC or not, because we just kind of went

12 downhill for 30 years in a row. It must not

13 have had anybody really upset about that at

14 the time.

15 So the fact that you have regional

16 reports that not only are plans, but they

17 highlight the progress that you're referring

18 to, or disputing in great detail -- I'd

19 recommend really reviewing those, because

20 there's a tremendous amount of detail on the

21 really dramatic improvements to the economy

22 in every region of the state.

23 SENATOR KRUEGER: So you would suggest

24 that if I were to review those reports, I

1 would find charts in them that show this is

2 how much New York State spent on a project,

3 this is how many jobs we created, this is how

4 much tax revenue we gave up as part of the

5 deal?

6 COMMISSIONER ZEMSKY: I would suggest

7 that we have an incredible amount of data,

8 both in this report and on our website, on

9 all of the projects -- now 5,000 of them,

10 over the years -- that have been supported,

11 yes.

12 SENATOR KRUEGER: Well, I would

13 suggest that I struggle every year in hopes

14 that when looking at all these reports I

15 really can come away saying, Oh, the State of

16 New York spent this much money, we got this

17 many jobs, so the cost per job was -- and

18 that included both grants but also the loss

19 of tax revenue. Because of course in

20 economic development, a huge percentage of

21 the cost, so to speak, is the lost revenue

22 because we give people tax-free programs.

23 So I would love a report that showed

24 that across programs.

1 COMMISSIONER ZEMSKY: Yup. Well, the

2 vast majority of the job programs are easily

3 tracked through the Excelsior program or the

4 economic development grants. So we publish

5 those really quite often, even quarterly.

6 And then there are a lot of projects

7 that we support through the REDC that aren't

8 technically job programs. So for example,

9 your colleague Assemblyman Schimminger

10 highlighted several projects that he was very

11 pleased -- and I couldn't agree more -- to

12 see got funding.

13 For example, the Niagara Street

14 Gateway in the City of Buffalo that goes up

15 to Tonawanda. The City of Tonawanda, at

16 Niagara River and Ellicott Creek, will expand

17 public access and dock facilities allowing

18 residents and visitors to take advantage of

19 city's waterfront. Well, there's a perfect

20 project that deserves support, and his

21 support, which it has.

22 It's very hard for me to tell you what

23 the job creation is by creating a place that

24 people want to live and work and activating

1 the waterfront. That's been a big part of

2 the turnaround in Buffalo.

3 There's projects on workforce

4 development and welding. We need welders in

5 Western New York. The manufacturing economy

6 is short on people with these types of

7 skills. I think that's really important.

8 There's a lot of projects we do in a

9 holistic, sensible way that's laid out in

10 these plans. Some of them are very direct

11 job-creating projects; others just create the

12 environment or create the workforce that

13 allow the economy to grow.

14 All those numbers are kind of grouped

15 together in how is our economy doing, and our

16 economy in New York is doing well. Our

17 economy in most every upstate region is --

18 they're all doing a lot better than they were

19 not that many years ago. And I think we are

20 demonstrating great progress in the metrics.

21 SENATOR KRUEGER: I'm going to cut you

22 off because I have a few more questions.

23 We sat through, earlier in the week, a

24 hearing where the localities, municipalities,

1 counties, towns, were begging us for

2 infrastructure money. And I would argue

3 actually if somebody wanted to improve their

4 waterfront for tourism or the value of a

5 community, we'd be better off just giving

6 them the infrastructure money that they're

7 asking for rather than defining it this way.

8 Given all of the criticisms of the

9 corruption scandals involved with projects

10 correlated to economic development, would you

11 not support the call for Comptroller

12 oversight of all of your projects?

13 COMMISSIONER ZEMSKY: I mean, when you

14 say all of the allegations of corruption of

15 economic development projects, we have 5,000

16 economic development projects. You're

17 talking about a very, very, very small few.

18 And none of them relate to ESD.

19 And you know, we are, I think, in a

20 really good position right now to advance a

21 lot of these projects in a way that, you

22 know, finds the right balance -- and I assume

23 you're referring to SUNY Poly -- between

24 getting the projects done and really having

1 the transformative impact that was intended.

2 SENATOR KRUEGER: And why would

3 Comptroller's oversight be a problem for any

4 of that?

5 COMMISSIONER ZEMSKY: And why what?

6 SENATOR KRUEGER: Why would allowing

7 the Comptroller to have more concrete

8 oversight over this cause you a problem?

9 COMMISSIONER ZEMSKY: I mean,

10 truthfully, all of these projects go through

11 PACB. They all get reviewed. This is an

12 independent not-for-profit. So we are -- you

13 know, we have adopted so many changes to the

14 bylaws, open meeting laws, codes of conduct.

15 There's so many positive changes to the

16 transparency. I think we have found a good

17 balance between maintaining independent

18 not-for-profit status and dramatically

19 enhancing the transparency.

20 SENATOR KRUEGER: The Comptroller

21 could only help in this process.

22 How much in clawbacks have you gotten

23 over the last five years for deals that were

24 done where they did not deliver on their

1 commitments?

2 COMMISSIONER ZEMSKY: Can you say it

3 again? How many clawbacks have we gotten

4 from what?

5 SENATOR KRUEGER: How much money did

6 you get in clawbacks over the last five years

7 for deals that did not deliver on the

8 commitments that they made?

9 COMMISSIONER ZEMSKY: You know, the

10 vast majority make it. And we'd have to get

11 back to you. I don't know if there's a

12 project you're interested in particularly or

13 just in general.

14 Most of the economic development

15 projects don't get -- they're pay for

16 performance. So, you know, the Excelsior tax

17 credit program, you have to have demonstrated

18 the employment before you get the tax credit.

19 It's not like you get it all up-front and

20 then five years later you claw it back.

21 So it's typically structured in a way

22 that you don't get the credit unless you've

23 met your obligation.

24 SENATOR KRUEGER: Just in closing, did

1 you get the $28 million back from the Utica

2 deal that fell through?

3 COMMISSIONER ZEMSKY: Did we get $28

4 million back?

5 SENATOR KRUEGER: The state spent

6 $28 million on the chip factory that then

7 pulled out of the deal in Utica. Are we

8 getting that $28 million back?

9 COMMISSIONER ZEMSKY: Well, that money

10 wasn't given to the chip company, it's for

11 the infrastructure that will be used for the

12 next chip fab. It didn't go to the company,

13 so I can't claw it back from the company.

14 SENATOR KRUEGER: Can you just repeat,

15 what was it used for?

16 COMMISSIONER ZEMSKY: For developing

17 the infrastructure. Remember, the

18 investments in these projects are in the

19 public domain. So the infrastructure and the

20 building remains in the public domain. It's

21 owned publicly, in essence.

22 So the money didn't go to AMS.

23 There's nothing to get back from them. They

24 invested money in the, you know,

1 consideration --

2 SENATOR KRUEGER: So it was just its

3 own cost that now can't be gotten back or

4 used?

5 COMMISSIONER ZEMSKY: No, it will be

6 used. We're continuing to make investment in

7 the infrastructure so that we actually reduce

8 the amount of time it will take from the time

9 the next company is interested in putting a

10 chip fab in and the time it takes to actually

11 construct it. So that will position us even

12 better in Utica for that industry. So the

13 money isn't gone. In fact, it remains as an

14 asset for us to attract other fabs.

15 SENATOR KRUEGER: Thank you.

16 CHAIRWOMAN YOUNG: Thank you.

17 We've been joined by Senator Leroy

18 Comrie and Senator James Sanders.

19 Chairman Farrell.

20 CHAIRMAN FARRELL: We've been joined

21 by Assemblyman Weprin.

22 Next to question, Assemblyman Walter.

23 ASSEMBLYMAN WALTER: Thank you,

24 Chairman.

1 Thanks, Commissioner. I just want to

2 take off on what Senator Krueger was talking

3 about there as far as oversight.

4 It was reported that almost a half a

5 million dollar contract between Governor

6 Cuomo and Bart Schwartz was never approved by

7 the State Comptroller. Can you explain,

8 after the scandals that reached into the

9 Governor's inner circle regarding some of

10 these bid-rigging issues, does Mr. Schwartz

11 continue to have a role in the oversight of

12 the projects now that ESD is in charge? Is

13 that an appropriate role for somebody that

14 doesn't have a formal position with the state

15 government to have? And why wouldn't we want

16 an independently elected official -- like the

17 Comptroller or the Attorney General or

18 both -- conducting oversight of these

19 projects, rather than somebody from the

20 outside that has no accountability to the

21 public?

22 COMMISSIONER ZEMSKY: My best

23 understanding is the contract wasn't with

24 Empire State Development, so I can't speak to

1 what contractual relationship he had with the

2 state or not.

3 We worked a lot with Bart Schwartz and

4 his office on procurement guidelines and

5 payment requests and -- spent months working

6 together, actually. So he issued a lot of

7 guidelines. We've adopted the guidelines.

8 We don't work with him any longer, but it was

9 a productive several-month relationship.

10 And I think, you know, it's really --

11 the whole process and procedure is working

12 well.

13 ASSEMBLYMAN WALTER: So there's no

14 continued oversight by Mr. Schwartz's office?

15 COMMISSIONER ZEMSKY: Not that I'm

16 aware of. We've adopted the guidelines. We

17 worked together for months, and I don't --

18 I'm not aware of any continuing relationship.

19 But I'm not the definitive words on that.

20 ASSEMBLYMAN WALTER: Do you think that

21 the independently elected Comptroller or

22 Attorney General has no role to play here as

23 far as oversight of ESD, especially

24 considering what's happened?

1 COMMISSIONER ZEMSKY: You know, every

2 time we draw down any funds for any of these

3 projects, all of these invoices, the

4 thousands of pages, all of requisitions, it

5 all goes to PACB. So there's an active role

6 every step along the way.

7 And, you know, I'm not interested in

8 being part of something that isn't well

9 vetted or transparent. And I don't think any

10 of us are. So it has a lot of active

11 participation from OSC.

12 ASSEMBLYMAN WALTER: Regarding the

13 Buffalo Billion Phase 2, despite what the

14 Buffalo News editorial board may think, I

15 think I can speak for all of my colleagues

16 from Western New York that we're excited that

17 the Governor is continuing his investment

18 into Buffalo and Western New York.

19 Now, this proposed investment of

20 another $500 million -- is that correct?

21 COMMISSIONER ZEMSKY: I think there's

22 $400 million line-itemed in the budget and

23 another $100 million from other agencies.

24 ASSEMBLYMAN WALTER: When the Governor

1 did his regional State of the State

2 addresses, he listed I think roughly 20

3 different projects as part of that

4 $400 million. But that is not lined out in

5 the budget. Is there a reason why there's

6 not details in the budget regarding how he

7 plans to spend that money?

8 COMMISSIONER ZEMSKY: I think the time

9 frame was to give people a real sense of what

10 are the priority impactful projects. But we

11 don't have -- you know, it's been a pretty

12 short time frame, and we don't have specific

13 dollars for every single project.

14 So I think it relates to that. I

15 think it's kind of a whole comprehensive --

16 that's not any different than it was with

17 Buffalo Billion 1. You know, sometimes you

18 get into it, you spend a little bit more or

19 you spend a little less or you learn

20 something along the way.

21 But I think it gives people a real

22 flavor of kind of the continuity of Buffalo

23 Billion 1 and Buffalo Billion 2, and the

24 focuses on workforce and revitalization and

1 innovation and, you know, trying to make some

2 long-standing goals happen in Western

3 New York. And I kind of refer to the transit

4 study and sort of doing the SEQR for that.

5 And that's the next step in that process.

6 I mean, you know, we're trying to

7 build on the things that we have really seen

8 succeed in Western New York. And, you know,

9 you've been part of that, you see the

10 innovation economy, you see the role UB plays

11 in that, you see the incredible investments,

12 transit-oriented development, waterfront

13 activation. You know, all the

14 entrepreneurship that's finally happening,

15 we're trying to build on all that. Workforce

16 development.

17 And then we're really trying to

18 capture the east side of Buffalo in terms of

19 capturing a big piece of the investment for

20 the east side, build on some of the

21 corridors, build on some of the historic

22 assets, and really spread out the impact that

23 it has had.

24 ASSEMBLYMAN WALTER: Regarding the

1 REDCs, you mentioned numerous times that they

2 just serve in an advisory capacity. Well,

3 where and who makes the final decision? And

4 how often does the final decision not line up

5 with what recommendations REDCs make?

6 COMMISSIONER ZEMSKY: It does happen.

7 I don't know exactly with what percent, but

8 it's not unusual. Every year, in every

9 region, it happens.

10 And the ultimate decision gets -- you

11 know, the state agencies weigh in and

12 ultimately take into account the

13 recommendations, and then we go from there.

14 ASSEMBLYMAN WALTER: So ultimately

15 Empire State Development Corporation is

16 making the final decision?

17 COMMISSIONER ZEMSKY: Yeah, we have

18 definitely a role to play in the final

19 decisions. But it's really, you know, most

20 heavily impacted by the state agencies.

21 CHAIRWOMAN YOUNG: Thank you.

22 Our next speaker is Senator Kennedy.

23 SENATOR KENNEDY: Thank you very much,

24 Commissioner. Always great to see you. And

1 thank you for your work. You are all over

2 this state, and you bring a tremendous amount

3 of knowledge at a very detailed level to this

4 meeting. Thank you very much for your

5 service.

6 I want to elaborate a little bit more

7 on the Buffalo Billion. Obviously the focus

8 is on economic development, job creation from

9 the transportation, tourism, and even

10 education. Can you speak to the Say Yes to

11 Education commitment that is being made

12 through this initiative?

13 COMMISSIONER ZEMSKY: Well, we've

14 committed I believe $10 million to say Yes to

15 Education.

16 You know, the most significant

17 pipeline for our future workforce in Western

18 New York is the Buffalo public schools. And,

19 you know, Say Yes to Education is an amazing

20 program. It gives people a fabulous

21 opportunity. We are proud to support it. I

22 know you've supported Say Yes to Education in

23 a big way.

24 You know, good economic development

1 really gives everyone an opportunity. When

2 we talk about workforce initiatives as a

3 significant part of Buffalo Billion 2, we

4 thought of Say Yes to Education as a great

5 opportunity for the region to give people --

6 you know, focused particularly in the city --

7 the opportunity to further their education

8 and take advantage of the economic

9 opportunity that's happening that, you know,

10 wasn't happening for so long.

11 SENATOR KENNEDY: It's a big state

12 with many diverse issues that you're dealing

13 with. I can speak to Buffalo and the

14 renaissance that's happening in Buffalo

15 personally, as a Buffalonian, and as someone

16 that represents the City of Buffalo and

17 Western New York.

18 So to your point regarding the REDC

19 initiative, the START-UP initiative, the

20 Buffalo Billion commitment, it seems to me

21 that this is working, at least in our region.

22 And I would argue that to your point as well,

23 from the data that I've seen, that it is

24 working in other areas specifically focused

1 on upstate New York.

2 Can you talk a little bit more about

3 this Buffalo Billion commitment and what it

4 means to the momentum that's already been

5 created?

6 COMMISSIONER ZEMSKY: Yeah. I mean,

7 we, first of all, couldn't be more excited

8 for the opportunity. Obviously, Western

9 New York is -- you know, you don't have to

10 live there to know how dramatically different

11 the environment is there, how many kids are

12 coming back and how many are staying. I

13 mean, it's sort of the acid test, I think.

14 The whole upstate region lost such a

15 disproportionate share of young people over

16 so many years. I mean, we lost population in

17 all the upstate regions, but we lost a

18 disproportionate share of people 20 to 40.

19 So seeing that turn around I think is the

20 acid test that we've turned the corner.

21 But what we've seen work -- as you

22 know, we've had this amazing success on

23 innovation. The 43 North business plan

24 competition, the largest business plan

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1 competition in the country now, has been so

2 impactful. So continuing that for five more

3 years.

4 We're so successful with START-UP and

5 early-stage companies now. We've run out of

6 innovation space and incubator space.

7 Putting in a world-class accelerator helped

8 these companies continue to grow. You know,

9 creating opportunity for everyone by focusing

10 on investments that are accessible to people.

11 That's why I'm so excited about the

12 light rail expansion. You know, we sprawled

13 out all over Western New York, and we made it

14 more and more difficult for people without

15 cars or people from lower incomes and lower

16 education to get to employment. This has

17 been a very purposeful strategy of, you know,

18 Buffalo since 2011, and it was embedded in

19 the Buffalo Billion plan.

20 So extending public transportation,

21 giving people the opportunity to get to work

22 in Amherst. Continuing to develop

23 transit-oriented development, activating the

24 waterfront further, the river, the outer

101

1 harbor, the inner harbor -- all these things

2 that really drive so many decisions as to

3 where to live and work if you are one of

4 those 20-to-40-year-olds.

5 And so continuing to do that,

6 continuing to invest in the workforce, all

7 these -- continuing to invest in tradable

8 sectors of the economy, those sectors that

9 play to our strength in life sciences and

10 tourism and manufacturing. I mean, I think

11 we have the ideal circumstance. We have a

12 model, I think, for the state and for the

13 country in terms of how to actually intervene

14 and impact dramatically the trajectory of the

15 economy.

16 And I think -- you live there, you've

17 got kids, it means a ton to you personally.

18 Because, look, my kids are all in their mid

19 and late 20s. Ten years ago, they were in

20 high school. Every one of them would have

21 told you, I'm going to go to college and I'm

22 not coming back. Now I got two back and one

23 to go. And that's a story that's repeated

24 all over Western New York.

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1 SENATOR KENNEDY: I want to touch on

2 two quick things. I'm going to be mindful of

3 time. With the Buffalo Billion initiative, I

4 also represent the City of Lackawanna and

5 Town of Cheektowaga. The City of Lackawanna,

6 there is a great investment planned for the

7 Bethlehem Steel site -- a thousand-acre site,

8 deeply troubled with the industrial past.

9 But there is a new reality that we're looking

10 at with the potential for a new parkland.

11 If you could comment on that as well

12 as the badly needed funding for the zombie

13 property disaster that has occurred not only

14 statewide, but specifically in our community

15 upstate, how this funding will target the

16 zombie properties in the Town of Cheektowaga.

17 COMMISSIONER ZEMSKY: Yeah. So

18 Lackawanna, you've got the Bethlehem Steel

19 site. In many ways it's a perfect industrial

20 site because you've got multi-modal

21 transportation and you've got literally

22 hundreds of acres -- thousands.

23 You know, look at what happened at

24 RiverBend, the old Republic Steel site.

103

1 Let's take a page out of that book. You had

2 Republic Steel that is now -- you know, an

3 old, closed brownfield site, remediated; you

4 know, 21st-century industry there now.

5 There are only so many of these types

6 of sites that are so big that you can do a

7 megaproject. And what we don't want to do is

8 what we used to do, which was the greenfield

9 sites spread and sprawled all over. We take

10 up agricultural lands, we extend sewers

11 everywhere. We have the infrastructure in

12 Lackawanna. We have the proximity. And

13 let's find a repurpose for it. I think

14 that's part of our driving strategy that

15 worked at RiverBend, and it's in a spot where

16 people can get to work.

17 And then, look, the zombie -- we're

18 going to work with HCR on the zombie

19 properties and we're going to put some money

20 to it. So we've got to really figure out the

21 detailed strategy of that. But this whole

22 notion of these neighborhoods just stay

23 abandoned and/or boarded up and you cannot

24 get control of the property, I think we can

104

1 work with the banks and get control of those

2 properties and make something happen. I

3 think that's an important piece of the plan.

4 CHAIRWOMAN YOUNG: Thank you.

5 CHAIRMAN FARRELL: We've been joined

6 by Assemblyman Pretlow.

7 And next to present, Assemblywoman

8 Glick.

9 ASSEMBLYWOMAN GLICK: Sorry, I needed

10 to get to a mic that worked.

11 I was very pleased to hear you refer

12 to our colleges and universities as key

13 assets for the state. They are publicly

14 owned facilities. Over the last many years,

15 we've had a fairly decent amount of what is

16 referred to as critical maintenance capital

17 investment. That keeps our aging facilities

18 that may need a new HVAC or new piping,

19 because it's leaking, or doors are falling

20 off -- so it's really just putting Band-Aids

21 on older facilities.

22 There really hasn't been a consistent

23 five-year capital plan so that new facilities

24 that might encourage, within what was

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1 START-UP and is now rebranded as Excelsior --

2 that might provide a better platform for new

3 companies to come into those areas. And

4 while the big university centers do very

5 well, there are a lot of smaller towns

6 throughout upstate that are struggling.

7 Those towns that have a SUNY are clearly in a

8 better position than those that don't. And

9 those towns help the general area.

10 This budget does not include any

11 movement on real capital investment other

12 than the critical maintenance to keep the

13 places running, but no significant -- and

14 some of those -- there's well over a billion,

15 probably closer to $3 billion worth of

16 projects that are planned or envisioned, but

17 no dollars.

18 What is your view of why this budget

19 does not provide, since you're running

20 Excelsior and supporting that, why wouldn't

21 we want to invest in existing state assets

22 that are clearly, from your point of view,

23 important for upstate's future?

24 COMMISSIONER ZEMSKY: Yeah, and I

106

1 wouldn't be able to speak with great detail

2 or authority on the education budget. I'm

3 not -- you know, that's another hearing.

4 But we do have, you know, important

5 relationships with our colleges and

6 universities. As you point out, you know,

7 probably skewed at times, from an economic

8 development standpoint, to the research

9 universities where there's a lot of

10 innovation and partnerships with business.

11 You know, we're working with a lot of

12 these towns you talk about. You know,

13 Jamestown, we're working on downtown

14 investments. We have downtown investments in

15 Oswego, other college towns. You know, I can

16 speak, you know, to how important the

17 colleges and universities are. I can speak,

18 you know, to the economic impact they have in

19 Western New York. It's a multi-billion-

20 dollar economic impact. When we did a

21 strategic plan in Western New York, we had

22 four or five things that we said we're going

23 to hang our hat on this, and of course one of

24 them was the colleges and universities. You

107

1 think about the way they impact -- you know,

2 I can't tell you how many companies are

3 looking to expand or relocate. And what do

4 they want? They want a labor market

5 assessment. They want to know what the

6 colleges and universities are training for.

7 They want to know where they're going to get

8 people in finance and human resources and

9 technical skills and engineering and

10 management and laborers and all those skills.

11 So it's important.

12 ASSEMBLYWOMAN GLICK: Well, if I could

13 just follow up for one split second, I

14 understand that you're not overseeing the

15 higher ed budget. But since the colleges are

16 so key to plans that you're doing, I would

17 urge you to think about the kinds of

18 investment -- I've always seen our colleges

19 and universities as economic development

20 potential. And yet even though that is the

21 mantra, the actual dollars do not show up at

22 what are our own state-owned facilities, our

23 own state-owned assets.

24 And I would urge some redirection,

108

1 some rethinking. It's very concerning. I

2 mean, the major university centers, there are

3 four, but we have a lot of smaller ones --

4 schools in Utica, schools in Delhi, schools

5 in the Plattsburgh area. Those are key

6 locations and important to those regions.

7 So I would hope that you would

8 consider talking to the Governor about the

9 use of some economic development dollars to

10 assist those assets.

11 COMMISSIONER ZEMSKY: I mean, we do,

12 through the REDC, fund a lot of projects that

13 connect to colleges and universities.

14 Sometimes it's workforce development

15 projects, oftentimes connected to community

16 colleges. And sometimes not community

17 colleges. We invest oftentimes in research

18 programs that they're doing. Maybe it's

19 connected to life sciences or material

20 sciences or, you know, other projects like

21 that.

22 Obviously, through some of these SUNY

23 Poly projects, we're connected very closely

24 to nanosciences --

109

1 CHAIRMAN FARRELL: Thank you.

2 COMMISSIONER ZEMSKY: -- and things of

3 that nature. So we're integrated in with

4 START-UP, we're integrated in with the REDCs

5 through workforce development. We support a

6 lot of university projects and research. You

7 know, it's not just public, public and

8 private. Some of it is, you know, data

9 sciences, cybersecurity, photonics. You

10 know, 21st-century industries that are

11 connected to colleges and universities do get

12 support through REDCs.

13 CHAIRMAN FARRELL: Thank you.

14 CHAIRWOMAN YOUNG: Thank you.

15 Senator Tom Croci.

16 SENATOR CROCI: Thank you.

17 Good morning, Commissioner. How are

18 you?

19 Commissioner, in 2016, in July,

20 Comptroller DiNapoli's report came out. In

21 response, Brandon Muir, the executive

22 director of Reclaim New York, which is a

23 nonpartisan advocacy group focused on keeping

24 businesses and people here, said that because

110

1 the results prove the failed strategy, the

2 report's release was delayed.

3 In addition, Ron Deutsch, the

4 executive director of the Fiscal Policy

5 Institute, a think tank in Manhattan and

6 Albany, concurred, saying "START-UP NY has

7 spent tens of millions of dollars on

8 advertising and only created an anemic number

9 of jobs." "I don't think we can consider

10 this a success by any measure," he said.

11 More concerning to me is when the

12 Comptroller's report came out -- and this

13 seems to be a trend now in these budget

14 hearings as we bring in commissioners -- one

15 of the lines in the Comptroller's report said

16 that the auditing -- when doing the auditing

17 of the Excelsior Jobs Program in July 2016,

18 ESD withheld information and restricted

19 access to program staff and necessary

20 information. And the Comptroller concluded

21 that these actions created an intentional

22 interference with transparency and

23 accountability.

24 And those of us who have been in these

111

1 hearings the last few days are confronting

2 now commissioners who have to respond to the

3 Comptroller's terms. And these terms of

4 transparency and accountability are alarming.

5 So my question, both in this aspect

6 and for the other commissioners, has been

7 what are we doing going forward to improve

8 transparency and public accountability?

9 COMMISSIONER ZEMSKY: We have

10 responded to all of the Comptroller's

11 reports. I obviously strongly disagree with

12 those opinions. I think there's too much

13 dependence on opinion and not enough

14 dependence on fact.

15 I think we run an amazing agency. I

16 think there are times when they ask for

17 things and if we don't have it, they conclude

18 we are just not giving it to them. I don't

19 think that's reasonable. They have done an

20 audit of the Excelsior for over a year. They

21 couldn't find a single instance where we made

22 a payment that we shouldn't have, yet they

23 concluded that we were somehow, you know, in

24 error or doing something wrong.

112

1 My biggest disappointment -- I've been

2 in this job for two years. My biggest

3 disappointment has been the relationship with

4 the Comptroller's office and the conclusions

5 that they reach and the way their audits are

6 done. I hope to improve that. I can't

7 guarantee it.

8 But ESD conducts itself in a way --

9 and has people who do an amazing job. And

10 that is not properly recognized or captured

11 or reflected in any of the Comptroller

12 reports.

13 So I respectfully disagree. We have

14 responded to all of their conclusions with

15 our own statements. You can find those on

16 the record. And we stand by those. But I

17 sure hope, over time -- because those reports

18 belie the fact that we actually work

19 constructively with the Comptroller's office

20 almost day in and day out and week in and

21 week out to advance projects. And why every

22 single report has to be so negative in a way

23 that, to me, is not accurate, is something I

24 can't explain.

113

1 SENATOR CROCI: This is a growing

2 theme, though, that we continue to see

3 commissioners who are -- their agencies are

4 being audited, and this -- the transparency

5 and accountability theme keeps coming back

6 and back and back every time we have these

7 conversations.

8 I want to touch on something else

9 before we're out of time. You repeatedly

10 said about the Regional Economic Development

11 Councils that they have no statutory

12 responsibility or authority. Interesting

13 that if we were to say the president of the

14 United States -- any president, any party --

15 were to come to the United States Congress

16 and say "I want a pot of money, I want to be

17 able to appoint all of people who spend that

18 money, and there's going to be no statutory

19 authority or responsibility, no financial

20 disclosures, no ethics disclosures for the

21 individuals who are spending that money,"

22 what do you think the United States Congress

23 would tell that executive?

24 Well, I'll answer that question. It's

114

1 lunacy.

2 My colleagues have well represented

3 our concerns -- not about how this is done as

4 far as getting local officials and leaders of

5 communities together to determine what

6 projects are most stimulative to their local

7 economy, but the individuals who are making

8 these determinations.

9 Sir, who makes the final determination

10 on an REDC project? Who does the final pick?

11 COMMISSIONER ZEMSKY: Who does what?

12 SENATOR CROCI: Who makes the final

13 pick on an REDC project? I'm not talking

14 about the scoring that's done at the local

15 level. When it comes up to this town, who

16 makes the final pick?

17 COMMISSIONER ZEMSKY: Most primarily,

18 the agencies make the final pick. That's the

19 overwhelming -- and then we --

20 SENATOR CROCI: Executive branch

21 agencies.

22 COMMISSIONER ZEMSKY: The state

23 agencies.

24 SENATOR CROCI: That are controlled by

115

1 the executive branch.

2 COMMISSIONER ZEMSKY: That are what?

3 SENATOR CROCI: A state agency

4 controlled by the executive -- an executive

5 branch agency. The department of

6 Transportation, et cetera. Commissioners

7 appointed by the Governor; correct?

8 COMMISSIONER ZEMSKY: The

9 commissioners appointed by the executive

10 branch and confirmed by the legislative

11 branch and -- I mean, I feel like I'm

12 speaking -- since I can, you know, represent

13 ESD, I feel like we work very collaboratively

14 with legislators across the State of New

15 York. We're in every one of these regions,

16 we're responsive, we're really helping to

17 make economic development happen. There are

18 times we step in and intercede and try to

19 help companies to grow, or we've been

20 involved in keeping companies from closing.

21 We've served as a broker to, you know,

22 troubled companies to try and find buyers so

23 we don't lose jobs. We've advanced broadband

24 over the state. We're advancing economic

116

1 development strategies all over the state.

2 You know, I feel like --

3 SENATOR CROCI: I understand, sir,

4 that you're working hard and your team is

5 working hard. And no one questions your work

6 ethic or your motivations in helping the

7 State of New York.

8 What I'm saying is the economic

9 policies have failed. It's pretty clear that

10 if you're picking and choosing sectors of an

11 economy, if you're picking and choosing

12 winners in an economy, ultimately you're

13 going to have the kind of anemic growth that

14 has been reported.

15 COMMISSIONER ZEMSKY: Look, I'm just a

16 business guy. You know, I'm not a

17 politician. I don't really get the whole

18 value of saying something is failing when

19 it's been an amazing success. So I can't

20 explain that. I understand you feel that

21 way. I couldn't disagree more. I think most

22 of the regions couldn't disagree more. We've

23 probably talked about this now through nine

24 different questions and answers. I could

117

1 keep talking about it. I'm not going to get

2 upset again about, you know, REDCs. I think

3 we have great plans. I think we do a great

4 job.

5 You know, why we call success failure

6 is a mystery to me. I'm just trying to help.

7 And I think all these regional councils, and

8 I think everyone here, you know, is

9 interested in economic development. And I

10 don't think we should call success failure.

11 That's my opinion.

12 SENATOR CROCI: Okay. Well, thank

13 you. Appreciate your testimony here today.

14 CHAIRWOMAN YOUNG: Thank you.

15 CHAIRMAN FARRELL: Thank you.

16 Assemblywoman Jenne.

17 ASSEMBLYWOMAN JENNE: Thank you,

18 Mr. Chairman.

19 Good morning, Commissioner. It's

20 still morning for a little bit of time, so --

21 you may feel like you've been there forever,

22 but it's only been a couple of hours.

23 I'd like to start by echoing some of

24 my colleagues' concerns. I'm similarly

118

1 bewildered at why we would spend over

2 $50 million on brand I.D. and then go ahead

3 and change the name. That certainly concerns

4 me. And if, you know, we are still

5 contending that this is a successful program,

6 albeit one that's probably far more of a

7 long-term strategy for success, I don't know

8 why we would go ahead and abandon a name that

9 we spent so much time and money on bringing

10 awareness to, not only in this state but in

11 this nation and likely a global reach as

12 well.

13 So that concerns me, and I think that

14 maybe we should rethink that. Because you'll

15 just have to spend as much money, probably,

16 getting people to understand which program

17 they want to apply for for the benefits that

18 the program has.

19 You mentioned in earlier testimony

20 today that the refining and refocusing of the

21 program, that that was led by suggestions

22 from apparently very long discussions with

23 businesses that are already in the program.

24 Was that correct?

119

1 COMMISSIONER ZEMSKY: Yes. In part it

2 was formed by that, yes.

3 ASSEMBLYWOMAN JENNE: Okay. I'm just

4 wondering what parts of the refine and

5 refocus effort were the result of legislative

6 input. You and I have talked about this

7 program in hearings in the past. I've made

8 suggestions about perhaps looking at some of

9 our SUNY schools that we know should be the

10 cornerstone of economic activity in our

11 regions, and look at projects that they have

12 proposed, such as the accelerator at SUNY

13 Canton and a film production type of

14 facilitator at SUNY Potsdam.

15 I don't see any of that really

16 traceable in the budget, that we would make

17 that type of investment in our SUNY system so

18 that then they could actually work with

19 start-ups in our region. Were any of those

20 suggestions taken into account in this

21 refining and refocusing effort?

22 COMMISSIONER ZEMSKY: Yeah, I mean, we

23 have -- we're organizing ourselves at ESD

24 around, you know, the innovation opportunity

120

1 through the new -- newly restructured

2 business program and assets and people that

3 we have at ESD and SUNY.

4 So yes, we are -- I think we're going

5 to be bringing to the table people who

6 have -- and, in fact, some people from UB who

7 I think have really lived this program in a

8 way that represents a great model, and we're

9 going to bring those assets and resources --

10 ASSEMBLYWOMAN JENNE: Yeah, we would

11 just like funding for that model in other

12 parts of the state other than just Western

13 New York, as we were asking for these things

14 that seem to align with what your

15 programmatic goals are, but we seem to be

16 stymied in actually getting that support to

17 get down to our individual communities.

18 I would just also point out that there

19 were other suggestions made at the hearing on

20 this program, and many of them went to

21 transparency. And so my take-away, I guess,

22 from the refining and refocusing and changing

23 of this program in statute is that we asked

24 for more transparency and the accommodation

121

1 we got was further secrecy. And so I guess

2 that seems to be what the Governor envisions

3 our role to be, as even less in these

4 programs.

5 Turning to the regional councils,

6 which have been a huge topic of discussion

7 here this morning as well, I am wondering how

8 many actual new jobs we can concretely say

9 have been created. Of the 210,000, I'm sure

10 a bunch of them are retained, which I mean

11 that was, I think, a change in the program,

12 because we had many businesses waiting to go

13 under. And so early on, retention was not

14 allowed as -- you know, those projects

15 weren't allowed to be funded under the

16 regional councils. So a couple of years into

17 it, we finally got retention of the

18 cornerstones of our regional economies to be

19 considered.

20 But, you know, when we talk about

21 creation, we know the START-UP NY jobs,

22 there's commitments for jobs; I'm just

23 wondering how many we've actually created

24 versus have commitments to create or retain.

122

1 Do you have a number?

2 COMMISSIONER ZEMSKY: Yeah, about

3 20 percent.

4 ASSEMBLYWOMAN JENNE: About 20

5 percent.

6 COMMISSIONER ZEMSKY: Twenty percent,

7 about.

8 ASSEMBLYWOMAN JENNE: Okay, thank you.

9 Also the program is to be funded at

10 $750 million. Is that just the discrete part

11 of the competition that deals with economic

12 development, or is that the total number for

13 all the other pots of grant funding that come

14 through other means? It might be

15 pass-throughs from the federal government or

16 that we as a legislature fund under different

17 agencies. But we've created this

18 consolidated form? Does the $750 million

19 include all of those other agencies that

20 money is doled out through this process, or

21 is it just your economic development

22 programs?

23 COMMISSIONER ZEMSKY: It includes some

24 funds from other state agencies.

123

1 ASSEMBLYWOMAN JENNE: Okay. So what

2 portion of the $750 million is strictly your

3 agency for economic development, not for

4 other tourism or community development? You

5 mentioned one of those projects in

6 Mr. Schimminger's district that had to do

7 with something that was more aesthetic and

8 probably more what the Department of State

9 does -- waterfront revitalization and access

10 to the water. That wasn't your program, was

11 it, that funded that? Was it --

12 COMMISSIONER ZEMSKY: It was REDC.

13 ESD is about $150 million.

14 ASSEMBLYWOMAN JENNE: A hundred and

15 fifty million, okay.

16 CHAIRMAN FARRELL: Thank you.

17 ASSEMBLYWOMAN JENNE: Thank you.

18 CHAIRWOMAN YOUNG: Thank you.

19 Our next speaker is Senator Savino.

20 SENATOR SAVINO: Thank you, Senator

21 Young.

22 Thank you, Commissioner.

23 I'm just going to focus on two parts

24 of the budget. We were very pleased to see,

124

1 in the Executive Budget, the Governor's

2 commitment to the Buy American proposal.

3 We're big supporters of it. And I'm a member

4 of the Independent Democratic Conference.

5 We're also committed to the idea of not just

6 buy American but buy New York products.

7 One of the things that we have seen,

8 though, is the difficulty of maintaining

9 manufacturing here in New York State, and

10 we've made some proposals about making it

11 easier to retain manufacturers, including

12 property tax exemptions. What are your

13 thoughts about making it easier to retain

14 manufacturing and incentivize manufacturers

15 to stay in New York State?

16 COMMISSIONER ZEMSKY: Yeah, I mean I

17 think by reducing the tax rate to

18 manufacturers to zero, we've tried to create

19 a very positive environment for

20 manufacturing. That's a focus for many of

21 our regions, a tradable sector in

22 manufacturing. They have different

23 strengths, different regions have different

24 strengths within manufacturing. But, you

125

1 know, it's a very -- it's a high priority.

2 SENATOR SAVINO: Thank you.

3 Secondly, on the MWBE program, we know

4 that one of the state's commitments is to, I

5 think, get it up to 30 percent of contracting

6 in the state.

7 Last year I was the chair of the

8 Senate's Banking Committee and I did a

9 hearing alongside Assemblywoman Bichotte, who

10 was with me, to focus on the lack of access

11 to capital and credit for MWBEs. Because

12 that's one of the reasons why many of the

13 MWBEs are not able to compete. Even the

14 entity that was set up to lend to MWBEs, the

15 New York Banking Development Corporation, is

16 not meeting its stated goals.

17 Coincidentally, the Senate Labor

18 Committee held a hearing on prompt payment in

19 the construction industry and its effect on

20 MWBEs, which are oftentimes subcontractors.

21 And it turns out that the worst payers -- it

22 turns out to be the state. You're laughing,

23 because you know the cases.

24 COMMISSIONER ZEMSKY: Sorry.

126

1 SENATOR SAVINO: So it's almost as if

2 our own policies are getting in the way of

3 our stated commitments.

4 So I would hope that -- you know,

5 you're probably one of the smartest people

6 involved in this state. If you could look

7 into this and help us solve this problem of

8 access to capital and credit for the MWBEs,

9 it would go a long way towards helping us

10 achieve that stated goal of 30 percent of

11 state contracts. And also put some pressure

12 on the state agencies, whether it's DOT or

13 the MTA, which is not a state -- well, it's a

14 quasi-state agency -- to solve that problem

15 of prompt payment. That will then really

16 help these MWBEs. Because once they get a

17 contract, they wind up becoming delisted or

18 debarred because, through no fault of their

19 own, they are not getting money. Then they

20 can't meet payroll and they don't maintain

21 their certification, and it's just like

22 they're going around in circles. So I would

23 hope that you would help us with that.

24 COMMISSIONER ZEMSKY: Sure.

127

1 SENATOR SAVINO: And at that point,

2 I'm done. Thank you.

3 COMMISSIONER ZEMSKY: Okay. Let me

4 just -- I can follow up with you some more

5 and get you some more statistics on it, but

6 we do have a number of small business access

7 to capital programs that have been very

8 successful. And I want to recognize the

9 agency for doing those capital access

10 programs -- surety bond assistance, small

11 business revolving loans, Bridge to

12 Success -- helping MWBE firms really in so

13 many different ways.

14 I think these programs are almost

15 fully subscribed. They are very active. And

16 the nice thing about the revolving loan fund

17 is that it continues to replenish itself and

18 help. The surety bond helps MWBEs with

19 contracting projects. The access to capital

20 program, $8 million against loan loss

21 reserves to, you know, put out microloans and

22 small business loans. Which we've had a huge

23 impact on over 1600 loans in that program

24 alone, $53 million of lending.

128

1 So small business is a big focus of

2 ours also. We do have several very active

3 loan programs and access to capital programs.

4 And we can provide, you know, more detail on

5 those. But they're a very active part of

6 what we do.

7 SENATOR SAVINO: I'd appreciate that.

8 Because half the battle is knowing where to

9 look.

10 COMMISSIONER ZEMSKY: Exactly. And we

11 have so many of them. And they're, you know,

12 firing on all cylinders that you should know

13 about them. They're good programs.

14 SENATOR SAVINO: Thank you.

15 CHAIRWOMAN YOUNG: Thank you.

16 CHAIRMAN FARRELL: Assemblyman

17 Bronson.

18 ASSEMBLYMAN BRONSON: Good morning,

19 Commissioner. Thank you for being here.

20 COMMISSIONER ZEMSKY: Thank you.

21 ASSEMBLYMAN BRONSON: A couple of

22 things. First of all, let's talk about the

23 $4.6 billion expended over the last six

24 years. And you indicated that 210,000 jobs

129

1 were either retained or created, and I

2 believe your answer to a question previously

3 was that 20 percent of that overall number

4 were jobs created. So that means about

5 42,000 jobs have been created.

6 Of those jobs that were created, how

7 many of them were temporary construction

8 jobs? And how many of them were permanent

9 jobs?

10 COMMISSIONER ZEMSKY: Yeah, they're

11 not -- the temporary construction jobs are

12 not -- I don't believe we incentivize against

13 the temporary construction jobs, so they're

14 full-time jobs.

15 ASSEMBLYMAN BRONSON: Okay. So the

16 construction jobs in doing the bricks and

17 mortars are not included in the 210,000

18 number here?

19 COMMISSIONER ZEMSKY: Right.

20 ASSEMBLYMAN BRONSON: Okay. So of the

21 jobs that were created, 42,000 roughly, are

22 those all permanent jobs?

23 COMMISSIONER ZEMSKY: Say that again?

24 ASSEMBLYMAN BRONSON: Of the jobs that

130

1 were created, the 42,000 -- that doesn't

2 include construction jobs --

3 COMMISSIONER ZEMSKY: Right.

4 ASSEMBLYMAN BRONSON: -- were they all

5 permanent jobs?

6 COMMISSIONER ZEMSKY: Yes. Permanent

7 jobs, full-time jobs, yeah.

8 ASSEMBLYMAN BRONSON: Okay. And of

9 that number, are those positions still filled

10 today, the 42,000?

11 COMMISSIONER ZEMSKY: Well, there's a

12 lot more positions now filled, frankly,

13 because the economy has grown so much. But I

14 can't -- of course, I cannot --

15 ASSEMBLYMAN BRONSON: Sir, only --

16 COMMISSIONER ZEMSKY: I cannot

17 speak -- of course, as you know, I cannot

18 speak to every single job and if it's still

19 filled or if there's more jobs than they

20 expected or fewer jobs than they expected

21 over time. Because they compete, and some

22 companies succeed and some companies don't.

23 If you look back over five years --

24 ASSEMBLYMAN BRONSON: I understand --

131

1 sir, I understand that dynamic.

2 COMMISSIONER ZEMSKY: Well, so that's

3 the reality.

4 ASSEMBLYMAN BRONSON: But you've made

5 the claim that it --

6 COMMISSIONER ZEMSKY: That's the

7 reality of the economy.

8 ASSEMBLYMAN BRONSON: I understand

9 that dynamic.

10 But you've made the claim that 42,000

11 jobs were created. That's the 20 percent

12 number. So if you know those jobs were

13 created, the question then is -- you get

14 reports from these companies. The question

15 is, do you know if we still have 42,000

16 people working in those jobs?

17 COMMISSIONER ZEMSKY: Well, what I

18 know is the vast majority of that is through

19 tax credit programs that you don't get the

20 tax credit unless you have the job. So when

21 we spend the money, it's because you've

22 created the job and the job exists.

23 If you ask me five years later if the

24 job, it's -- you know, it's impossible to

132

1 guarantee what the economy or what the

2 company will do 10 and 15 years in the

3 future.

4 ASSEMBLYMAN BRONSON: I -- I'm not

5 asking --

6 COMMISSIONER ZEMSKY: But you put

7 together the program -- sorry. We put

8 together the program, most of it is done, the

9 vast majority, in a pay-for-performance mode.

10 ASSEMBLYMAN BRONSON: All right. So

11 I'm not asking you to look at 15 years from

12 now. I'm asking you to look at today. And

13 if you have tax credit reports, whenever they

14 applied last time, then we should be able to

15 get that number.

16 COMMISSIONER ZEMSKY: Yup.

17 ASSEMBLYMAN BRONSON: The second point

18 you made, in answering other questions, was

19 ESD is an independent nonprofit status. With

20 all due respect, I understand that. But

21 we're talking about $4.6 billion of taxpayer

22 dollars, whether you're talking tax credits

23 or otherwise. These are taxpayer dollars.

24 And whether those dollars are flowing through

133

1 an independent nonprofit organization or

2 they're flowing directly through a state

3 agency, we owe it to our taxpayers to know

4 how those dollars are being spent.

5 So I and many of my colleagues are

6 interested in making sure that we have the

7 sufficient transparency, the sufficient

8 accountability, and the oversight on these

9 dollars. So you don't need to answer that,

10 that's just the position I'm stating.

11 As chair of the Commission on Skills

12 Development and Career Education, I'd like to

13 ask you a series of questions about the

14 workforce development. Because ultimately,

15 economic development is really about jobs for

16 our families and jobs for our young people to

17 stay here, which I think you agree with.

18 So without -- you answered the

19 Senator's questions regarding Buffalo. I'd

20 like to have you explain to us what workforce

21 development is happening in the Rochester

22 area, in particular in connection with

23 photonics, to make sure that our urban youth

24 are able to get into these jobs and other

134

1 folks are able to get into these jobs.

2 COMMISSIONER ZEMSKY: Yeah,

3 Rochester -- and as you know, the head of

4 Monroe Community College is now, you know,

5 cochair of the Regional Council. They have a

6 very large focus on workforce development.

7 They have a very large focus on poverty

8 reduction.

9 You know, I know there was a lot of

10 funds allocated most recently from the URI to

11 mentorship programs, to education programs,

12 to workforce training programs. There is a

13 very active council there. And we can go

14 through their plan, but I think they've been

15 very aggressive in funding workforce

16 development initiatives.

17 So, boy, the way that council's

18 structured now, with Anne Kress as the

19 cochair, you can imagine there's going to be

20 a, you know --

21 (Reaction as lights go out in hearing

22 room.)

23 COMMISSIONER ZEMSKY: So much for

24 transparency.

135

1 (Laughter.)

2 CHAIRMAN FARRELL: Open the doors back

3 there.

4 (Lights come on in hearing room.)

5 UNIDENTIFIED SPEAKER: There we go.

6 CHAIRMAN FARRELL: Never mind.

7 (Laughter.)

8 COMMISSIONER ZEMSKY: So, you know, so

9 let me say --

10 CHAIRMAN FARRELL: As you were saying.

11 COMMISSIONER ZEMSKY: Oh, sorry about

12 that. I don't know what to make of that.

13 Maybe there's a signal.

14 UNIDENTIFIED SPEAKER: Don't read

15 anything into it.

16 ASSEMBLYMAN BRONSON: Well,

17 Commissioner, you --

18 COMMISSIONER ZEMSKY: We couldn't

19 agree more that workforce development is a,

20 you know --

21 ASSEMBLYMAN BRONSON: My time is up.

22 I would just ask you -- because ultimately

23 economic development is about creating jobs,

24 and ultimately there are populations in

136

1 geographical areas in this state that really

2 need a lot more focus on making sure that the

3 workforce development programs are closely

4 aligned with whatever economic development we

5 do. I know we're doing some of that in

6 Rochester. I would just like to see our

7 efforts be expanded in that regard.

8 Thank you.

9 COMMISSIONER ZEMSKY: Got it. I

10 agree.

11 CHAIRMAN FARRELL: Thank you.

12 CHAIRWOMAN YOUNG: Thank you.

13 Our next speaker is Senator Comrie.

14 SENATOR COMRIE: Thank you, Madam

15 Chair.

16 Good afternoon, Mr. President {sic}.

17 COMMISSIONER ZEMSKY: Hi.

18 SENATOR COMRIE: I wanted to ask you a

19 couple of questions about the airport

20 redevelopment projects that the Governor has

21 talked about and where are we on the timing

22 for La Guardia and how that's progressing in

23 terms of -- on scheduling and minority

24 participation.

137

1 And what is he doing in terms of

2 Kennedy? Has there been any group that has

3 been -- any effort or specific effort that

4 has been put together since he made his

5 announcement of revamping Kennedy Airport?

6 COMMISSIONER ZEMSKY: Yeah, I think

7 Kennedy -- La Guardia is under construction.

8 I mean, I fly in there weekly, it's an active

9 construction site.

10 So Kennedy Airport was announced

11 recently in terms of its upgrades. Any time

12 there's a project like that, there's going to

13 be -- I don't know exactly what the

14 percentage MWBE goal is on that, but it's

15 going to be significant.

16 And, you know, that's -- we're not

17 doing the airport renovations at ESD, but --

18 SENATOR COMRIE: Oh, that's not going

19 through ESD?

20 COMMISSIONER ZEMSKY: -- but it's, you

21 know, more -- a lot of the airport work is

22 through the Port Authority and things of that

23 nature.

24 SENATOR COMRIE: Okay.

138

1 But won't you be part of the

2 monitoring of the MWBE for both projects?

3 COMMISSIONER ZEMSKY: You know, we

4 monitor MWBE across the state, so we have a

5 role there.

6 SENATOR COMRIE: All right. I just

7 wanted to also second what my colleague

8 Senator Savino said about the MWBE loan

9 funding and making sure that that happens.

10 And I would like to get an update on exactly

11 where those loans went to and what groups

12 have been involved in it and where do those

13 seminars take place, so that we can inform my

14 constituencies as well.

15 COMMISSIONER ZEMSKY: Yeah, that's

16 great. Yeah, we can do that.

17 We've got -- and it's an ongoing

18 program. I mean, we're providing training,

19 we're providing mentoring, we're providing

20 all types of programs on how to get state

21 contracts, on how to be certified as an MWBE,

22 how to get information on state contracts,

23 things of that nature. So we're very active

24 in the regions on that.

139

1 SENATOR COMRIE: Well, I see that the

2 Governor was only calling for $635,000 in the

3 Business Development and Lending Program, but

4 I've heard you say earlier that there are

5 other programs that MWBEs are involved in.

6 And I'd like to get the overall number of

7 money that's loaned out to MWBEs.

8 And then my final question is, how

9 many minority prime contractors have been

10 developed under this program?

11 COMMISSIONER ZEMSKY: Well, there

12 are -- I can't speak to that specifically. I

13 can tell you that we have added literally

14 thousands of MWBE-certified firms in recent

15 years. But I cannot speak to what number is

16 prime contractors. I don't have that.

17 SENATOR COMRIE: But does your program

18 enable prime contractors to be established,

19 to be created? And how are you working to

20 develop the capacity for people that are

21 looking to be prime contractors?

22 COMMISSIONER ZEMSKY: Yeah. Well, we

23 do have a lot of programs that are helping

24 MWBE firms with capacity, not only lending

140

1 but -- and not only mentoring, but capacity

2 in terms of business building. So ...

3 SENATOR COMRIE: And are you working

4 with the other financial institutions to

5 increase the revolving loan fund through

6 their participation as well, for the access

7 to capital?

8 COMMISSIONER ZEMSKY: Yes, we deal

9 with CDFIs all across the state, many of

10 them, dozens of them.

11 SENATOR COMRIE: And can you give this

12 committee a breakdown of who those banks are

13 as well --

14 COMMISSIONER ZEMSKY: Sure.

15 SENATOR COMRIE: -- so we can know

16 who's participating and what kind of vigor

17 they are participating with in creating

18 opportunities for people?

19 COMMISSIONER ZEMSKY: Absolutely.

20 SENATOR COMRIE: And then just my last

21 question on the Jamaica -- the Governor has

22 given us seed money to Downtown Jamaica

23 Revitalization. And I would hope that we can

24 get a full access to other opportunities to

141

1 have a larger discussion on what we need to

2 do to fund the needs in the Jamaica area.

3 As you know, it's a transportation

4 hub, it's a central business location, it's a

5 real opportunity with over nine hotels being

6 built in the next two years that are going in

7 down there for some real economic

8 development. And I hope that the seed money

9 that the Governor has proposed there would be

10 followed up quickly by some real economic

11 opportunities.

12 COMMISSIONER ZEMSKY: Yup.

13 SENATOR COMRIE: Thank you.

14 COMMISSIONER ZEMSKY: Thank you.

15 SENATOR COMRIE: Thank you, Madam

16 Chair.

17 CHAIRWOMAN YOUNG: Thank you, Senator.

18 CHAIRMAN FARRELL: Thank you.

19 Assemblywoman Woerner.

20 ASSEMBLYWOMAN WOERNER: Thank you,

21 Mr. Chairman.

22 Thank you, Mr. Zemsky.

23 I have two areas I'd like to talk to

24 you about. One is the Global 450 Consortium

142

1 at SUNY NanoCollege. I know this was a

2 program that was designed to end in 2016.

3 COMMISSIONER ZEMSKY: Yup.

4 ASSEMBLYWOMAN WOERNER: The innovation

5 that -- the industry's adoption of the

6 450 nanometer technology has not kept up with

7 the innovations, so it makes some sense that

8 the consortium would be disbanded. On the

9 other hand, it is a key aspect to nurturing

10 the innovation in that industry, and to

11 continuing upstate New York's centrality in

12 the industry, that that kind of a consortium

13 remain, that public/private partnership.

14 So my question for you is given the

15 sunsetting of the Global 450 Consortium, what

16 is ESD's -- and in your capacity now

17 overseeing the SUNY CSNE programs, what is

18 your strategy or intent to continue to foster

19 that industry in upstate New York?

20 COMMISSIONER ZEMSKY: We have first

21 tried to stabilize the myriad of projects

22 that were in varying degrees of disarray, for

23 starters. We have then reengaged with many

24 of the partners that you're referring to.

143

1 And again, part of the money in the budget is

2 to square up and make good on some of the

3 state commitments that are out there.

4 And simultaneously, we're working on

5 the planning of what's next. So, you know,

6 it might be different partners, it may -- you

7 know, five years is a long time in the

8 technology space.

9 But I think it's important to note, as

10 you did, that that program wasn't intended to

11 be going on for 20 years. So it was a

12 research program -- we are engaged with

13 industry, we're actively speaking to other

14 potential partners and projects, but at the

15 same time we walked into a need to, you know,

16 triage the patient and stabilize the base --

17 and that's from the Schuyler projects to the

18 Global 450 Consortium and some of those

19 partners and other partners -- at the same

20 time working on planning.

21 We see that and I know the Governor

22 sees that as a huge priority. And we've

23 invested mightily in that industry. It's a

24 real point of distinction for New York State.

144

1 How to leverage and continue to leverage the

2 relationships and the industry contacts that

3 have been built up over so many years, how to

4 maintain a point of distinction in the

5 industry, I think is very important to the

6 go-forward opportunity in front of New York.

7 So we're taking it very seriously.

8 But we're prioritizing things also, and

9 that's what you're seeing in part in the

10 budget and the way we're engaged with the

11 board and these myriad of different companies

12 and at the same time planning, actively

13 planning on the future. Things are busy.

14 ASSEMBLYWOMAN WOERNER: Great. Thank

15 you. I'm glad to hear that statement of

16 support for the industry and for the

17 continuing efforts to build New York's

18 premier status in the industry.

19 My second question has to do with the

20 broadband program.

21 COMMISSIONER ZEMSKY: Yup.

22 ASSEMBLYWOMAN WOERNER: So we've spent

23 about 10 percent -- Phase 1 was about

24 10 percent of the total that was allocated.

145

1 What percentage of the unconnected households

2 are now connected through the Phase 1 part of

3 the project?

4 COMMISSIONER ZEMSKY: Well, I think we

5 added something like 35,000 households

6 through Phase 1. We're going to add more

7 shortly when we announce Phase 2. Every

8 phase is going to be more costly than the

9 prior phase, because we're getting to get

10 into more and more remote areas. So first it

11 was sort of the low-hanging fruit, and we're

12 going to continue to kind of move out.

13 By the end of the year we'll have --

14 you know, in part because of the agreement

15 that was made with the Time Warner/Charter

16 merger, we will have 97 percent or something

17 of the state covered. But we will have it

18 all covered by the end of '18.

19 ASSEMBLYWOMAN WOERNER: Forgive my

20 skepticism.

21 COMMISSIONER ZEMSKY: Okay.

22 ASSEMBLYWOMAN WOERNER: The Time

23 Warner/Charter merger was -- included a

24 commitment for 145,000 households, something

146

1 like that. And so now you've got -- and

2 we've got an additional 33 through Phase 1.

3 That's 175 -- say 175,000. That seems like a

4 pretty small percentage of the total

5 unconnected households that we have to cover.

6 COMMISSIONER ZEMSKY: I think --

7 ASSEMBLYWOMAN WOERNER: And I take

8 your point that it's only going to get more

9 expensive from here.

10 COMMISSIONER ZEMSKY: Yeah.

11 ASSEMBLYWOMAN WOERNER: So is

12 $500 million a realistically feasible budget

13 for this? I mean, it just seems --

14 COMMISSIONER ZEMSKY: Well, we have

15 that money. We have some money from this

16 recent settlement with I think the FCC. And

17 I think we will be able to do it. And I

18 think -- you know, I've talked to our

19 broadband people. They feel very optimistic.

20 I -- you know, I walk around myself, you

21 know, with a certain amount of skepticism

22 about a lot of things, but in this case I'm

23 not skeptical.

24 I think they've made really good

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1 progress. I think you're going to see an

2 announcement on Phase 2 very soon, and then

3 they're going to kick off Phase 3. And I

4 think this program is on track.

5 ASSEMBLYWOMAN WOERNER: So when we are

6 sitting here next February we're going to be

7 able to say we're close to 100 percent?

8 COMMISSIONER ZEMSKY: Yes.

9 ASSEMBLYWOMAN WOERNER: Okay. Thank

10 you.

11 COMMISSIONER ZEMSKY: I mean,

12 certainly committed if not fully installed.

13 But yeah, I mean -- I think, you know, we're

14 on track. You know, there was a lot of

15 people skeptical about the Second Avenue

16 subway, but I was at a celebratory event

17 there, so, you know --

18 ASSEMBLYWOMAN WOERNER: And that took,

19 what, 20 years?

20 (Laughter.)

21 COMMISSIONER ZEMSKY: I think 100.

22 But not under this Governor.

23 So, I mean, I know this Governor well.

24 We're going to do what we said, and I think

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1 it's on track. I think the team at broadband

2 is doing a great job, and I think of all the

3 things to be skeptical of, you should not

4 worry too much about this one.

5 ASSEMBLYWOMAN WOERNER: All right.

6 I'm looking forward to our conversation next

7 year, then.

8 COMMISSIONER ZEMSKY: Okay.

9 CHAIRMAN FARRELL: Thank you.

10 CHAIRWOMAN YOUNG: Thank you.

11 Senator James Sanders, please.

12 SENATOR SANDERS: Thank you, Madam Chair.

13 Good afternoon, sir.

14 COMMISSIONER ZEMSKY: Hi.

15 SENATOR SANDERS: Returning to MWBE,

16 two questions. I'm sure you've been up here

17 a long time.

18 Are you concerned that the Governor's

19 desire to extend the law that has to do with

20 15A will have a negative impact on the

21 disparity study itself?

22 COMMISSIONER ZEMSKY: Do I think the

23 Governor's desire to --

24 SENATOR SANDERS: The Governor is

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1 talking of extending the law over 15A.

2 COMMISSIONER ZEMSKY: Extending the

3 law. Oh, I --

4 SENATOR SANDERS: But there is a

5 disparity study that's taking place that is

6 due.

7 COMMISSIONER ZEMSKY: Yes.

8 SENATOR SANDERS: If the law is

9 extended and the disparity -- how will this

10 impact the disparity study?

11 COMMISSIONER ZEMSKY: The disparity

12 study's been extended to June. I don't think

13 you will need to extend it again.

14 SENATOR SANDERS: Okay.

15 COMMISSIONER ZEMSKY: So I don't think

16 those are connected.

17 SENATOR SANDERS: Okay. Then I stand

18 corrected. I did it wrong, extending the

19 disparity study. But the law may sunset.

20 COMMISSIONER ZEMSKY: No, I think it's

21 designed in a way that the law will not

22 sunset in a way that creates a void.

23 SENATOR SANDERS: Okay. As long as it

24 does not create a void, that is a concern.

150

1 I'm interested also in the total

2 amount of loans that are aimed at the MWBE

3 community and what is the interest rate on

4 these loans. You may not have that

5 information at hand, but if you'd be kind

6 enough to get that to me later.

7 COMMISSIONER ZEMSKY: Yup.

8 Absolutely. We can do that.

9 They are intended to be very

10 affordable loans. So, you know, that's part

11 of the subsidization of them. We reduced the

12 risk of the loan through the state money, and

13 that allows the loan to be made, and at a

14 favorable interest rate. So we'll get you

15 that information.

16 SENATOR SANDERS: Yes. Now, New York

17 City has 3 percent on some of its loans. I

18 trust that the state can beat the city, I'm

19 sure.

20 (Laughter.)

21 COMMISSIONER ZEMSKY: You're a tough

22 negotiator. Three percent is pretty good.

23 SENATOR SANDERS: Well, we're the

24 state. We will do better, I'm sure.

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1 COMMISSIONER ZEMSKY: Okay.

2 SENATOR SANDERS: Thank you very much,

3 sir.

4 Thank you, Madam Chair.

5 CHAIRWOMAN YOUNG: Thank you.

6 Assembly?

7 CHAIRMAN FARRELL: Yes. Assemblyman

8 Murray.

9 ASSEMBLYMAN MURRAY: Thank you,

10 Mr. Chairman.

11 And Mr. Zemsky, thank you for being

12 here.

13 I'd like to raise the issue of

14 credibility. During your testimony today

15 you've used terms such as "overpromised and

16 underdelivered," "lousy reputation," "empty

17 promises," and these were issues that you

18 raised that maybe happened years ago, maybe

19 decades ago, and said that maybe we're trying

20 to change that reputation. But my question

21 is, have we succeeded?

22 And my concern lies in issues like, a

23 few years ago, we had the Empire Zones, where

24 we were giving tax credits. Those Empire

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1 Zones then changed to the Excelsior Jobs

2 Program. We made promises to companies and

3 said if you create this number of jobs,

4 you'll get these tax credits. And we had

5 companies that were participating in this,

6 and then we deferred those tax credits -- in

7 fact, in some cases up to three years at a

8 time.

9 Now, as a company -- as a small

10 business owner myself, I can tell you that we

11 plan. We don't just go by whims, we're

12 planning and sometimes years in advance. So

13 when they're saying we're going to create

14 X number of jobs and we're now going to pay

15 for those jobs based on us getting these tax

16 credits, but the state turns around and

17 defers those credits not one year, not two

18 years, but in some cases three years, my

19 question is do we know how many of these

20 companies were affected on how much we

21 deferred?

22 COMMISSIONER ZEMSKY: I do not know

23 offhand how much from the Empire Zone

24 benefits were deferred.

153

1 ASSEMBLYMAN MURRAY: But can you see

2 where this might be a credibility issue with

3 some of these companies, and why we might be

4 having a problem with this?

5 We also have the issue of -- we have

6 the Excelsior Jobs Program, where there's a

7 certain parameter in order to qualify. We

8 now have START-UP NY, which is now going to

9 be the Excelsior Business Program. Again, I

10 can see where this could be quite confusing

11 to companies as to which is which, especially

12 since the Excelsior Business Program

13 parameters are a bit lower than those with

14 the Excelsior Jobs Program.

15 So there might be a bit of buyer's

16 remorse, if you will, with companies

17 participating in the Excelsior Jobs program.

18 Would you agree?

19 COMMISSIONER ZEMSKY: Well, I think

20 what they -- you know, really, it's a

21 continuum. So they could start in the

22 Excelsior Business Program and then really,

23 as they grow over time, can enter the

24 Excelsior Jobs Program. So I think it's a --

154

1 you know, potentially it's a pretty seamless

2 segue for them. And it's intended to be that

3 way.

4 ASSEMBLYMAN MURRAY: Well, if the

5 parameters are different, though, one being

6 higher, one being lower -- and right now it's

7 my understanding that the Excelsior Business

8 Program has a little bit lower parameters as

9 far as the number of jobs needed to create in

10 order to benefit from the tax credits.

11 COMMISSIONER ZEMSKY: Yeah. But if

12 you can't create jobs and make investment

13 because you're an early-stage, a really

14 early-stage company, you can't really get any

15 benefit out of the Excelsior Jobs Program.

16 So it really -- it is to your

17 advantage, as a formative-stage company, to

18 have the Excelsior Business Program. And

19 then as you get your footing and you develop

20 your technology, you grow and you're adding

21 an investment in jobs, and you would take

22 advantage -- and so it would be, I think, a

23 smooth transition. And they're complementary

24 programs.

155

1 ASSEMBLYMAN MURRAY: Well, back to the

2 credibility issue, would -- I'd like to get

3 your opinion on that. Do we have a

4 credibility problem based on our recent past?

5 COMMISSIONER ZEMSKY: I think we've

6 gone a long way in -- you know, I'm not going

7 to -- I'm probably getting worn out, but I'm

8 not going to, you know, spend a ton of time

9 talking about it.

10 My opinion is the State of New York is

11 a much better place to do business than it

12 was not that many years ago. I think -- we

13 track perceptions of the State of New York.

14 We know that businesses in the state and out

15 of the state see, you know -- we see a

16 dramatic improvement in perceptions that

17 people have of the State of New York, and for

18 good reason.

19 If you look at our infrastructure

20 investment, if you look at the economic

21 development, if you look at our colleges and

22 universities, if you look at almost any

23 metric in the knowledge economy, New York is

24 well-positioned. And if you look at our tax

156

1 rates, if you look at our balanced budgets,

2 if you look at the functionality of

3 government, we're just in such a dramatically

4 better place than we were.

5 It has a positive impact on the way

6 people perceive the state, both in the state

7 and out of the state. So I think our

8 credibility has been enhanced quite a bit.

9 ASSEMBLYMAN MURRAY: I appreciate your

10 optimism there.

11 I will just close by commenting on

12 something you had stated earlier, and you

13 said that you can understand why some of us

14 are calling a failure what you are deeming a

15 success. Well, when we get reports back and

16 we're asking for progress reports and we get

17 them late regarding the START-UP NY Program,

18 when we finally do receive them, we hear

19 numbers like START-UP NY creating more

20 tax-free areas, at 441, than they actually

21 created jobs, at 408, after spending roughly

22 $53 million in promotions, much of which is

23 in-state.

24 We're using the information we're

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1 getting from you, and that's where we're

2 coming up with this. I don't know if I would

3 go as far as to say a failure, but I

4 certainly wouldn't call it a gleaming success

5 by any stretch of the imagination to this

6 point.

7 Thank you.

8 COMMISSIONER ZEMSKY: Thank you.

9 CHAIRMAN FARRELL: Thank you.

10 CHAIRWOMAN YOUNG: Thank you. My

11 turn.

12 CHAIRMAN FARRELL: Yes.

13 (Laughter.)

14 CHAIRWOMAN YOUNG: Thank you,

15 Mr. Chairman.

16 I think we only have myself and I

17 think Senator Boyle wants to ask a couple

18 more questions. But thank you, Mr. Zemsky,

19 for all of your answers today. We truly

20 appreciate it.

21 I just had a few questions. Under the

22 Executive Budget proposal, there's

23 $207.5 million in capital money. And this is

24 a new appropriation, I think it's termed the

158

1 Strategic Projects Program. And the language

2 merely states that "the funds appropriated

3 herein shall be used for services and

4 expenses, loans, grants, related strategic

5 economic development projects that create or

6 retain jobs and support innovation." And as

7 written, the use of the funds would be at the

8 sole discretion of the Governor via Empire

9 State Development.

10 So what project or projects would be

11 included under this $207.5 million

12 appropriation?

13 COMMISSIONER ZEMSKY: So they are

14 projects that connect back to SUNY Poly that

15 we've already announced or are actively --

16 active partnerships that we have.

17 CHAIRWOMAN YOUNG: So is there a list?

18 COMMISSIONER ZEMSKY: It's not, you

19 know -- and then as we negotiate those, we'll

20 bring them forward in a very transparent way.

21 It will go through PACB. It's not for -- you

22 know, it's to -- getting back to my

23 conversation with Assemblymember Woerner,

24 it's to square up, reestablish our

159

1 credibility with many of the existing

2 projects and partnerships that we have at

3 SUNY Poly.

4 CHAIRWOMAN YOUNG: Is there a list

5 floating around of the projects? Just

6 because we'll have to vote, as the

7 Legislature, on these projects when we pass

8 the budget. Is there information out there?

9 COMMISSIONER ZEMSKY: There isn't in

10 amounts, because some of those are still

11 under negotiation. But they're, you know,

12 some of the, you know, partners that exist at

13 SUNY Poly now. So ...

14 CHAIRWOMAN YOUNG: If there's any

15 information that you can provide to us, I'm

16 sure everyone would really appreciate it.

17 The other question I have, I'm just

18 trying, Howard, to understand how this new

19 Excelsior Program would work. And from what

20 information I'm gathering, everything would

21 be tax-free for a company that was

22 participating, as it was for START-UP NY,

23 correct? So everything would be tax-free for

24 a company that would be allowed into the

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1 program?

2 COMMISSIONER ZEMSKY: Right.

3 CHAIRWOMAN YOUNG: Okay. So then on

4 top of it, I think there's a new provision

5 that actually would give a refundable tax

6 credit to these companies. So not only would

7 they be entirely tax-free, but then on top of

8 it they would be paid to have their company

9 in New York. Is that how that would work?

10 COMMISSIONER ZEMSKY: Yeah, over --

11 they would --

12 CHAIRWOMAN YOUNG: I'm just trying to

13 understand.

14 COMMISSIONER ZEMSKY: Yeah, so they

15 would be able to -- they would qualify for

16 the Excelsior Job Program as they grew.

17 So we would, you know, have a more

18 narrow definition of the companies that

19 entered the Excelsior Business Program, and

20 then they would have the opportunity to

21 participate in the Excelsior Job Program

22 going forward.

23 CHAIRWOMAN YOUNG: Okay. Thank you.

24 I wanted to ask about the MWBE

161

1 program, because -- and there's been some

2 discussion so far. But what I'm hearing from

3 companies in our region is that in many cases

4 there aren't enough MWBE qualified companies

5 in upstate. And they're having a very

6 difficult time, and in some cases are having

7 to subcontract with another company. And all

8 it is is that that company is making profit

9 off of it -- I think it may add to the cost

10 of a project -- just so that they can meet

11 their requirement of this 30 percent MWBE

12 mandate that we have in this state. That's

13 number one.

14 Number two, oftentimes local

15 companies -- just because we don't have a lot

16 of MWBE companies in certain parts of the

17 state, as I said, a lot of times local

18 people, local companies are excluded from

19 having those jobs that would be under these

20 projects. So is there something that we can

21 do to try to address that?

22 I think there's something similar to a

23 waiver that may be given, but I'm hearing

24 that it's very difficult to get that waiver.

162

1 COMMISSIONER ZEMSKY: So we have

2 added, you know, several thousand MWBE firms.

3 And we are very active regionally, so we go

4 out into each of the regions and we know, for

5 example, both Western New York and the

6 North Country have had issues around this,

7 and so we've concentrated many of our efforts

8 in trying to educate and encourage MWBE

9 formation.

10 And the balancing act between allowing

11 an MWBE -- I mean, we're one state. There

12 are, you know -- we encourage MWBEs from one

13 part of the state to participate in

14 opportunities if it makes sense for them in

15 other parts of the state. And

16 simultaneously, we try to increase the number

17 of MWBEs across the state.

18 So, you know, I realize that there are

19 times when people feel like, hey, they're

20 from another region or another city. But

21 that's, you know, the program, and those are

22 the guidelines of the program and, you know,

23 we try to work within those.

24 CHAIRWOMAN YOUNG: Right. But as you

163

1 know, in the Southern Tier people are

2 struggling from an economic sense, and there

3 are companies that employ people, the people

4 need the jobs, and they're being shut out of

5 the process. So if there's some way that we

6 could look to address that issue, it'd be

7 very helpful. Obviously, we want MWBEs and

8 we want people to succeed. But at the same

9 time, you know, the question is how do we

10 address regions that need jobs desperately

11 and they're not getting them. So that's one

12 thing related to MWBE.

13 And I apologize if I might not have

14 heard your answer on this, but there was a

15 disparity report that was due in February of

16 2016. Is that report completed?

17 COMMISSIONER ZEMSKY: Which report?

18 CHAIRWOMAN YOUNG: For MWBE. There

19 was a disparity report that was required

20 under statute, and it was supposed to have

21 been completed by February of 2016. And I'm

22 just wondering if that report is completed or

23 not.

24 COMMISSIONER ZEMSKY: Yeah, I think

164

1 that's the disparity study that's been

2 extended to 2017 -- I mean June of 2017.

3 CHAIRWOMAN YOUNG: The information I

4 have is 2016. But do you know what's in --

5 if the study's being done and where it's at

6 in the process?

7 COMMISSIONER ZEMSKY: Are you talking

8 about the disparity study?

9 CHAIRWOMAN YOUNG: Yes.

10 COMMISSIONER ZEMSKY: Tillman

11 Associates is doing the disparity study. I

12 believe they're based in California. They've

13 been -- the state contracted with them.

14 That study is delayed. It's way more

15 extensive than the previous disparity study.

16 And I think OSC just approved the contract

17 extension till June of 2017.

18 CHAIRWOMAN YOUNG: Okay, so we should

19 be looking forward to information from the

20 study --

21 COMMISSIONER ZEMSKY: Yup.

22 CHAIRWOMAN YOUNG: -- shortly?

23 Thank you. Just switching gears to

24 the Empire State Film Tax Credit, that's a

165

1 $420 million annual tax credit. And the last

2 information that I have is that the film jobs

3 created in New York in 2013 and '14 were

4 mostly in New York City, 84 percent.

5 Do you have any stats about updated

6 information and where some of these

7 film-related jobs are across the state? Are

8 there any upstate? I think there are some,

9 but is there any kind of breakdown that we

10 could have access to?

11 COMMISSIONER ZEMSKY: Yeah, I can get

12 you more detail. But, I mean, the film tax

13 is concentrated downstate, but there's been a

14 lot of growth in the mid-Hudson, in Albany,

15 in Western New York in film production and

16 post-production.

17 The industry is booming in the State

18 of New York. I mean, it's amazing. We've

19 posted the most recent film industry study

20 and, you know, for the last two years, '15,

21 '16, we've got 70,000 jobs associated with

22 the film industry. We've got $12.5 billion

23 in spending, and $4.2 billion in earnings for

24 workers.

166

1 It's a big industry, it's grown, it's

2 doubled, and it's got a good return on

3 investment. And it's not -- obviously,

4 New York City is one of the leading film and

5 production locations in the world. But we

6 also know from all of our experience that

7 it's very sensitive to incentives. When we

8 increased the incentives, we grew the

9 business dramatically.

10 The reason we're looking to extend it

11 is because companies make long-term

12 decisions. They have to know if we're going

13 to be in this business, if we're going to

14 maintain the incentive. It impacts the

15 decisions that they make today.

16 So that's why, you know, we've seen a

17 great impact across the state. Yes, like

18 some industries are more focused in some

19 regions, and this is one, but there has been

20 a lot of growth in some other parts of the

21 state.

22 CHAIRWOMAN YOUNG: So is there a way

23 that we market different locations to film

24 companies? And the reason I ask is that more

167

1 than 30 years ago The Natural, with Robert

2 Redford, was filmed in South Dayton,

3 New York, at the train depot, and also John

4 Candy's Planes, Trains, and Automobiles was

5 partially filmed there. So we haven't had

6 much in the Southern Tier since then.

7 So I was just wondering, is there a

8 way that the state markets different

9 landmarks or potential filming sites?

10 COMMISSIONER ZEMSKY: Yeah, that's a

11 good question. You know, we have a very

12 active division of ESD on film, and I'll go

13 back and see exactly how do we inform every

14 potential film of what the different assets

15 and shooting locations are.

16 You know, oftentimes they're looking

17 for a certain period or a certain landscape

18 or what have you, so -- you know, I don't

19 want to overstate it, I think we do a good

20 job of representing where the different

21 opportunities are across the state. But I'll

22 find out exactly how do we specifically

23 market the Southern Tier, for example.

24 CHAIRWOMAN YOUNG: Thank you. The

168

1 other -- just two quick questions.

2 So the Governor is proposing the

3 Buffalo Billion Squared, which would be

4 another half a billion dollars. And you've

5 spoken to members from the Buffalo region

6 about a vision for Buffalo and some of the

7 money -- as to some of the projects, how the

8 money would be spent.

9 But how much would that be allocated

10 to some of the outlying counties? So, for

11 example, the Southern Tier. You know, I'm

12 sure Senator Gallivan would be interested in

13 Wyoming County, for example.

14 COMMISSIONER ZEMSKY: Right.

15 CHAIRWOMAN YOUNG: So how would that

16 money be spent, and what would the breakdown

17 be?

18 COMMISSIONER ZEMSKY: Yeah. So, I

19 mean, the Buffalo Billion has been focused

20 on, you know, trying to revitalize what was

21 maybe the poorest city in the state. And the

22 way the Regional Council has addressed the

23 fact that Buffalo has had the extra funding

24 is it has prioritized almost all of the

169

1 funding from the REDC process to other

2 counties.

3 So, for example, Chautauqua County has

4 gotten more funding in recent years than --

5 through the REDC process, oftentimes, than

6 any other county in the region, so -- and the

7 DRI was a Jamestown project.

8 And, you know, as you know, there's a

9 big focus on anything we can do to improve

10 the economy in the Southern Tier. We work

11 with you often on economic development

12 opportunities. I saw a new flyer was coming

13 to the Southern Tier, you know, Jamestown

14 DRI, the hopefully repowering of the power

15 plant, ultimately -- you know, on again, off

16 again. Hopefully on again.

17 CHAIRWOMAN YOUNG: It's on again,

18 Howard, so --

19 COMMISSIONER ZEMSKY: Hopefully on

20 again.

21 CHAIRWOMAN YOUNG: -- we need your

22 commitment from Empire State Development.

23 COMMISSIONER ZEMSKY: Absolutely.

24 So we -- you know, a lot of investment

170

1 in the Comedy Center, that's part of the

2 Buffalo Billion, Phase 2. You know, that's

3 been a big priority --

4 ASSEMBLYMAN PERRY: Excuse me, Madam

5 Chair. Excuse me. Is there any way you

6 could turn the sound up? Because the

7 Commissioner is speaking very softly, and the

8 sound isn't projecting.

9 CHAIRWOMAN YOUNG: Is it hard for you

10 to hear, Nick?

11 COMMISSIONER ZEMSKY: Sorry.

12 CHAIRWOMAN YOUNG: Lean in, Howard.

13 COMMISSIONER ZEMSKY: Sorry about

14 that.

15 Yeah, so we've prioritized REDC

16 funding to counties like Chautauqua. We have

17 of course worked hard as part of this

18 transition from SUNY Poly to, you know,

19 working with PhoeniX. You know, the power

20 plant project's been a big priority,

21 Jamestown DRI. Chautauqua has really won

22 more money through the REDC process than

23 really almost any other county.

24 CHAIRWOMAN YOUNG: And we're -- you

171

1 know, obviously we're very, very excited and

2 happy about that.

3 But obviously we need to do more work

4 in the Southern Tier. We deal with rural

5 poverty. And it's very difficult, for

6 example, for somebody from Wellsville to

7 drive to Dunkirk, which could be an hour and

8 a half, two-hour drive each way, in order to

9 have a job at a PhoeniX.

10 So one of the issues that I brought

11 forward to you and the Governor in the past

12 is the New Forest Economy, and I'm hoping

13 that we can get some more traction on this.

14 So there's that.

15 I think -- just one more thing related

16 to the power plant. The transition aid that

17 we put in last year in the budget, the Senate

18 put in $30 million to help communities

19 affected by closures of power plants. And

20 the Empire State Development afterwards came

21 up with some regulations that actually say

22 that the funding will be phased out over a

23 certain amount of years.

24 And I'm hoping we can work together on

172

1 that, because Dunkirk is going to repower the

2 NRG plant, and it will take two years for the

3 project to be finished. And in the meantime,

4 I think we'll be leaving Dunkirk, Chautauqua

5 County, and the school district in a very

6 precarious spot.

7 And I'm sure that there are other

8 communities around the state that are

9 concerned about the same thing, so hopefully

10 we can work together on that issue.

11 Okay, thank you.

12 Senator Boyle. Oh, I'm sorry, no, the

13 Assembly -- I'm sorry, I thought Denny said

14 we were done, but we're not.

15 CHAIRMAN FARRELL: Assemblyman

16 McLaughlin.

17 And we've been joined by Nick Perry.

18 ASSEMBLYMAN McLAUGHLIN: Thank you,

19 Mr. Chairman.

20 Mr. Zemsky, thank you for your

21 testimony. I'll go fairly quickly, because

22 time is short.

23 But you've stated -- I think you'd

24 agree that $53 million has in fact been spent

173

1 on the START-UP NY campaign, is that correct?

2 COMMISSIONER ZEMSKY: I would say that

3 money's been spent on promoting New York

4 State as a place to do business.

5 ASSEMBLYMAN McLAUGHLIN: But not --

6 well, the ads were not START-UP NY specific?

7 COMMISSIONER ZEMSKY: That the ads

8 included reference to START-UP NY, but that

9 for now many years we've been promoting

10 New York State as a place to do business.

11 ASSEMBLYMAN McLAUGHLIN: So it was --

12 yeah, you've said that it was about changing

13 the perception of New York as a friendly

14 place to do business, right? But in fact,

15 $53 million was spent.

16 Do you agree or disagree with the

17 Governor's statement -- that he has

18 repeatedly made, by the way -- that

19 START-UP NY cost nothing?

20 COMMISSIONER ZEMSKY: I think what

21 he's referring to is that START-UP NY, the

22 companies aren't paying any taxes currently.

23 So they're start-up businesses, you're not

24 foregoing revenue that you had been receiving

174

1 in the past. And so in that sense,

2 there's -- you know, it's not a cost in terms

3 of removing what had been some annuity of

4 revenue.

5 ASSEMBLYMAN McLAUGHLIN: Well, that's

6 not completely true, and I'll get back to

7 that in a second.

8 But in fact, his own Division of

9 Budget states that it will cost us

10 $323 million over the first three years of

11 operation. Do you agree with that or not?

12 COMMISSIONER ZEMSKY: I don't -- I'm

13 not familiar enough with it. I don't -- I

14 definitely don't agree with it, based on what

15 I know, no.

16 ASSEMBLYMAN McLAUGHLIN: So we're

17 not -- we're saying that the Division of

18 Budget is not correct in apparently stating

19 that we are losing revenue -- and I guess the

20 Governor's tortured logic is that because the

21 companies weren't here, they weren't paying

22 it to begin with, so therefore it didn't cost

23 anything. However, I don't think there's any

24 doubt that $53 million went to an advertising

175

1 campaign overwhelmingly targeted towards

2 START-UP NY. Do you agree with that or

3 disagree?

4 COMMISSIONER ZEMSKY: I -- we've --

5 I've answered the question.

6 ASSEMBLYMAN McLAUGHLIN: Not really.

7 The GEMx plant in -- the GE GEMx

8 plant, the Empire State Development -- your

9 agency has listed I think a $12.5 million

10 grant to GEMx. Is that -- are you familiar

11 with that grant? It's a GE subsidiary.

12 COMMISSIONER ZEMSKY: Yup.

13 ASSEMBLYMAN McLAUGHLIN: GEMx shut

14 down. Is there any plan or any ability to

15 recoup that $12.5 million?

16 COMMISSIONER ZEMSKY: I think we have

17 recouped some.

18 ASSEMBLYMAN McLAUGHLIN: Some? Okay.

19 Any idea how much?

20 COMMISSIONER ZEMSKY: I don't recall

21 offhand. But yeah, we did.

22 ASSEMBLYMAN McLAUGHLIN: Okay.

23 The original plan for START-UP NY was

24 about $150 million, as I understand it, and

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1 the original projection was for 4,000 jobs.

2 It created 408, after $53 million. It's now

3 in its third iteration. It started as

4 Tax-Free NY. That apparently didn't fly with

5 polling, and it was immediately changed to

6 START-UP NY. And now we're on to the

7 Excelsior Program again.

8 If it's such a success, if START-UP NY

9 was such a success -- and just a week ago,

10 the Governor said that START-UP NY

11 effectively applies to every single one of

12 our economic development programs across the

13 entire state. Well, if that's the case, why

14 are we abandoning the START-UP NY name after

15 spending $53 million? Because anything

16 that's a success you don't abandon, I'd think

17 you agree.

18 COMMISSIONER ZEMSKY: I think it's

19 great that you want to -- you know, that now

20 after, you know, beating me up for a couple

21 of years on START-UP NY, you want to keep

22 START-UP NY.

23 ASSEMBLYMAN McLAUGHLIN: No, I don't

24 want to keep it. I've said it's a disaster

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1 to begin with.

2 COMMISSIONER ZEMSKY: I'm in shock.

3 ASSEMBLYMAN McLAUGHLIN: I'm just

4 wondering why it is that you proclaimed it a

5 success repeatedly here today and, for the

6 past couple years, this Governor has

7 proclaimed it a success all over the place up

8 until a week ago, and now suddenly pulls the

9 plug on it and renames it Excelsior. Which

10 is a complete waste of the $53 million in

11 advertising, because you're no longer going

12 to see START-UP NY.

13 COMMISSIONER ZEMSKY: Okay, I assume

14 that wasn't a question or --

15 ASSEMBLYMAN McLAUGHLIN: No, that's a

16 question. I'm like --

17 COMMISSIONER ZEMSKY: What's the

18 question?

19 ASSEMBLYMAN McLAUGHLIN: -- how do you

20 justify wasting the $53 million and

21 rebranding it to Excelsior Program when

22 you've proclaimed it repeatedly to be a

23 success? By the way -- that's my question.

24 But by the way, even if you had hit your

178

1 numbers of 4,000 jobs after $153 million, I

2 think any analysis of that would find that to

3 be a pathetic number of jobs created -- 4,000

4 after $153 million.

5 COMMISSIONER ZEMSKY: Right.

6 ASSEMBLYMAN McLAUGHLIN: So that set

7 aside, I just don't understand -- my question

8 is, how are you justifying it, how is this

9 Governor justifying rebranding it yet again?

10 COMMISSIONER ZEMSKY: We think it's a

11 simplification of the program and it fits

12 seamlessly with Excelsior, which has a very

13 strong brand here in New York. And you start

14 out in the Excelsior Business Program, you

15 can graduate to the Excelsior Job Program.

16 Excelsior is not exactly a name that

17 doesn't have brand equity. It's been used

18 and it's familiar for hundreds of years.

19 And, you know, it's a reset.

20 And from my standpoint, you know, it's

21 a curious environment, and all of your anger

22 about it -- you know, I lived upstate, I live

23 upstate now for 35 years. I think it's a

24 great opportunity to connect industry with

179

1 academia. I realize that it doesn't have the

2 instant gratification that you demand, but it

3 has the opportunity to be really

4 transformative. And the opportunity to

5 connect business with colleges and

6 universities more aggressively is a really

7 important idea.

8 Facebook had about 10 people after its

9 first year; I suspect you would have called

10 it a failure. So the point is there's a lot

11 that goes into innovation.

12 Companies that were open in New York

13 State for less than one year created

14 175,000 jobs. Companies that were open in

15 New York State for more than 25 years created

16 125,000 jobs a couple of years ago. We are

17 trying to build the innovation ecosystem in

18 the State of New York, and we're trying to

19 connect colleges and universities to industry

20 and give opportunities for college students

21 with those industries. We lost such a

22 disproportionate share of kids that age, it

23 was criminal.

24 And so there are initiatives like

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1 START-UP NY -- and if you don't like the

2 name, the old name or the new name, the idea

3 is important. And the willingness to say

4 what worked -- or didn't work, frankly, in

5 upstate New York forever -- means there's no

6 reason to be so married to the status quo of

7 what worked so poorly for so long.

8 ASSEMBLYMAN McLAUGHLIN: Yeah.

9 COMMISSIONER ZEMSKY: So I'm glad --

10 ASSEMBLYMAN McLAUGHLIN: Right, well

11 it doesn't work.

12 COMMISSIONER ZEMSKY: -- he has the

13 gumption to start a program --

14 ASSEMBLYMAN McLAUGHLIN: What doesn't

15 work is high taxes, high fees --

16 COMMISSIONER ZEMSKY: -- that connects

17 colleges and universities to industry --

18 ASSEMBLYMAN McLAUGHLIN: -- high

19 regulations, the worst tax environment in the

20 United States.

21 So you can spin this however you want.

22 This program was an epic failure. Admitted

23 to, offhandedly, by the fact that you're

24 rebranding it.

181

1 Let me talk about --

2 CHAIRMAN FARRELL: Ah, no.

3 ASSEMBLYMAN McLAUGHLIN: Let me talk

4 about --

5 CHAIRMAN FARRELL: Mr. McLaughlin,

6 your time has run out. Thank you --

7 ASSEMBLYMAN McLAUGHLIN: Give me one

8 more question, Mr. Chairman, if you would.

9 CHAIRMAN FARRELL: No, no, no. We

10 haven't given it to anybody else.

11 CHAIRWOMAN YOUNG: Thank you.

12 Senator Boyle.

13 SENATOR BOYLE: Thank you, Chairwoman.

14 And thank you again, Commissioner, for

15 coming here today and for lending your

16 business expertise to our government. We

17 appreciate your service.

18 A quick point. One of the things that

19 you're hearing over and over again is a

20 frustration, I think, on the part of

21 legislators about the lack of transparency

22 and openness, or what we perceive as that.

23 COMMISSIONER ZEMSKY: Right.

24 SENATOR BOYLE: And we're not talking

182

1 about -- whether it's Regional Economic

2 Development Councils or others, about going

3 back -- some of the Governor's aides will no

4 doubt say that those corrupt legislators just

5 want to go back to the old days of pork.

6 We don't. We understand that. That's

7 not the way to do it. However, we would like

8 more of a say, obviously, in how our economic

9 development money is spent.

10 And one of the things I would say --

11 from your background as a businessperson, you

12 were talking about information, how important

13 it is to make business decisions. We have no

14 master list, if you will, of economic

15 development programs. ESD has some, SUNY,

16 state authorities. If we had one list, open

17 and transparent, about all the projects --

18 this is the number of jobs they're creating,

19 this is the intent -- so everyone can look at

20 it, and we had a matrix -- and businesspeople

21 like yourself make those decisions based on

22 this information, what's working, what's not

23 working.

24 You know, we can all disagree on some

183

1 things, but if we have different ways of

2 comparing apples and apples and oranges and

3 oranges, that's difficult to make.

4 So I would hope you would consider

5 doing that, having some proposal to put it

6 all out there with a database of deals, if

7 you will, or a master list of projects.

8 COMMISSIONER ZEMSKY: Right. And

9 we -- the REDCs have -- you can find like

10 5,000 projects on that website.

11 CHAIRWOMAN YOUNG: Thank you.

12 Do you have any? I think we're all

13 set.

14 So thank you so much, Mr. Zemsky, for

15 being here today --

16 COMMISSIONER ZEMSKY: Okay, thank you.

17 Appreciate it. Thanks for everyone's time.

18 CHAIRWOMAN YOUNG: -- for being

19 forthcoming and giving the answers. So we

20 truly appreciate your service to the state

21 and everything that you do. So thank you.

22 COMMISSIONER ZEMSKY: Thank you.

23 Thank you very much.

24 CHAIRMAN FARRELL: Thank you.

184

1 CHAIRWOMAN YOUNG: Our next speaker is

2 Commissioner RoAnn Destito, New York State

3 Office of General Services, OGS.

4 While we're getting settled, I do want

5 to read into the record comments by New York

6 State Senator John J. Bonacic before the

7 Economic Development Joint Budget Hearing.

8 Unfortunately, Senator Bonacic was not able

9 to join us today, and I'll put his statement

10 into the record.

11 "I unfortunately am unable to attend

12 today's hearing due to pressing matters in my

13 district. However, I would like to share the

14 following concerns regarding economic

15 development in New York State, specifically

16 related to the 33,000 direct and indirect

17 jobs attributable to the horse racing

18 industry.

19 "It is very fitting that we are having

20 the Economic Development Joint Budget Hearing

21 on the same day as the opening of del Lago

22 Casino, which is expected to create jobs and

23 spur economic development in upstate

24 New York. However, we must now fully address

185

1 the very real impact of the cannibalization

2 of video lottery terminal revenues at

3 Finger Lakes by a new gaming facility less

4 than 27 miles away. In their gaming facility

5 license application, del Lago's own market

6 study included an expected cannibalization of

7 21 percent of Finger Lakes' revenue, and

8 other estimates have put this expected

9 cannibalization rate significantly higher.

10 "This will lead to a corresponding

11 decrease in the video lottery terminal

12 revenue streams, which are currently

13 dedicated to fund purse support payments at

14 Finger Lakes and contributions to the

15 New York Thoroughbred Breeding and

16 Development Fund. Without a solution to

17 address this crisis, we are putting at risk

18 the future of the New York racing industry

19 and the hundreds of jobs that support

20 thoroughbred racing at Finger Lakes.

21 "Additionally, video lottery terminal

22 revenues for purse support and breeding fund

23 payments generated by Resorts World at

24 Aqueduct have been impacted by incongruent

186

1 distribution formulas, which has led to a

2 reduction in funds available for the New York

3 Thoroughbred Breeding and Development Fund

4 and purse support payments at NYRA tracks.

5 This is another issue which demands our

6 immediate attention and action to address it

7 in the budget.

8 "On the issue of NYRA privatization

9 itself, the Governor has provided us with a

10 workable road map, and I believe, through

11 negotiation, we will be able to come to a

12 workable solution. However, I would like to

13 stress the importance I feel for both the

14 breeders and horsemen to have a full voting

15 representative on the new NYRA Board.

16 Additionally, there is a need for increased

17 clarity and specificity for the circumstances

18 under which video lottery terminal revenues

19 to NYRA will be subject to impoundment by the

20 Franchise Oversight Board, combined with the

21 need for a greater-than-simple majority vote

22 to do so."

23 Those are the personal views of

24 Senator Bonacic. He asked that we read them

187

1 into the record today. I believe that the

2 racing proposals will be examined under the

3 Taxation budget hearing that's upcoming, but

4 thank you for your indulgence.

5 Commissioner, hi.

6 COMMISSIONER DESTITO: Hi, Senator,

7 how are you?

8 CHAIRWOMAN YOUNG: I'm great. Good to

9 see you.

10 COMMISSIONER DESTITO: Good to see

11 you.

12 Assemblyman --

13 CHAIRMAN FARRELL: Commissioner.

14 COMMISSIONER DESTITO: -- Chairman.

15 Do you want me to start?

16 CHAIRMAN FARRELL: Yes.

17 COMMISSIONER DESTITO: Okay.

18 Good morning. I'm RoAnn Destito,

19 commissioner of the Office of General

20 Services, and I'd like to thank Senator

21 Young, chair of the Senate Finance Committee,

22 and Assemblymember Denny Farrell, chair of

23 the Assembly Ways and Means Committee, for

24 inviting me to testify today. I would also

188

1 like to thank the members of the committee.

2 Thank you.

3 From operating buildings to

4 construction management, establishing

5 procurement contracts, and conducting tours

6 of the Capitol, OGS is truly a diverse

7 organization. We lead the way on a number of

8 the Governor's enterprise initiatives that

9 increase efficiencies in state government,

10 including our new Business Services Center,

11 Real Estate Center, and Procurement Services.

12 I'm glad to be here today to talk

13 about the progress of the Division of

14 Service-Disabled Veterans' Business

15 Development at OGS, and I'll refer to it as

16 "the division." Before I get much further,

17 I'd like to point out and apologize that the

18 annual report due on December 31st was

19 several weeks late, but posted on our website

20 early last week. And it's www.OGS.ny.gov.

21 As a member of the New York State

22 Assembly for 19 years before becoming OGS

23 commissioner, I was a strong advocate for the

24 veterans community. This is why I am so

189

1 honored that Governor Cuomo signed the

2 Service-Disabled Veteran-Owned Business Act

3 into law in May 2014 and made OGS the agency

4 from which it would be managed.

5 Today I am pleased to tell you that

6 more than $33 million in state contracts have

7 been awarded to businesses certified by OGS.

8 As of December 31, 2016, a total of

9 284 businesses have been certified. And

10 today that number is hovering at 300.

11 When Governor Cuomo signed this act

12 into law, he sent a strong message about his

13 commitment to veterans, and we have achieved

14 a high level of success already. New York

15 State is certifying businesses at a

16 nation-leading pace, and in fewer than two

17 years we are already third of the seven

18 states that have similar programs. Only

19 California, which has been doing this since

20 1989, and Maryland, which started its program

21 in 2010, have more certified businesses.

22 The number of state-certified

23 service-disabled veteran businesses continues

24 to grow due to the focused efforts of the

190

1 program staff, who are all veterans

2 themselves. They conduct in-depth due

3 diligence to make sure that all businesses

4 certified are legitimately controlled by

5 qualifying service-disabled veterans and are

6 capable of performing on state contracts.

7 The division places a high priority on

8 an efficient, thorough, and timely

9 certification process. In 2016, 112

10 businesses were certified in an average time

11 of 39 working days, with 88 percent receiving

12 a face-to-face visit by the division's

13 executive director prior to certification.

14 The list of businesses is available on our

15 website and is updated regularly.

16 The division is taking steps to

17 increase the pool of state-certified

18 businesses to meet the statewide 6 percent

19 goal by taking a two-pronged approach.

20 First, by focusing efforts on identifying and

21 certifying existing service-disabled

22 veteran-owned businesses (SDVOBs) and,

23 second, by working with strategic partners to

24 help service-disabled veterans start new

191

1 businesses.

2 During its first fiscal year,

3 2015-2016, the division began its work with a

4 pilot group of six agencies and four

5 authorities. The pilot was an extreme

6 success. As a result of these achievements,

7 the expansion of the program statewide was

8 announced in December 2015 for the fiscal

9 year 2016-2017.

10 The first step in the statewide

11 implementation was to receive goal plans from

12 all participating agencies and authorities

13 detailing their action plan to work toward

14 the 6 percent utilization goal. Through the

15 end of the second quarter of 2016-2017, 49

16 out of the 97 agencies and authorities

17 executed more than $9.3 million in contracts

18 with state-certified businesses, including

19 more than $6.6 million in disbursements. As

20 a result, by September 30, 2016,

21 94 businesses -- more than 33 percent of all

22 state-certified firms -- had been awarded a

23 state contract.

24 The division is actively engaged in

192

1 educating agency and authority staff.

2 Through classes, webinars, and matchmaking

3 events, the division is providing agency and

4 authority staff with the tools and resources

5 to help them meet their goals.

6 The Statewide Financial System has

7 been updated to include New York State-

8 certified status as part of the vendor file,

9 and a new prompt has been added to all

10 document-listing reports in AnalyzeNY

11 Financials, which allows users to filter data

12 based on New York State-certified SDVOB

13 status. These updates will allow reports to

14 be generated within AnalyzeNY Financials to

15 assist agencies in completing their quarterly

16 SDVOB activity reports.

17 OSC performed an audit of the

18 implementation of the program for the period

19 from June 2014 through December 2015 and

20 issued its report in September 2016. The

21 headline for the news release from the Office

22 of the New York State Comptroller dated

23 September 7, 2016, was "OGS Veteran-Owned

24 Business Program Off to Good Start."

193

1 The OSC audit report states: "The

2 division has made substantial progress

3 carrying out its responsibilities to

4 implement the program during the 18 months

5 since the act was created."

6 During the course of the audit, OSC

7 recognized the division's nation-leading

8 certification growth rate and stated in the

9 report that "the Division instituted a

10 targeted marketing strategy to attract SDVOB

11 applications, and coordinated with various

12 state agencies and authorities to help them

13 understand the program and to encourage the

14 use of certified SDVOBs."

15 The division will continue to take

16 steps to increase the pool of certified

17 service-disabled veteran-owned businesses,

18 educate them on the best ways to secure

19 contracts, and assist agencies and

20 authorities in identifying and contracting

21 with these businesses. These steps include

22 installing a new online database, building

23 better reporting systems, creating additional

24 matching opportunities, continuing education

194

1 for businesses and agencies, promoting

2 contract segmenting and set-asides, and more.

3 We will be right there trying to help them

4 make their goals and get more people

5 involved.

6 We would be happy to partner with the

7 Legislature at events in your communities to

8 help educate veterans about the certification

9 process and bring certified businesses and

10 the state together.

11 OGS is proud to report on the

12 tremendous success that the division has

13 achieved in the 2 1/2 years since the passage

14 of the act. Thank you for your time, and I'd

15 be glad to answer any questions that you

16 might have.

17 CHAIRWOMAN YOUNG: Thank you,

18 Commissioner.

19 Senator Croci has a question.

20 COMMISSIONER DESTITO: Okay.

21 SENATOR CROCI: Commissioner, how are

22 you?

23 COMMISSIONER DESTITO: Hi, Senator

24 Croci, how are you?

195

1 SENATOR CROCI: I'm very well.

2 Thank you again for your call this

3 morning. I understand -- I have read the

4 Comptroller's report, and of the state

5 agencies that have been audited in the last

6 year, yours seems to be one of the best. So

7 I compliment you on that.

8 COMMISSIONER DESTITO: Thank you.

9 We've had about five audits this past year,

10 and we've come through with good reports.

11 Thank you.

12 SENATOR CROCI: Unfortunately, the

13 reports are not as good for some of the other

14 agencies. And one of the consistent themes

15 in the Comptroller's reporting is

16 transparency and accountability and

17 cooperation with his auditors.

18 I did receive your report, and thank

19 you for telling us that it did come in late.

20 I wanted to know, was the lateness of the

21 report due to other agencies failing to give

22 you the information that you requested?

23 COMMISSIONER DESTITO: The report --

24 we had to -- we have three members, as I

196

1 stated, in this division. They're all

2 veterans. They work very hard. I have two

3 of them with me today.

4 I can tell you that we also had the

5 January 15th deadline for the utilization

6 goals and the plans coming in at the same

7 time, so it was just a matter of really work

8 and bandwidth for getting the work done.

9 SENATOR CROCI: So all of the

10 departments and agencies beneath you who had

11 to provide you with their materials did so in

12 a timely manner?

13 COMMISSIONER DESTITO: Yes. And I

14 can't talk off the top of my head as far as

15 who had it in on time or who didn't, but we

16 were in the process of doing both the new

17 plans as well as the report for

18 December 31st. So we apologize. We were

19 25 days late. We're very sorry, and we will

20 try to do better the next time.

21 SENATOR CROCI: The report itself --

22 curiously, one of the departments or agencies

23 that the Comptroller did cite for being less

24 than transparent, ITS, was in your previous

197

1 two reports but somehow fell off the most

2 recent report that you referenced. So I'm

3 wondering why ITS is not on there, and what

4 is their compliance rate? The commissioner

5 testified yesterday. It was ambiguous. But

6 I would very much like to know why they're

7 not on this report and what percentage rate

8 of compliance they're at.

9 COMMISSIONER DESTITO: I will get that

10 information to you, Senator.

11 SENATOR CROCI: You're going to

12 provide it to the committee.

13 COMMISSIONER DESTITO: Excuse me?

14 SENATOR CROCI: You're going to

15 provide the information to the committee?

16 Thank you.

17 COMMISSIONER DESTITO: I will see why

18 it wasn't in there, yes. Thank you. I'm

19 sorry.

20 SENATOR CROCI: Okay. And then as you

21 go through the list on the report of all the

22 agencies that have complied, whereas I think

23 progress is a good thing, there are a lot of

24 agencies at 0, 0.12, 1.72, 0.28. There are

198

1 only a few that are completely compliant in

2 the entire State of New York.

3 I think the intent of the

4 Service-Disabled Veteran-Owned Business Act

5 of 2014 -- and I wasn't here to see that go

6 through the steps -- was to send a message to

7 veterans all over the country that if you

8 come to New York State, whether you're from

9 here or you want to relocate to here, this is

10 a place that recognizes the value of your

11 service, the value of your experience --

12 which for a lot of veterans is unique. It's

13 tough to write what you do in the military on

14 a civilian resume.

15 But this sluggish and anemic growth

16 and compliance rate is something that I think

17 the departments and agencies -- and you're

18 just the reporting agency. And OGS is

19 compliant, and you exceeded the 6 percent.

20 But some of your colleagues in the other

21 departments and agencies are not.

22 So what I would ask is what measures

23 are being taken to ensure that when you come

24 back or the other commissioners come back

199

1 next year, that we see 6 percent, 6 percent,

2 6 percent, 10 percent, 100 percent

3 compliance?

4 COMMISSIONER DESTITO: Well, first of

5 all, let me state that from the inception of

6 the program, the division has received

7 361 applications which resulted in 284

8 certifications. And as I said, we're

9 hovering at about 300 because I just signed

10 some more certificates. But we feel that

11 through the end of the second quarter of

12 2016-2017, 49 of the 97 agencies and

13 authorities executed more than $9.3 million

14 in contracts with these businesses, including

15 more than $6.6 million in disbursements. And

16 as a result, 94 businesses -- more than

17 33 percent of the state-certified firms --

18 have been awarded a contract.

19 But you also asked what are we doing

20 next. We're installing a new database which

21 will have a robust, searchable public

22 database for the service-disabled

23 veteran-owned businesses. And it will

24 replace the current spreadsheet that we have

200

1 and will allow agency and authority personnel

2 to efficiently search and research for the

3 businesses that meet their specific needs.

4 We're going to build reporting

5 systems. We really strive to improve agency

6 compliance. We understand that you're

7 looking at it, we're looking at it. You

8 know, we're all trying to work very well

9 together and help the agencies with their

10 discretionary spend and show them where the

11 businesses are available to provide services

12 and commodities and the like.

13 So we are really creating additional

14 matching opportunities. The staff goes out

15 all the time. We've worked with Nassau

16 County to help them implement their program.

17 They use our list, and they find it very

18 effective along with what they're doing down

19 in Nassau County.

20 So we're also providing continuing

21 education for the businesses and agency and

22 authority personnel. We're identifying

23 additional resources. So we're seeking out

24 third-party resources to promote the SDVOB

201

1 utilization and assistance, and we're

2 promoting contract segmenting and set-asides.

3 We want everybody to understand the

4 segmenting of contracts so that some

5 contracts might be able to be pulled out of

6 larger contracts so that the veteran-owned

7 businesses will be able to provide the work,

8 where they might not be able to bid on the

9 larger project.

10 And we're increasing the national

11 service-disabled veteran-owned businesses in

12 a national inclusion. We'll promote the

13 New York State program to all of the SDVOB

14 groups to encourage them to develop the

15 sufficient New York State presence required

16 for certification. Because we have a

17 requirement, as you know, to be one year in

18 New York State.

19 SENATOR CROCI: I'm out of time. I'll

20 just end with this question. I'm looking at

21 Empire State Development, $635 million in

22 agency non-exempt and non-excluded

23 disbursements made. Zero percent went to

24 service-disabled veteran-owned businesses.

202

1 ITS -- and this is the last report that I

2 have, because IT is not on this current

3 report -- $75 million in disbursements;

4 0.0 percent went to -- and those are areas

5 where you would think the military skill set

6 easily translates into those fields. And of

7 course a lot of us who are veterans know that

8 there are those businesses out there.

9 I just find it very difficult to

10 believe that this report doesn't, first of

11 all, have ITS in it -- as an oversight, is it

12 some mistake, or was it deliberately held

13 back because it again --

14 COMMISSIONER DESTITO: No. We'll

15 continue --

16 SENATOR CROCI: -- shows a low

17 percentage?

18 COMMISSIONER DESTITO: We will

19 continue to work with ITS. We will get you

20 information.

21 And again, I think that installing the

22 database and building better reporting

23 systems -- is a brand-new program for our

24 agency as well as the services that we

203

1 provide from ITS. So we are paying for a

2 database search engine to be placed in our

3 agency. So I think that will help resolve

4 the problem.

5 SENATOR CROCI: Well, I appreciate

6 that, because I don't want our veterans to

7 question our commitment to them and to their

8 families, and I certainly don't want our

9 veterans to question the Governor's

10 commitment to them when he signed this into

11 law.

12 COMMISSIONER DESTITO: I can assure

13 you that Governor Cuomo and myself

14 personally, we share your same sentiment with

15 regard to this program, the veteran

16 businesses and their families all across the

17 State of New York.

18 SENATOR CROCI: Thank you.

19 COMMISSIONER DESTITO: And I can tell

20 you -- I also have to say I will speak for my

21 division director. He is sincerely dedicated

22 and works very hard on this program to meet

23 everyone and to go out there and search for

24 the businesses.

204

1 SENATOR CROCI: Thank you. And I

2 thank you all for your hard work in this

3 area.

4 COMMISSIONER DESTITO: Thank you.

5 SENATOR CROCI: Thank you, Madam

6 Chair.

7 CHAIRWOMAN YOUNG: Thank you.

8 Chairman Farrell?

9 CHAIRMAN FARRELL: Thank you.

10 We've been joined by Vivian Cook,

11 Assemblywoman.

12 And first to question, Assemblywoman

13 Woerner.

14 COMMISSIONER DESTITO: Hi.

15 ASSEMBLYWOMAN WOERNER: Hi,

16 Commissioner. Thank you so much.

17 Congratulations on a successful pilot.

18 COMMISSIONER DESTITO: Thank you.

19 ASSEMBLYWOMAN WOERNER: My question

20 has to do with the future. So it has been

21 successful on a relatively small scale within

22 the state. Do you have thoughts about

23 expanding this program beyond the state

24 border to counties, municipalities, school

205

1 districts, BOCES who might also be able to

2 take advantage of the highly skilled

3 service-disabled veterans businesses that we

4 have, and who will then have a track record

5 of success through state contracts?

6 COMMISSIONER DESTITO: Thank you for

7 your question. We already work with some of

8 the local governments. They use our -- they

9 look to us for the certified businesses.

10 And as I stated, Nassau County has

11 really partnered with us to establish and

12 expand their program. So we are out there

13 talking at as many match-making events -- we

14 invite locals to our events. And we'd love

15 to work with any of your local governments,

16 we'd love to match-make with you in your

17 districts all over the state, because I think

18 you know where the businesses are in your

19 district and I think you'd be very helpful.

20 Ken Williams is our director. I'll

21 have him raise his hand. He is very good,

22 and he will come out and talk with whoever

23 you would like him to. And especially local

24 governments, because we'd love to share and

206

1 collaborate.

2 ASSEMBLYWOMAN WOERNER: Fantastic.

3 Thank you very much.

4 COMMISSIONER DESTITO: Thank you.

5 CHAIRWOMAN YOUNG: Okay, thank you.

6 Senator Savino, do you have questions?

7 SENATOR SAVINO: Just one. Thank you,

8 Senator Young.

9 Good afternoon, Commissioner.

10 COMMISSIONER DESTITO: How are you,

11 Senator?

12 SENATOR SAVINO: How are you?

13 So I just want to ask a question, and

14 I ask you this every year, but it seems to be

15 getting even smaller. So the Concourse,

16 we're losing business on the Concourse. The

17 florists are gone, the candy stores are gone,

18 even the banks are gone. And I'm just

19 somewhat confused. It's like New York is

20 open for business everywhere, apparently, but

21 the Empire Plaza.

22 So what's happening on the Concourse,

23 and why don't we have any business? We have

24 a captive audience. I would think we should

207

1 be able to --

2 COMMISSIONER DESTITO: Well, first of

3 all, those were all decisions made by the

4 businesses themselves. As you know, we can't

5 require people to stay in locations.

6 We do have banks, we have credit

7 unions. We have expanded our food

8 specialties. Our restaurants have expanded.

9 We've been very successful on that level.

10 We are currently in the process,

11 through our Real Estate Center, working with

12 an outside broker to look at retail and bring

13 more retail services into the Concourse. But

14 both the candy, the cards and the floral have

15 all made decisions, business decisions to

16 leave.

17 SENATOR SAVINO: Well, certainly, you

18 know, I understand business decisions. But I

19 just think that working with --

20 COMMISSIONER DESTITO: Retirement was

21 one of -- two of them retired.

22 SENATOR SAVINO: But it would just

23 seem that we should do more to promote the

24 Concourse, I think. Because it's not just

208

1 those of us who work here who would

2 appreciate being able to, I don't know,

3 purchase a pair of stockings if we get a run

4 one day. But even in the neighborhood around

5 here, people would come --

6 COMMISSIONER DESTITO: Thank you,

7 Senator Savino. We agree with you

8 wholeheartedly. And we're active and

9 hopefully we'll be able to demonstrate to you

10 through our Real Estate Center that we will

11 be adding more retail establishments.

12 SENATOR SAVINO: Okay. And finally,

13 this might be -- it's not necessarily

14 budget-related. Maybe it's a pet peeve of

15 mine because my office is on the third floor.

16 But every day at 5 o'clock the guys leave out

17 the third-floor exit onto State Street. And

18 for whatever reason, there's no one there to

19 man it, and people just walk right through

20 it, and the alarm will ring and ring and

21 ring. It will go on for hours before someone

22 comes and turns it off --

23 COMMISSIONER DESTITO: Okay, thank

24 you.

209

1 SENATOR SAVINO: -- despite the phone

2 calls. Again, it's not budget-related, but

3 it just drives us crazy on the third floor.

4 COMMISSIONER DESTITO: Senator Savino,

5 we'll take a look at it and make sure we

6 address that issue.

7 SENATOR SAVINO: Okay, thank you.

8 COMMISSIONER DESTITO: You're welcome.

9 CHAIRWOMAN YOUNG: Commissioner, I

10 just have a couple of questions.

11 COMMISSIONER DESTITO: Okay, sure.

12 CHAIRWOMAN YOUNG: Under the Executive

13 Budget proposal, there would be the creation

14 of a Chief Procurement Officer who would

15 serve as the principal officer tasked with

16 oversight of state procurements. And the

17 duties would include oversight of the

18 integrity and uniformity of procurement

19 practices across the state, disclosing

20 reportable matters to the State Inspector

21 General, ensuring state procurement staff are

22 prepared and positioned to conduct effective

23 and ethical procurements, and serving as a

24 member of the Procurement Council.

210

1 I believe that's the language that's

2 included.

3 COMMISSIONER DESTITO: Yes.

4 CHAIRWOMAN YOUNG: So what would the

5 process for oversight for the state

6 procurement contracts be? How would it

7 actually work?

8 COMMISSIONER DESTITO: Well, first of

9 all, I'm supportive of the Governor's

10 proposal to create a position of Chief

11 Procurement Officer.

12 But the official would have oversight

13 of all procurements in the state. We just do

14 centralized contracts and ITS contracts at

15 OGS. So it would be -- currently there is no

16 one that oversees all procurement throughout

17 the state.

18 I have a procurement officer that

19 really just does what we're responsible for,

20 and we are bound by State Finance Law in our

21 procurements.

22 So I believe that this person filling

23 this role would really help ensure that the

24 best practices of procurement are being

211

1 applied consistently throughout all of the

2 procurement statewide. So I think that's

3 what the Governor is trying to achieve, that

4 all of the procurements and the best

5 practices that we use at OGS and throughout

6 the State of New York agencies are

7 consistently applied all over.

8 CHAIRWOMAN YOUNG: So, for example,

9 would this procurement officer oversee the

10 Comptroller's office or the Attorney

11 General's --

12 COMMISSIONER DESTITO: No, not the

13 Comptroller's office, I don't believe. It

14 would be executive -- I believe it says

15 executive agencies and public authorities.

16 CHAIRWOMAN YOUNG: Okay. So strictly

17 within the executive branch and the --

18 gotcha, okay. Thank you.

19 Just a quick question about the flood

20 damage and recovery proposal that the

21 Governor has. It would require OGS to make a

22 payment in an amount no less than coverage

23 limits of a standard flood insurance policy

24 when a state-owned structure and its

212

1 contents are damaged as a result of a flood.

2 And payments would only be made on damages

3 incurred on state-owned structures in flood

4 plains designated by the Federal Insurance

5 Administrator.

6 So the Governor is saying that the

7 legislation is necessary to maintain New York

8 State's exemption from the requirement of

9 purchasing flood insurance on state-owned

10 structures and its contents within these

11 federally designated areas.

12 So what would the term of the policy

13 be, commissioner?

14 COMMISSIONER DESTITO: The policy --

15 we are not the ones that will administer it.

16 We're going to purchase it, because we have

17 the Bureau of Insurance under our agency.

18 We are working with the Division of

19 Homeland Security and Emergency Services, who

20 works with the federal government. And I

21 believe one of the reasons for having us

22 enter into this arrangement is a federal

23 requirement that we have this type of policy.

24 CHAIRWOMAN YOUNG: Thank you. So this

213

1 is a four-year policy?

2 COMMISSIONER DESTITO: Yes.

3 CHAIRWOMAN YOUNG: And so what would

4 the fiscal impact on the state be?

5 COMMISSIONER DESTITO: Excuse me?

6 CHAIRWOMAN YOUNG: Over those four

7 years, what would the fiscal impact on the

8 state be? How much money would it --

9 COMMISSIONER DESTITO: The dollars --

10 I will have to get back to you on the exact

11 dollar amount that we will be paying.

12 Because I don't believe we've gone out.

13 CHAIRWOMAN YOUNG: Okay. That would

14 be helpful to get that.

15 I'm also curious about -- there are

16 some changes regarding the transfer of

17 certain Division of Military and Naval

18 Affairs employees to the Office of General

19 Services as part of the centralization of

20 certain human resource functions. I don't

21 know -- did you discuss that, Senator?

22 SENATOR CROCI: No.

23 CHAIRWOMAN YOUNG: I'm just asking

24 because he's Division of Military Affairs.

214

1 But how many DMNA employees would be

2 transferred to OGS?

3 COMMISSIONER DESTITO: We don't have a

4 number. It's in conjunction with our

5 Business Service Center, where we will be

6 taking -- we've done this throughout the

7 state, in all of the state agencies. It's a

8 transfer of function. And it's only those

9 employees that are substantially engaged in

10 either financial transactions or HR

11 transactions.

12 And we need this authorization to

13 allow us to do that so we can support DMNA in

14 the HR and finance area. These are the

15 back-office operations. It has nothing to do

16 with the strategic work of DMNA or their

17 subject matter work. It has to do with their

18 HR functions as well as their financial

19 transactions. So it's all related to the

20 Business Service Center, not anything to do

21 with what they do as an organization.

22 CHAIRWOMAN YOUNG: Okay. Thank you.

23 COMMISSIONER DESTITO: You're welcome.

24 CHAIRWOMAN YOUNG: Anybody else?

215

1 Senator Krueger.

2 SENATOR KRUEGER: Good afternoon.

3 COMMISSIONER DESTITO: Good afternoon,

4 Senator Krueger.

5 SENATOR KRUEGER: Just following up on

6 Senator Young's question about the Chief

7 Procurement Officer, so that would be

8 reviewing contracts in advance of letting

9 them?

10 COMMISSIONER DESTITO: Yes, I believe

11 they would be reviewing contracts, not so

12 much -- they would be reviewing for the way

13 in which it was done. You know, the best

14 practices, whether it's an RFP, an RFI, all

15 of the different ways that we can go out to

16 procure services and commodities and design

17 and construction.

18 So it would be in oversight. Not that

19 this Chief Procurement Officer would be doing

20 it, they would be oversight. And they would

21 be able to review, at any time, procurement

22 and I guess refer in a related manner to the

23 appropriate organization.

24 SENATOR KRUEGER: And who would they

216

1 report to?

2 COMMISSIONER DESTITO: Actually I

3 believe it's proposed to be under the OGS

4 commissioner.

5 And I would say that that's probably

6 appropriate, because we are where a lot of

7 the procurements are done, especially the

8 centralized contracts. So we have the staff,

9 and we have the best practices that we do,

10 and we follow State Finance Law. So we would

11 be probably working with the Chief

12 Procurement Officer, and that person would

13 also be part of our Procurement Council.

14 SENATOR KRUEGER: So the Governor has

15 proposed it because he thinks something

16 hasn't been working right. Can you give me

17 an example or two of what hasn't been working

18 right?

19 COMMISSIONER DESTITO: I believe that

20 he just wants to see that all

21 procurements are being done consistently and

22 with the same best practices that we'd use

23 and that everyone does across the State of

24 New York. I don't have an example of what he

217

1 was thinking.

2 SENATOR KRUEGER: And is the budget

3 for just one person or a new unit?

4 COMMISSIONER DESTITO: No, it's just

5 one person. Because I have a full

6 procurement office.

7 SENATOR KRUEGER: And the Governor has

8 also proposed a Buy American program within

9 the budget.

10 COMMISSIONER DESTITO: Correct.

11 SENATOR KRUEGER: Can you tell me

12 OGS's role either in overseeing the whole

13 program and/or how you're going to implement

14 for the procurement you do through OGS?

15 COMMISSIONER DESTITO: The Buy

16 American, first of all, is proposing an

17 expansion of New York State's Buy American

18 legislation. And as you know, it's for

19 procurements of $100,000 or more.

20 We currently already use American

21 steel in our construction projects. But this

22 is really to -- it really will not

23 significantly increase the cost of

24 procurements. We believe that we have

218

1 manufacturers, not only in New York but in

2 America, that we should be able to use for

3 not just design and construction and not just

4 construction projects, but for commodities

5 and, you know, products that we use in the

6 State of New York.

7 So we believe that manufacturing --

8 each year New York State does spend billions

9 of dollars on the procurement of goods and

10 services, and it's our responsibility here in

11 New York to reinvest our tax dollars in not

12 only New York products, but buy American.

13 So we don't believe it will be a

14 difficult implementation.

15 SENATOR KRUEGER: I support the

16 program. I'm very glad to see him expanding

17 it.

18 COMMISSIONER DESTITO: Yes. No, we

19 don't have a problem.

20 SENATOR KRUEGER: Do you do -- have

21 you done any evaluation now of what

22 percentage of OGS's purchases aren't of

23 American products?

24 COMMISSIONER DESTITO: I can tell you

219

1 that our steel is in our construction

2 projects, those that we build from scratch.

3 Although we don't do a lot of building of new

4 buildings, we do a lot of renovation, gut

5 rehabs and that type of thing.

6 But I don't know exactly. I know that

7 the Buy American is going to allow for goods

8 with up to 40 percent of the component parts

9 not of domestic origin. So I want you to

10 also know that that would be helpful. And I

11 believe that transit buses and subway cars

12 and all of the like, I think that will help

13 many of the manufacturers in Northern

14 New York when it comes to our purchasing.

15 So I don't have a number for you

16 because we don't make all the purchases on

17 behalf of all the state agencies. We only

18 know our centralized contracts.

19 SENATOR KRUEGER: But you targeted

20 exactly a question I was going to ask you,

21 because I'm from New York City, we buy subway

22 cars and buses. And we were always very

23 happy that they were being made in upstate

24 New York. But some of those companies moved

220

1 their facilities across the border to Canada.

2 So under this -- your understanding is that

3 the MTA would also be obligated to follow

4 there?

5 COMMISSIONER DESTITO: Correct, yes.

6 SENATOR KRUEGER: And somebody's going

7 to have to figure out how we get our subway

8 cars built.

9 COMMISSIONER DESTITO: Right. Well,

10 Bombardier is in Northern New York, and I

11 believe that they are building subways cars.

12 I've been there --

13 SENATOR KRUEGER: So maybe it's -- is

14 it the bus companies that went to Canada?

15 COMMISSIONER DESTITO: It's the bus

16 companies, I believe. But they also --

17 SENATOR KRUEGER: So we're okay on the

18 subway cars, but we might have a new issue

19 with the buses.

20 COMMISSIONER DESTITO: Right. So yes.

21 SENATOR KRUEGER: Thank you very much.

22 COMMISSIONER DESTITO: You're very

23 welcome. Thank you.

24 CHAIRWOMAN YOUNG: Thank you.

221

1 Chairman Farrell.

2 CHAIRMAN FARRELL: Mr. O'Donnell.

3 ASSEMBLYMAN O'DONNELL: Good

4 afternoon, RoAnn. Very nice to see you.

5 COMMISSIONER DESTITO: Hi.

6 Assemblymember O'Donnell, thank you.

7 ASSEMBLYMAN O'DONNELL: I'm sorry I

8 missed the beginning of your testimony, I was

9 upstairs. But you seemed to be very thorough

10 in providing us a lot of facts, and I

11 appreciate that a great deal.

12 Maybe you missed it; when the previous

13 commissioner was testifying, I had some

14 questions about the signs along the highway,

15 the I Love New York signs, which may or may

16 not be a violation of federal law. And I

17 asked him whether or not he had anything to

18 do with the procurement of those signs, and

19 he told me he didn't know where they went.

20 But I wasn't asking about the placement of

21 the signs, I was talking about the purchasing

22 of the signs. Did your agency have --

23 COMMISSIONER DESTITO: No.

24 ASSEMBLYMAN O'DONNELL: -- anything to

222

1 do with the purchasing of the allegedly maybe

2 illegal signs?

3 COMMISSIONER DESTITO: No, we did not.

4 ASSEMBLYMAN O'DONNELL: And do you

5 know who did?

6 COMMISSIONER DESTITO: I don't know.

7 I would believe that it would be the

8 appropriate transportation agency where they

9 were placed.

10 ASSEMBLYMAN O'DONNELL: Well, I'm

11 going to call them the Lady Bird signs from

12 now on, so we know what we were talking

13 about.

14 Thank you very much.

15 COMMISSIONER DESTITO: You're welcome.

16 Thank you.

17 CHAIRMAN FARRELL: Senator?

18 CHAIRWOMAN YOUNG: Anyone else?

19 Well, thank you very much,

20 Commissioner. It seems like old times when

21 we had great discussions in the Assembly

22 together. So we truly appreciate you

23 appearing today.

24 COMMISSIONER DESTITO: Thank you very

223

1 much. Thank you for having me. It was great

2 to be back here.

3 CHAIRMAN FARRELL: My daughter said to

4 say hello.

5 COMMISSIONER DESTITO: Well, you tell

6 Sophia hello, please. I missed her last

7 year.

8 Thank you.

9 CHAIRWOMAN YOUNG: Thank you.

10 Next on the schedule was the Business

11 Council of New York. Unfortunately, they

12 were not able to attend today due to illness.

13 So we are going to Executive Director

14 Brian McMahon, New York State Economic

15 Development Council. He's joined by Alison

16 Lands, executive director-designate.

17 Welcome.

18 MR. McMAHON: Good afternoon.

19 CHAIRWOMAN YOUNG: Good afternoon.

20 Happy to have you here.

21 MR. McMAHON: Chairwoman Young, thank

22 you, Chairman Farrell, thank you for the

23 opportunity to testify. I don't know if

24 we'll get you back on track, but we'll do our

224

1 best.

2 Joining me today is Alison Lands. As

3 some of you know, last May I informed my

4 board that I intend to retire on July 1st.

5 They did an exhaustive search and we're

6 incredibly fortunate to be able to have hired

7 Alison, who will succeed me on July 1st.

8 CHAIRWOMAN YOUNG: Congratulations to

9 both.

10 MR. McMAHON: You have our testimony

11 in front of you. We're certainly not going

12 to go through all of the issues we comment

13 on. In fact, I think what we would like to

14 do is kind of focus on the second half of our

15 comments and talk about things that we would

16 like to see in the Executive Budget that were

17 not there.

18 Most of these proposals deal with

19 economic development capacity building for

20 our communities to help them better prepare

21 for economic growth in the future. And the

22 first issue that we'd like to talk about is

23 an incredibly important issue, a competitive

24 issue relating to the development of

225

1 shovel-ready sites.

2 Shovel-ready sites are commercial and

3 industrial sites that have completed the

4 planning, zoning, surveys, title work and

5 environmental studies, et cetera, prior to

6 putting the site up for sale or lease, and

7 are under the local control or community or

8 other third party. Shovel-ready sites reduce

9 the time it takes for a business to begin

10 construction on a new facility, which reduces

11 their risk and allows them to become

12 operational and provide job opportunities to

13 our residents sooner.

14 Site consultants, especially those

15 doing searches for advanced manufacturing,

16 data centers, and warehouse and distribution

17 facilities, comment on our lack of

18 market-ready sites. Even though New York was

19 one of the first states to have a

20 shovel-ready certification program, we are

21 losing ground to other states. Currently

22 New York has 32 shovel-ready certified sites;

23 South Carolina, by comparison, has 65 such

24 sites.

226

1 Late last fall our organization

2 surveyed our members to identify potential

3 sites. The survey sought specific

4 information and data on comprehensive

5 criteria. Our survey identified an

6 additional 42 sites in the state that meet

7 the criteria.

8 We are not asking the state to fund

9 the entire share of developing these sites.

10 Funding partners typically include the

11 community, an IDA, a utility, and if the site

12 is privately owned, a developer. But the

13 state's involvement is important, especially

14 with funding up-front planning and

15 engineering costs.

16 Importantly, ESD has a shovel-ready

17 certification program now. It just lacks

18 resources to support any sites that could

19 become shovel-ready. And that is why we are

20 urging the Legislature and the Governor to

21 provide $50 million of funding over four

22 years to begin another round of shovel-ready

23 site certification grants.

24 The second program we would like to

227

1 talk about is a program that's been discussed

2 pretty extensively in this hearing this

3 morning, and that is RESTORE NY.

4 The RESTORE NY Communities Initiative

5 provides municipalities with financial

6 assistance for revitalization of commercial

7 and residential properties. The program

8 encourages community development and

9 neighborhood growth through the elimination

10 and redevelopment of blighted structures. It

11 directs funding where it is most needed, for

12 projects involving the demolition,

13 deconstruction, rehabilitation, or

14 reconstruction of vacant, abandoned,

15 condemned or surplus properties. There is

16 also a strong emphasis placed on projects in

17 economically distressed communities.

18 In 2006 the RESTORE NY program was

19 created and received an initial funding of

20 $300 million, and that was allocated over a

21 three-year period through three rounds of

22 funding.

23 Two years ago the Legislature added

24 $25 million to the final State Budget to fund

228

1 a new round of RESTORE NY grants. And on

2 January 26th, this year, Governor Cuomo

3 announced the awarding of $40 million of

4 RESTORE grants to 75 municipalities.

5 The $75 million that we are

6 recommending would fund a fifth round of

7 RESTORE NY grants and would continue the

8 success of the program. This is one of the

9 state's most important economic development

10 programs. It has been successful every time

11 there has been a round. And we think it

12 should be funded again.

13 I'm going to ask Alison to talk about

14 a very important topic for us, workforce

15 development. Alison?

16 MS. LANDS: Thank you.

17 The availability of a skilled

18 workforce is the number-one site selection

19 factor for businesses deciding where to

20 locate facilities, according to Site

21 Selection Magazine. Companies considering

22 New York as a place to invest -- and the site

23 selection firms they hire to represent

24 them -- work closely with NYSEDC's members to

229

1 identify where and how to grow their

2 footprint within our state economy.

3 Based on our members' collective

4 experience, we recognize that successful and

5 sustainable economic development efforts

6 require collaboration across multiple sectors

7 of physical, economic, and workforce

8 development. Imbalances within this

9 portfolio prevent New York State from

10 optimizing its investments in growth, which

11 is why it is important to note that although

12 site selection professionals have come to

13 value the quality of a state's labor shed

14 above all other factors, New York State lacks

15 a source of flexible workforce funding to

16 bring economic and workforce development

17 stakeholders together.

18 I'll point out that the January issue

19 of Site Selection Magazine has its annual

20 State of the States Comparison Report, and in

21 that report New York ranked eighth out of

22 nine Northeast states in our region in terms

23 of our workforce competitiveness.

24 Given the substantive resources

230

1 devoted to site preparation, statewide

2 marketing and attraction efforts, and

3 structuring business incentive packages, the

4 ability to invest in the human-capital

5 component of the location strategy equation

6 would enhance and make more responsive

7 New York's economic development toolset.

8 New York State Economic Development

9 Council supports NYATEP's -- the New York

10 Association of Training and Education

11 Professionals, who you'll hear from

12 shortly -- objectives of identifying flexible

13 funds for sector-based workforce training

14 that is connected to employment, as well as

15 their goal of enhancing local cross-sector

16 collaboration between economic and workforce

17 developers to serve the changing needs of

18 industry across New York.

19 To that end, the council recommends

20 identifying flexible funds that can be

21 awarded through the Regional Economic

22 Development Council process and used to

23 capitalize regional workforce development

24 skills training funds.

231

1 These flexible resources could be used

2 to fund workforce solutions that are aligned

3 with economic development projects at the

4 regional level, and such funding could be

5 administered by a provider within each

6 region, with oversight from a board of

7 directors consisting of both economic

8 development and workforce investment board

9 leadership. Together they possess intimate,

10 meaningful insight into the skills gaps and

11 employer needs at a localized level.

12 By permitting greater flexibility in

13 the development of capital projects to

14 accommodate the critical worker and labor

15 shed components of economic development,

16 citizens within New York's regions will be

17 able to take an active role in the

18 investments enacted through the REDCs, and

19 will gain access to training that will not

20 only improve their own earning capacity, but

21 will also support the success of the economic

22 development projects in progress, while

23 strengthening the draw of New York State as a

24 place to do business in the future.

232

1 MR. McMAHON: And the last issue that

2 we want to talk about is an issue that we've

3 discussed before relating to the treatment of

4 assessed property under PILOTs and the tax

5 cap. Very important issue for economic

6 development, very important issue for school

7 districts.

8 Typically, IDAs take bare title to

9 property and extend their tax-exempt status

10 to the beneficial owner of the project

11 property. The IDA then enters into a PILOT

12 agreement with the project owner, which

13 generates new revenue for local taxing

14 jurisdictions. However, new growth that is

15 subject to an IDA PILOT agreement is excluded

16 from the calculation for determining a

17 jurisdiction's quantity change factor, and

18 thus its tax base growth factor.

19 Consequently, communities that are

20 successful in attracting new economic growth

21 through incentives provided by an IDA are

22 penalized, thereby preventing taxing

23 jurisdictions, and especially school

24 districts, from factoring this growth into

233

1 the calculation for determining the tax levy

2 limit.

3 Our written testimony includes a chart

4 showing the impact to local taxing

5 jurisdictions in a typical IDA transaction.

6 It is considerable. Using a PILOT agreement

7 that mirrors a 485-b exemption for a

8 $10 million project, the impact over 10 years

9 is more than $2 million. Recognizing that

10 the average IDA project investment is

11 $18 million -- and there are approximately

12 4600 IDA projects throughout the state -- the

13 overall impact of this exclusion to taxing

14 jurisdictions is indeed quite significant.

15 In 2015, legislation was introduced by

16 Senator O'Mara and Assembly Majority Leader

17 Morelle to address this inequity also. Two

18 years ago, the Legislature included in the

19 final budget agreement a requirement for the

20 Department of Tax and Finance to, and I

21 quote, "as appropriate, promulgate rules and

22 regulations regarding the calculation of the

23 quantity change factor, which may adjust a

24 calculation based on the development on

234

1 tax-exempt land." Nothing has been done with

2 that provision, and I suspect nothing will

3 be.

4 Adding to this is the inconsistency of

5 not allowing property subject to a PILOT to

6 be included in the tax base growth factor,

7 but allowing properties subject to 485-b of

8 the Real Property Tax Law to be included.

9 485-b requires taxing jurisdictions that have

10 not opted out of the program to provide an

11 as-of-right 50 percent real property tax

12 exemption for any commercial investment

13 greater than $10,000. The exemption ramps

14 down 5 percent a year, for 10 years, at which

15 time the property is fully taxable.

16 So for all of these reasons, our

17 organization recommends amending the

18 2 percent real property tax cap to require

19 property subject to a PILOT to be included in

20 the tax base growth factor, as specifically

21 contained in the O'Mara/Morelle legislation.

22 That concludes our testimony.

23 CHAIRWOMAN YOUNG: Thank you very

24 much, Mr. McMahon and Ms. Lands, and we

235

1 appreciate you being here.

2 I do have a quick question about your

3 last proposal. If that were to happen, would

4 that mean that others in the taxing

5 jurisdiction who are not subject to a PILOT

6 would have to pay increased taxes?

7 MR. McMAHON: It would. There would

8 be a slight tax increase for sure.

9 But these projects -- I mean, when a

10 project locates in a community, the community

11 bears costs related to that project. It

12 might be infrastructure, the school district

13 might have to educate students from families

14 that work for those businesses. And, you

15 know, how do you compensate for those costs?

16 So I think local taxing jurisdictions

17 I think are kind of getting -- I think a lot

18 of money is being left on the table that

19 could be applied to our school districts,

20 could be applied to our municipalities, for

21 infrastructure and other costs related to the

22 projects.

23 The other thing, Senator, that it has

24 done, it has caused enormous tension between

236

1 primarily school districts and economic

2 development organizations simply that didn't

3 exist before this. There's always contention

4 or usually contention when IDAs are

5 considering projects. School districts

6 understand what the impacts are. So, you

7 know, we want to eliminate that tension, and

8 we think this would. And it would do it

9 fairly, too.

10 CHAIRWOMAN YOUNG: Thank you.

11 CHAIRMAN FARRELL: Assemblyman

12 Bronson.

13 ASSEMBLYMAN BRONSON: Thank you.

14 I want to follow up on the workforce

15 development piece of your testimony. Last

16 year NYATEP estimated that the REDCs invested

17 just over 1 percent in workforce development

18 programs. And as you indicated in your

19 testimony, their recommendation is that we

20 have more employer-driven workforce

21 development projects. Could you explain to

22 me, when you say employer-driven -- well, let

23 me put this in context.

24 So I look at workforce development as

237

1 addressing a number of issues. One of them

2 is addressing the middle-skills gap. Right?

3 Another one is making sure that we have job

4 training programs that match either new

5 emerging workforces or expanding workforces.

6 And then the fourth area would be to make

7 sure that we have job training for those who

8 are hard to place in employment --

9 disconnected youth in our urban settings, if

10 you will, neither connected to a job or

11 connected to education in any regard.

12 So given your review of the economic

13 development programs over the last few years,

14 where do you see the workforce development

15 programs in that context? And how do you see

16 having employer-driven workforce development

17 improve on what we've been doing?

18 MS. LANDS: I would say the feedback

19 from our members mirrors your observations

20 about the key areas of priority with respect

21 to workforce development, that being closing

22 the middle-skills gap or securing

23 middle-skill jobs and closing the gap between

24 the number of available workers and the

238

1 number of opportunities that are available

2 in, say, an industry such as advanced

3 manufacturing. As well as looking at

4 marginalized or challenging populations with

5 obstacles or barriers to employment, and then

6 also addressing the needs of jobs that we

7 don't quite know what they look like yet but

8 we know that they're emerging.

9 With respect to employer-driven

10 workforce development, I think, you know,

11 having worked closely with NYATEP on this

12 issue, there's a very physical focus to

13 economic development in terms of our capital

14 investments in the projects that we do. And

15 I guess based on the rankings that we have

16 right now, which are partially taking a look

17 at workforce development as a percentage of

18 total economic development budget, it would

19 be nice to see a bit more balance and an

20 ability to flexibly address the human-capital

21 element of investments.

22 And by employer-driven, you know,

23 typically, to us, that means actually

24 consulting with industry on the needs,

239

1 credentialing, skill sets, and career paths

2 that are needed and are in the most demand

3 and then working with educational partners

4 and training partners to make sure that the

5 programs that are developed and funded mirror

6 what the needs are out in the communities.

7 So that we're training individuals for

8 opportunities that really exist and that

9 they'll be meeting the needs of the employer

10 right on the nose.

11 ASSEMBLYMAN BRONSON: And so as I

12 understand your testimony, then, you are

13 looking at not the employer actually doing

14 the job training, in most instances, but that

15 it would be in partnership with job training

16 organizations, nonprofits, and educational

17 institutions like the community colleges

18 across the state and things of that nature?

19 MS. LANDS: I think in general it's a

20 flexible model. It could be any combination

21 of those different options.

22 But without direct employer input --

23 in some cases, in prior experience before

24 joining the council, this meant that an

240

1 employer actually had a training model that

2 needed to be expanded and scaled and they

3 couldn't do it in-house. So we ended up

4 using workforce development resources that

5 could help them scale their program, but do

6 so in a way that met their exact training

7 needs, as opposed to reinventing a program

8 organically.

9 I think there's a lot of options

10 there. And at the moment the challenge is

11 identifying a flexible way to use funds so

12 that as you're building a project and

13 attracting a prospect, you're also able to

14 address the workforce side of the house.

15 Which is an investment that stays in the

16 community regardless of what the prospect

17 does during or after the term of the

18 incentive.

19 ASSEMBLYMAN BRONSON: Well, I'm

20 encouraged by your perspective on this. It's

21 something I've been trying to advance for a

22 number of years.

23 The one aspect I would suggest to

24 consider, especially if you're looking at the

241

1 hard-to-place worker, versus just advancing

2 additional skills -- you know, a lot of these

3 jobs are entry-level jobs but they're

4 requiring higher skills than what would have

5 been required at an entry-level job a decade

6 or two decades ago.

7 But also that some of the folks who

8 are hard to place, their situation -- you

9 know, they have additional barriers, barriers

10 of transportation and other things. So one

11 of the things we've been talking about in my

12 area, in Rochester, is creating coaches or

13 mentors to work alongside or be available to

14 these workers not only during the training

15 programs but also for a number of years after

16 they're placed in the job. So that they can

17 help them work through barriers that may come

18 up, like childcare or transportation or, you

19 know, trauma that's happening in their homes,

20 that kind of thing.

21 So I would ask you to think a little

22 bit about, you know, the mentoring approach

23 to help folks be successful once employed.

24 MS. LANDS: Thank you.

242

1 ASSEMBLYMAN BRONSON: Thank you.

2 CHAIRMAN FARRELL: Senator?

3 CHAIRWOMAN YOUNG: Anyone else?

4 SENATOR KRUEGER: Thank you.

5 CHAIRWOMAN YOUNG: Thank you very

6 much.

7 MS. LANDS: Thank you.

8 CHAIRMAN FARRELL: Thank you.

9 CHAIRWOMAN YOUNG: Appreciate you

10 coming. And thank you for all that you do

11 for jobs and economic development in this

12 state.

13 And good luck to both of you, also.

14 Congratulations.

15 MS. LANDS: Thank you.

16 CHAIRWOMAN YOUNG: Our next speaker is

17 President and CEO Jo Wiederhorn, Associated

18 Medical Schools of New York.

19 Welcome.

20 MS. WIEDERHORN: Good afternoon.

21 CHAIRWOMAN YOUNG: Good afternoon.

22 CHAIRMAN FARRELL: Good afternoon.

23 MS. WIEDERHORN: I wanted to thank

24 you, Chairman Farrell, Chairwoman Young, and

243

1 the rest of the legislative body who's here.

2 I really appreciate this time to testify.

3 My name is Jo Wiederhorn. I'm the

4 president and CEO of the Associated Medical

5 Schools of New York. AMSNY is the consortium

6 of New York State's 16 medical schools. We

7 represent public and private schools

8 throughout the state. There are four SUNY

9 schools, one City University of New York

10 school, and the rest are all private schools.

11 And in a survey that we did in 2010, a

12 study that we had commissioned, the academic

13 medical centers provided $85 billion towards

14 the state's economy. One out of every $7

15 that the state put into research in the state

16 provided -- for every $1 that the state put

17 into research, there was a $7 return. And

18 also one out of every 13 jobs within the

19 state is associated with healthcare. Now,

20 that was an old study that was from 2010, and

21 I'm sure if we redid it at this point in

22 time, those numbers would go up.

23 I'm here today because I wanted to

24 talk to you about two issues that I think are

244

1 really important to the state's economy. One

2 is the investment in scientific talent. And

3 this is really important because, as the

4 state moves towards other new economies, this

5 is one of the largest growing economies in

6 the country. And the other one is, as people

7 have been talking about, a workforce issue

8 that we have within the state.

9 First of all, though, I just want to

10 give you a little bit of history. I know

11 that some of my colleagues have been here in

12 the past, but this is something that is

13 extremely important to us in terms of

14 scientific talent.

15 Over the past decade, states across

16 the country have been investing in biomedical

17 research, in particular in the recruitment

18 and retention of their star scientists.

19 California and Texas both put in $3 billion

20 towards this; Massachusetts put in

21 $1.5 billion, Connecticut $2.5 billion. And

22 in the meantime, smaller states have also

23 contributed.

24 And just as an aside, I thought you

245

1 might be interested to know that when Mike

2 Spence was the governor of Indiana, he was

3 actually given the Biotech Governor of the

4 Year Award for putting funds into their one

5 University of Indiana Medical School for the

6 recruitment and retention of bioscientists.

7 So actually, as I had mentioned, my

8 colleagues have been coming up here, we have

9 been coming up here now for a number of years

10 asking for $50 million a year for 10 years

11 for what we call the NY FIRST program. This

12 program would help in the recruitment of

13 faculty so that we could in fact develop new

14 laboratories for the development of new

15 discoveries. New discoveries in the basic

16 science field are what really drives what

17 happens when you're looking at new

18 treatments, new cures.

19 We need these funds in order to be

20 able to compete with other states. Our

21 ability to do so has been decreasing over the

22 past couple of years.

23 This year the Governor did in fact put

24 in $650 million into his budget for a Life

246

1 Sciences Initiative. Two hundred million

2 dollars of that is to go for state capital

3 grants, and $100 million is in an investment

4 capital fund. But to date, there has been no

5 particular line item that has been pulled out

6 for the recruitment and retention of faculty.

7 We have been told that this is something that

8 was meant to be part of this, but we'd like

9 to see the proof in the pudding here.

10 So what we are asking for from the

11 Legislature this year is to line out

12 $50 million that can be used for this

13 particular purpose. Part of this can be for

14 capital funds, and part of it would be for

15 the recruitment of not the head PIs for the

16 grants but, rather, for their postdocs and

17 young researchers, to help build our capacity

18 here in the state.

19 So the medical schools have made two

20 commitments related to these funds. One is

21 that for every dollar the state puts in, the

22 medical schools will match it on a two-to-one

23 basis. So for $50 million, if the state were

24 to put in $50 million, it would truly be a

247

1 $150 million fund.

2 The other one is the commitment that

3 we would not be using these funds in order to

4 support the salaries of what we call the star

5 researchers. Those salaries would be part of

6 the two-to-one match.

7 I know that in the past some of my

8 colleagues have talked about the old faculty

9 development program. This program, the state

10 put in $38 million to recruit similar types

11 of faculty. There was a $250 million return

12 on that. And we have examples from across

13 the state of people who are still working

14 here who have developed labs, have developed

15 spinoff companies, they've applied for

16 patents, they've made discoveries, they've

17 won some of the highest scientific awards in

18 the country.

19 So we really believe that this is an

20 investment in institutions that have been

21 here, some of them for a couple of hundreds

22 of years. They're not going to pick up and

23 leave. They will stay here, they will

24 support their local communities. The jobs

248

1 that will be created are, on an average,

2 about $83,000 a year. They come with full

3 benefits; oftentimes they come with

4 educational benefits.

5 Our second ask relates more to health,

6 and it relates actually more to workforce.

7 And this is more of a piece of information.

8 We have been supporting a Diversity in

9 Medicine program where we train students who

10 would like to go into medicine but need an

11 extra year of academic support. We've been

12 sending them to post-bacc programs. These

13 are very unusual post-baccalaureate programs,

14 in that the students have to apply to the

15 medical school, the medical school then

16 refers them to one of our programs. And if

17 they successfully complete it, they have a

18 guaranteed admission to medical school the

19 next year. So they don't have to repeat

20 taking the MCAT test or going through the

21 whole application process again.

22 We have four of those programs. Three

23 of them also provide master's degrees. This

24 is really important, because if they decide

249

1 not to go to medical school or they don't

2 quite make it to medical school, they

3 complete the program, they still get a

4 master's in science and they're able to work

5 in industry or in other areas.

6 We have very high success rates with

7 these programs. Over the past couple of

8 years, we've been funded through HCRA and

9 we've been funded at $1.6 million, which is a

10 cut from what our high was in 2008. That was

11 cut due to the recession. This year the

12 Governor threw all of those workforce

13 programs into a pool, and now we have to do

14 the Hunger Games and compete for the program,

15 and there's a 20 percent cut.

16 What we would really like to have the

17 Legislature do is go back again to lining us

18 out, having us at $1.6 million. Our primary

19 goal would be to have you restore the money

20 so we get $2 million again, because we had to

21 cut three programs when we lost that funding.

22 But we definitely want to be lined out with

23 no cut. There's a 20 percent cut now from

24 what the Governor has given us.

250

1 We also would like some support for a

2 scholarship program for the students who have

3 gone through one of our post-bacc programs.

4 Our scholarship program is pegged towards

5 SUNY tuition, $40,000 a year. And there

6 would be a commitment for the students who

7 take these funds -- for every year that they

8 get the money, they would have to work in an

9 underserved area.

10 Students these days leave medical

11 school with an average of $183,000 worth of

12 debt. If you add accrued interest to that,

13 it's often up to $225,000 or $250,000 worth

14 of debt. Which means that they really do not

15 have much -- well, they have a choice, but

16 they prefer to go into high-paying

17 specialties in areas where they're going to

18 be able to make some money and pay back their

19 debt.

20 So we would also like some support.

21 We're looking for money for 10 students, or

22 $400,000 a year for that program.

23 And I can see that's the end of my

24 time. If anybody has any questions? We'd

251

1 appreciate your support.

2 CHAIRMAN FARRELL: Questions?

3 CHAIRWOMAN YOUNG: Thank you so much

4 for your participation and your input. We

5 truly appreciate it. Very valuable.

6 MS. WIEDERHORN: Thank you.

7 SENATOR KRUEGER: Thank you very much.

8 CHAIRMAN FARRELL: Thank you.

9 CHAIRWOMAN YOUNG: Our next speaker is

10 Executive Director Melinda Mack, New York

11 Association of Training and Employment

12 Professionals.

13 Welcome.

14 MS. MACK: How are you?

15 CHAIRWOMAN YOUNG: I'm great, how are

16 you?

17 MS. MACK: Good, thank you.

18 Good afternoon, and thank you for

19 having me this afternoon. And again, I

20 apologize to Senator Savino and Senator

21 Young; you're going to probably hear some of

22 the things you heard during the workforce

23 testimony as well, so I apologize for any

24 repeats.

252

1 My name is Melinda Mack. I represent

2 the New York Association of Training and

3 Employment Professionals. We're a statewide

4 membership association that is made up of

5 education and training providers, including

6 BOCES programs, community colleges, workforce

7 development boards, a range of

8 community-based organizations and others.

9 Collectively, we serve close to a

10 million New Yorkers and really sort of bring

11 in close to half a billion dollars in

12 workforce resources to the state in terms of

13 federal funds and federal resources.

14 I'm here today to talk about the lack

15 of resources available to do workforce

16 development at the state level. As many of

17 you know, or as you've heard throughout the

18 day today -- I did listen in on Howard

19 Zemsky's testimony -- workforce development

20 continues to be a primary focus of many of

21 the economic development initiatives

22 statewide. However, the focus does not

23 translate to funding in the Governor's

24 budget.

253

1 One of the areas that we're

2 specifically interested in thinking more

3 creatively about the Regional Economic

4 Development Council resources and the URI

5 resources. I do want to make a

6 clarification; I did hear Howard Zemsky talk

7 about the investment in workforce development

8 related to the URI. In going back and

9 looking through those reports, I saw them to

10 be nominal at best. I think I sort of

11 calculated less than $10 million in actual

12 job training.

13 So again, I think the focus versus

14 funding is something that we continue to

15 struggle with.

16 That being said, we do have some

17 solutions or some proposals that we wanted to

18 put forward. And part of this does relate to

19 Assemblymember Bronson's comments prior about

20 issues related to funding support and

21 services, specifically for the lower-skilled.

22 As you'll see on page 2 of my

23 testimony, I've included some recent data

24 that describes the lack of educational

254

1 attainment for many New Yorkers. The recent

2 American Community Survey has detailed that

3 40 percent of New Yorkers have a high school

4 diploma or less. Which means that many of

5 these folks are not even at the point where

6 they're able to take advantage of many of the

7 other investments the state is making into

8 higher education and community colleges.

9 In terms of solutions, there are three

10 that I'd like to put forward. And I'd be

11 happy to take some of your questions as well.

12 The first is around establishing a

13 statewide training fund. As my colleagues at

14 the New York State EDC mentioned, we're very

15 interested in flexible resources, because

16 currently our system is propped up by --

17 primarily through federal funding. Federal

18 funding, as you are aware, comes with very

19 strict requirements and sort of application

20 mechanisms, and so ultimately we're not able

21 to meet the employer needs and demands as

22 quickly or as relevantly as we'd like. And

23 so, again, we're looking to think about ways

24 to be flexible.

255

1 We know that each year the Legislature

2 typically adds back anywhere between

3 $5 million and $12 million into the budget

4 for specific projects related to workforce

5 development. We'd like you to consolidate

6 those efforts into a statewide skills

7 training fund to make it a more equitable

8 distribution of those resources across the

9 state.

10 Second, the idea that -- we've

11 expanded on it in our testimony here on

12 page 4, is around expanding the uses of

13 Empire State's Regional Council Capital

14 funds. When you look at those capital

15 investments, again, as Alison and Brian

16 mentioned, those funds are primarily situated

17 for capital improvements. We'd like to see

18 some flexibility included in those resources

19 to allow for human-capital investment.

20 Specifically we're asking for

21 15 percent flexibility across those funds to

22 allow for partnerships that are sectorially

23 based, cross-section partners of

24 community-based organizations, of community

256

1 colleges, workforce development boards, among

2 others, to be able to work directly with

3 businesses to invest in development of

4 sector-based training programs.

5 If we just modified the rules for

6 15 percent of that -- it's $175 million --

7 we'd have $26 million that could be accessed

8 in those regional partnerships for job

9 training.

10 And then lastly, in support of some of

11 the work, again, that Assemblymember Bronson

12 has put forward in previous sessions, we feel

13 very strongly that we need to establish a

14 wage data clearinghouse.

15 We're only as good as our data. We

16 believe very strongly in putting forward

17 information about the success of education

18 and training programs, yet the data systems

19 to collect and distribute that information

20 have been lacking. And so we're asking the

21 state to make a nominal investment -- we

22 estimate it would likely be less than

23 $500,000 -- to develop and establish a wage

24 data clearinghouse.

257

1 So with that, I'll take any questions.

2 CHAIRWOMAN YOUNG: Thank you.

3 Any questions?

4 Yes, Mr. Bronson.

5 ASSEMBLYMAN BRONSON: So could you --

6 the wage data clearinghouse is a bill I

7 carry, and you've helped me develop some of

8 the language. But for purposes of the

9 record, could you explain how that would be

10 beneficial in matching potential workers with

11 actual jobs? I mean, in essence, what are we

12 trying to do with that bill?

13 MS. MACK: Sure.

14 So wage record data, for folks who are

15 unaware, is the data that you would find or

16 collect off of your pay stub, which is

17 currently maintained by Tax and Finance.

18 That information and data, as utilized in

19 other states, allows workforce development

20 organizations as well as colleges to be able

21 to actually understand whether or not

22 individuals who went through their training

23 programs are employed.

24 So you would do a data match on the

258

1 back end that would allow you to be able to

2 match whether or not a specific individual

3 was meeting an employment outcome.

4 Why that's really critically important

5 is, one, the system we have now is us calling

6 and following up directly with individuals or

7 with employers to specifically ask whether or

8 not they're employed. It's a huge waste of

9 time, it's a huge waste of resources, and

10 it's anecdotal data, it's not exact data.

11 And so we'd much rather have that.

12 On the flip side, you can also use

13 that information and data for research. And

14 so you're able to take a look at labor shed

15 and labor patterns. So, for example, if you

16 have a huge dislocation of home health aides

17 in a portion of the state, you're able to

18 take a look at the labor market data and the

19 wage data and say, okay, we have a mismatch.

20 We have folks with skills here, we don't have

21 the jobs related to those skills here. So

22 how do we start to align some of the

23 investments we're making in economic

24 development with the available workforce or

259

1 labor shed?

2 And so, again, having that resource is

3 something that many other states have

4 invested in. Places like Massachusetts,

5 Pennsylvania, Washington state, California,

6 you name it, they have pretty robust systems.

7 And at this point we've been told some

8 confidentiality barriers would sort of be in

9 place that wouldn't allow that to happen, but

10 ultimately I know that those are things we

11 certainly could work through if other states

12 have been able to.

13 ASSEMBLYMAN BRONSON: Okay. And we've

14 been talking about economic development and

15 you probably heard my statement to

16 Commissioner Zemsky that, you know, it's nice

17 to hear about the economy being vibrant and

18 all those kinds of things, but at the end of

19 the day, we're really talking about jobs for

20 our families and jobs for our young people.

21 And if we had a wage clearinghouse and

22 we also have funding for job training through

23 the Regional Economic Development Councils

24 and the other economic development proposals,

260

1 and we're trying to match to see if we're

2 expending taxpayer dollars that are either

3 retaining or creating those jobs, wouldn't a

4 wage clearinghouse also help us look at how

5 successful we are in those job retentions and

6 creations? Because we would also be looking

7 at the dollar amount that people are earning

8 and how that matches with being able to

9 provide for their families, and we'd be able

10 to really track whether or not these are

11 long-term jobs versus short-term jobs.

12 Do you agree with that?

13 MS. MACK: Absolutely. Absolutely.

14 And I think, again, for us in the

15 field who look at the workforce

16 development -- I'm using air quotes -- for

17 workforce development investments, we often

18 are at a loss for whether or not those are

19 effective. We don't have information or

20 data, based on the anecdotal evidence as

21 provided either by the Governor's office or

22 through press releases or reports. It's a

23 lot of money that's being invested in

24 so-called job training programs that we don't

261

1 know whether or not they're effective.

2 My members primarily implement federal

3 workforce development training programs.

4 Those federal programs have very specific and

5 rigid performance requirements which not only

6 they achieve but overachieve each year. We'd

7 like the state programs to be held at least

8 to the same level of accountability.

9 ASSEMBLYMAN BRONSON: Good. And your

10 response leads me to my last question I'm

11 going to pose to you, and that is what is

12 your observation on what's happening at the

13 federal level and what might happen with the

14 WIOA dollars that pass through the federal

15 into the state and then we get them to the

16 programs? Have you analyzed what's happening

17 at the federal level and what that impact may

18 be here in the State of New York?

19 MS. MACK: Yeah, absolutely. In fact

20 I'll be in DC next week meeting with the

21 transition team for the Trump administration

22 specifically about workforce dollars.

23 What we're deeply concerned about is

24 seeing some pretty tremendous cuts to federal

262

1 workforce funding. We get about 340-ish

2 million dollars in federal funding each year

3 from the federal government specifically for

4 education, job training and employment.

5 Those funds run through the New York State

6 Department of Labor as well as State Ed and

7 then trickle down to the local workforce

8 development programs.

9 The Heritage Foundation, which is what

10 we're seeing as being a blueprint right now

11 for the Trump administration's funding

12 formulas, it looks to zero out WIOA dollars.

13 We expect it won't be completely zeroed out,

14 but even if we're halved, cut in half, the

15 fight to get back up to just the level we're

16 at now will be pretty tremendous.

17 As you know, our federal funding has

18 been depleted significantly in the last 10

19 years. In fact, we have 50 percent less than

20 we did even 10 years ago. So another

21 50 percent cut would basically put us at a

22 25 percent sort of operating system.

23 Why this is significant for you all is

24 the federal funding is what creates the

263

1 workforce system in the state. That is not

2 the traditional pipeline. So the K-12 or

3 college system, that federal money is what

4 creates the local workforce development

5 training programs, the local workforce boards

6 and those local collaborations. And so we'd

7 be at quite a loss.

8 I also wanted to mention that the H-1B

9 visa program, which we also recognize may be

10 reduced, specifically related to some of the

11 president's immigration strategies, the

12 funding for those H-1B visas is actually

13 funding that's utilized to train workers

14 across the state and has been -- the New York

15 State Department of Labor has been successful

16 in getting many of those awards in the last

17 couple of years. So any reductions in those

18 visas will also mean a reduction in resources

19 at the federal level.

20 ASSEMBLYMAN BRONSON: Okay. Thank you

21 very much.

22 MS. MACK: Thank you.

23 CHAIRWOMAN YOUNG: Anyone else?

24 Okay, thank you very much. We

264

1 appreciate your participation.

2 I did accidentally skip over the

3 American Institute of Architects New York

4 State, Randolph Collins, CSArch

5 president/founding principal, and I think

6 he's joined by -- is it Michael Burridge,

7 director of government affairs.

8 Thank you for being here today.

9 MR. COLLINS: Good afternoon.

10 MR. BURRIDGE: Thank you for having

11 us.

12 Good afternoon. My name is Michael

13 Burridge, director of government affairs for

14 the American Institute of Architects New York

15 State. With me today is Randy Collins, who

16 is president and founding principal of

17 CSArchitecture, Engineering and Construction

18 Management.

19 On behalf of the American Institute of

20 Architects New York State Board of Directors

21 and our membership, we would like to thank

22 Chairwoman Young, Vice Chair Savino, and

23 Chairman Farrell for allowing us the time

24 today to testify on the Executive Budget

265

1 proposal.

2 In the interests of time, we want to

3 just focus on one issue, and that is the

4 Governor's design/build proposal. This year

5 the proposal seeks to make design/build

6 permanent in New York State and extend it to

7 all state agencies, authorities, SUNY and

8 CUNY, and counties outside of New York City.

9 AIA New York State recommends that

10 certain steps be taken before the scope of

11 the Infrastructure and Investment Act is

12 expanded. One of those steps, and it's a

13 major step, is that the Legislature and the

14 Governor's office should seriously think

15 about sitting down with the State Education

16 Department's Office of the Professions and

17 talking to them about their position on

18 design/build as it relates to the licensed

19 design professions.

20 Specifically, SED, which is the

21 licensing and regulatory authority for the

22 licensed design professions, maintains that

23 participation in the design/build contractual

24 arrangement is unethical and in violation of

266

1 the Education Law. Thus participation in a

2 design/build contract could expose architects

3 and other licensed design professionals to

4 charges of professional misconduct.

5 There is case law on this matter which

6 seems to confirm the legality of

7 design/build, yet there is no specific

8 statutory authorization for the licensed

9 design professions under the Education Law.

10 So we do -- and also the State Design

11 Boards representing the State Boards for

12 Architecture, Engineering, Land Surveying,

13 and Landscape Architecture, they do have a

14 position paper on design/build which lays out

15 how they see design/build should be practiced

16 in New York State, which would in line and in

17 compliance with Education Law.

18 Our second major recommendation is to

19 consider other alternative delivery methods

20 that are currently being used across the

21 country. And at this time I'm going to turn

22 it over to Mr. Collins, who's going to

23 explain that issue.

24 MR. COLLINS: Good afternoon.

267

1 Again, my name is Randy Collins. I am

2 an architect in practice for about 40 years

3 here in Albany and have been involved in a

4 lot of public projects where the current law

5 requires that public owners procure capital

6 projects, buildings, using the

7 design-bid-construct project delivery method.

8 The Governor is recommending that

9 design/build become an alternative project

10 delivery method to the current method.

11 We think that the best way to ensure

12 delivery of quality facilities in an

13 expeditious and cost-effective manner is to

14 provide public owners with project delivery

15 flexibility. Right now they really don't

16 have flexibility. This allows a public owner

17 to conduct a thoughtful, proactive and

18 objective assessment of the unique

19 characteristics of its project and the

20 ability to align the procurement plan with

21 the appropriate project delivery method.

22 There are several alternative project

23 delivery methods that should be considered in

24 conjunction with design/build, which promote

268

1 early collaboration between the builder and

2 the design professional and provide the state

3 with the efficiency it desires.

4 So construction manager as

5 constructor, also known as CM at-risk, is

6 another viable project delivery method that

7 we are advocating for. This method is

8 currently being used successfully for

9 privately funded projects in New York State

10 as well as other states across the country.

11 We believe that construction manager

12 as constructor is better suited than

13 design/build for vertical construction. By

14 vertical construction we mean buildings. It

15 eliminates conflicts with current law and

16 brings the contractor together early with the

17 licensed design professional during the

18 design phase.

19 Design phase collaboration is crucial

20 to ensuring constructability and has the

21 potential to reduce change orders, expedite

22 construction services, and reduce barriers to

23 MWBE participation by providing a review of

24 trade contract packaging early in the

269

1 process. Since most MWBEs are

2 subcontractors, this early identification of

3 trades contracts allows the CM to identify

4 qualified MWBEs from whom bids can be

5 obtained.

6 Within the CMC method, the public

7 owner contracts -- and this is important --

8 directly with an architect or engineer, and

9 then simultaneously contracts directly with

10 the construction manager at-risk.

11 That's opposed to design/build, where

12 the architect contracts with the builder. We

13 believe that this sets up a conflict of

14 interest and feel that CM as constructor is

15 more appropriate than design/build for

16 vertical construction.

17 So this separation of contracts, where

18 the architect and design professional has a

19 separate contract, as does the contractor,

20 does fall within the current practice of the

21 design-bid-build and complies with the

22 provisions of the Education Law that govern

23 the professions.

24 After the design phase, the

270

1 construction manager would essentially become

2 the equivalent of a general contractor for

3 the project and subcontract with all of the

4 remaining trades contractors -- and assume

5 financial obligation for construction, either

6 in the form of a guaranteed maximum price or

7 a cost-plus-fee contract with the owner.

8 CMC with a cost plus fee would be

9 essentially an open book providing

10 transparency, which may not otherwise exist

11 in design-build.

12 In closing, we want you to know that

13 AIA New York State has jointly prepared a

14 draft bill with AGC of New York State --

15 that's Associated General Contractors -- that

16 will authorize public agencies to use CM as

17 constructor, and we'd be happy to share that

18 with you.

19 Thank you.

20 CHAIRWOMAN YOUNG: Any questions?

21 Well, thank you for sharing today. We

22 truly appreciate it.

23 MR. COLLINS: Thank you.

24 CHAIRWOMAN YOUNG: Next up we have the

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1 Cornell-NYSTAR Centers of Excellence, Centers

2 of Advanced Technologies. Joining us will be

3 Daniel Walczyk, professor, RPI, and director

4 of New York State Center for Automation

5 Technologies, and Casey Hoffman, professor,

6 RPI, and cofounder of Vistex Composites.

7 Welcome, gentlemen.

8 DR. WALCZYK: Good afternoon and thank

9 you, Chairpersons Young, Farrell and

10 Schimminger, and members of the Senate

11 Finance and Assembly Ways and Means

12 Committees. I am Dan Walczyk, director of

13 the Center for Automation Technologies and

14 Systems at Rensselaer Polytechnic

15 Institute -- this has been since 2014 -- and

16 also a professor of mechanical engineering.

17 Let me give you some background of

18 myself because I think it's pertinent to this

19 discussion. I'm a homegrown technical

20 talent, I guess you could say. I grew up in

21 Syracuse, and I was shaped professionally by

22 the Center for Automation Technology, a

23 specific one. Growing up in Syracuse in the

24 1960s and '70s, I attended three New York

272

1 schools -- Onondaga Community College,

2 Rensselaer Polytechnic Institute, and also

3 Syracuse University.

4 I worked seven years in industry,

5 primarily in New York State, including a

6 machine builder in Syracuse and also GE, both

7 in Syracuse and in Niskayuna. I went to MIT

8 for manufacturing research and then postdoc

9 in Germany, at the Fraunhofer Institute,

10 dealing with machine tools. Came back to RPI

11 in 1996 and immediately started working at

12 the CATS, which is the Center for Automation

13 Technologies and Systems again.

14 All along the way, I was heartbroken

15 at the loss of manufacturing and related

16 industries in New York, especially upstate

17 and Long Island. As such, I want to thank

18 the leadership that has helped create the

19 CATS and also the COEs, the Centers of

20 Excellence, at Empire State Development and

21 NYSTAR. Without the leadership of the

22 Senate, Assembly and Governor's office, I

23 would not be in a position right now to make

24 a difference.

273

1 The New York State Centers for

2 Advanced Technology and Centers of Excellence

3 have been around since the mid-1980s, at

4 least the CATS. New York State currently

5 supports 15 CATS and 11 COEs to advance

6 technology from the universities and colleges

7 in the state to the private sector to grow

8 new companies, create jobs, and help the

9 New York economy.

10 This is similar to the Fraunhofer

11 model in Germany, which I took part in for a

12 brief period of time, and is relatively

13 unique among the states in the U.S. It

14 provides prolonged funding, unlike what the

15 federal government does.

16 The aggregated statistics for this

17 program over the last five years include

18 nearly $5 billion in economic impact and over

19 22,000 new or retained jobs. And this is for

20 a relatively modest investment by the state

21 of $26 million.

22 Let me talk more specifically about

23 the Rensselaer CATS. It was founded in 1989

24 for 10 years and then redesignated in 1999

274

1 and again in 2009. We assist New York client

2 companies with advanced manufacturing,

3 robotics, and automation to help them meet

4 their business goals, whatever those are.

5 Oftentimes we're asked to serve as the

6 surrogate research and development

7 departments for these companies because they

8 don't have the bandwidth or the expertise to

9 do so.

10 What we do is after de-risking

11 developments in our labs -- things that they

12 want to do but they don't have the means to

13 do -- we offer complete solutions to these

14 companies by working with what we call system

15 integrators, which are companies that make

16 machinery that they can use in their plants.

17 The 10 year statistics for the CATS

18 that have been reported to the ESD include

19 $328 million in economic impact and 1,050

20 jobs, for about a $9 million investment by

21 the state. This is similar to some of the

22 other CATS.

23 Let me talk a little bit about one

24 particular company, and then I'm going to

275

1 turn over the mic to my colleague from Vistex

2 Composites, Casey Hoffman.

3 This one company that we've worked

4 with is called Ecovative Design. They're a

5 biomaterials company, and they're famous for

6 mushroom packaging. It started out as two

7 Rensselaer engineers back in 2007 and has

8 grown into a 70-person company, high-tech

9 company, with corporate and R&D facilities in

10 Green Island and a manufacturing facility in

11 Troy.

12 From 2011 to 2015, the CATS worked

13 with them on five research projects, which

14 resulted in a new biocomposites material

15 which is actually their new line of products

16 that they're selling. They hire many RPI

17 engineers and scientists, who stay locally,

18 and it's a reverse of the brain drain that we

19 hear about in the popular media.

20 Now I'd like to turn over the mic

21 again to Dr. Casey Hoffman.

22 DR. HOFFMAN: Thank you for giving me

23 the opportunity to speak here today. As Dan

24 mentioned, my name is Casey Hoffman, and I'm

276

1 one of the cofounders of Vistex Composites,

2 an advanced manufacturing company that has

3 developed new ways of turning high-strength

4 composite materials, like carbon fiber, into

5 products that benefit society, like safer

6 helmets and lighter, more fuel-efficient

7 vehicles.

8 I would not be here speaking today

9 before you if it were not for the RPI CATS

10 and other programs like it across the state.

11 Vistex got its start while working within the

12 RPI CATS, along with funding with NYSERDA,

13 approximately five years ago. And we

14 continue to work with both of those

15 organizations to this day.

16 This partnership with RPI, and

17 specifically the RPI CATS, provides our

18 business with access to cutting-edge

19 equipment and top-notch faculty and staff

20 that has helped us to grow and attract

21 startup investment as well as customers.

22 Their experience and guidance in solving

23 technical problems helps us, as a small

24 startup, to avoid many of the mistakes that

277

1 other companies before us have made. And

2 more importantly, their widespread

3 connections to both academia and industry

4 partners have made finding the right person

5 to help us solve our technical problems more

6 effective.

7 I came here today to say thank you for

8 helping to create Vistex through your past

9 support of programs like the CATS and hope

10 that this support can continue in the future

11 so that other companies like Vistex can get

12 their start in the future.

13 Thank you.

14 DR. WALCZYK: Thank you, Casey.

15 In closing, I want to thank you again

16 for supporting both the Center for Advanced

17 Technology and Center of Excellence programs.

18 As I mentioned, Rensselaer is proud to have

19 contributed $328 million to the New York

20 State economy, with the state's $9 million

21 investment, but we are just one piece of the

22 almost $5 billion contributed by all the

23 Centers.

24 I'm not sure -- on a personal note,

278

1 I'm not sure if the Trump administration's

2 approach to revitalization of domestic

3 manufacturing will work as intended. The

4 New York State model, which includes both the

5 CATS and the COEs, predates the National

6 Network of Manufacturing Institute or

7 Manufacturing USA approach that was put forth

8 by the Obama administration and, in my

9 opinion, is the most effective approach due

10 to the long-term funding.

11 Recognizing the promising economic

12 impact of the Centers while acknowledging the

13 demands on state resources, we request that

14 each Center be funded at a $1.6 million level

15 in state fiscal year 2017-2018 budget in

16 order to magnify the returns on investment

17 already achieved through the CAT and COE

18 programs.

19 I welcome any questions that you may

20 have. Thank you.

21 CHAIRWOMAN YOUNG: Thank you very

22 much.

23 Senator Krueger has a question.

24 SENATOR KRUEGER: Hi. Thank you.

279

1 So it's 26 Centers. So if we jump to

2 $1.6 million each, how much would be your

3 budget request?

4 DR. WALCZYK: I think it's --

5 SENATOR KRUEGER: Close to 50, or 45?

6 DR. WALCZYK: -- $18 million.

7 SENATOR KRUEGER: I'm sorry?

8 DR. WALCZYK: Eighteen million.

9 SENATOR KRUEGER: Eighteen million.

10 DR. WALCZYK: Yeah. I wish I were a

11 human calculator, but I'm not.

12 SENATOR KRUEGER: And where does the

13 funding come from now? Is it through the

14 ESDC budget?

15 DR. WALCZYK: Through ESD, yes.

16 Empire State Development budget. Through

17 their NYSTAR program.

18 SENATOR KRUEGER: Got it.

19 So some of us, including me, have been

20 quite critical of the START-UP NY program,

21 which has been renamed but was targeted to

22 university settings. Somebody who testified

23 maybe three or four testifiers before you

24 made the argument that actually it's been

280

1 very valuable to have the START-UP program

2 affiliated with the colleges and drawing down

3 on students and interns and et cetera.

4 You're college-based, right? All of

5 your Centers are college-based?

6 DR. WALCZYK: Yes. Or university-

7 based.

8 SENATOR KRUEGER: So what's been your

9 experience in coordinating or working with

10 START-UP NY?

11 DR. WALCZYK: To be honest with you,

12 we really haven't done much with START-UP NY.

13 SENATOR KRUEGER: So you really

14 weren't working with them at all.

15 DR. WALCZYK: Our specific university,

16 no.

17 SENATOR KRUEGER: No.

18 DR. WALCZYK: We had considered it,

19 but really I don't know much about -- I know

20 about the program, but we haven't done much

21 with it to date.

22 SENATOR KRUEGER: So how do these

23 companies find you?

24 DR. WALCZYK: We have business

281

1 development directors who go out and

2 cold call or network or attend conferences.

3 Sometimes these companies come to us because

4 they hear about us. We should probably do a

5 better job of advertising that we exist.

6 But so far we've done pretty well on

7 the return on investment, and with the

8 additional resources, we would be able to do

9 even more.

10 SENATOR KRUEGER: And state money

11 isn't your only money, you also get paid by

12 these companies?

13 DR. WALCZYK: We have contracts,

14 research contracts with the companies. We

15 also go after third-party funding, federal

16 and state, foundation -- whatever makes sense

17 for the particular industry that we're

18 working in.

19 Our CAT works in manufacturing,

20 robotics, automation, so there are pots of

21 money at the federal and state level for

22 that. But a major part of the funding does

23 come from the companies.

24 SENATOR KRUEGER: So what would be the

282

1 total funding for all of these Centers on an

2 annual basis if you combined --

3 DR. WALCZYK: It would be 27 plus 18.

4 SENATOR KRUEGER: I'm sorry?

5 DR. WALCZYK: Twenty-seven million

6 currently, plus the 18 million ask.

7 SENATOR KRUEGER: Oh, plus the

8 hoped-for 18 million from the state.

9 DR. WALCZYK: Yes.

10 SENATOR KRUEGER: Got it.

11 And do any of these contracts with

12 businesses translate into, if they're

13 successful, where you end up with either

14 sharing of patents or stock shares in their

15 businesses?

16 DR. WALCZYK: It varies from

17 university to university. But for example,

18 with Vistex, there was -- RPI could have

19 patented and licensed it out. They chose not

20 to because it didn't fit into the portfolio

21 of technologies they wanted to promote. So

22 that allowed the current sponsor to -- and

23 RPI individuals to patent it separately, and

24 then it turned into a business.

283

1 Many times RPI will pay for the patent

2 costs and then license the technology to a

3 company. Sometimes the company brings in

4 their own IP, and so it's moot. So there's

5 many different situations. You know, think

6 of any permutation thereof, and it's been

7 done.

8 DR. HOFFMAN: I can add a comment to

9 that.

10 As I mentioned, Vistex grew out of the

11 RPI CAT, so -- and we're also a startup

12 company who is not participating in the

13 START-UP NY program. So kind of along with

14 the comments I made.

15 One thing I think we could stress here

16 is the fact that as a small business, you

17 know, at the time -- over the past few years,

18 we've been primarily two cofounders. The tax

19 incentives offered through the START-UP NY

20 program may be very limited, but having

21 access to the resources at these Centers,

22 like the RPI CATS and the Centers across the

23 state, allows us access to equipment,

24 multi-million-dollar pieces of equipment,

284

1 testing facilities, knowledge that we

2 absolutely have no other way to get. Okay?

3 And so any tax breaks that may be

4 offered to us mean very little compared to

5 the ability to go to a Center like this and

6 use equipment that we could never consider

7 purchasing.

8 SENATOR KRUEGER: Right. So you make

9 a pitch for continuing the relationships with

10 the universities, but actually make an

11 argument -- which I personally would agree

12 with -- that the tax incentive part of the

13 deal was never really going to be the

14 successful part of it anyway.

15 DR. HOFFMAN: Certainly not for

16 businesses at the size that we are right now.

17 SENATOR KRUEGER: And are all 26 of

18 your programs affiliated with engineering

19 schools, or it's different kinds of schools?

20 DR. WALCZYK: It's different kinds of

21 schools. We're mainly in engineering, but it

22 depends upon the technology area. There's

23 different CATS or Centers of Excellence, and

24 it pulls from science, may pull from the

285

1 business schools, may pull from architecture.

2 It really depends upon, again, the industry

3 that they're focusing on.

4 SENATOR KRUEGER: And in your

5 testimony -- I'm going to stop. I know, I'm

6 sorry. In your testimony the amount of money

7 you've helped generate for different

8 companies, close to $5 billion, and you list

9 some number of hundreds of projects.

10 DR. WALCZYK: Yeah, and 22,000 jobs.

11 SENATOR KRUEGER: So can you provide

12 me detail on that after the hearing, about

13 where those jobs were and what the projects

14 were?

15 DR. WALCZYK: Personally, I cannot.

16 But it's reported to the Empire State

17 Development group, and they have that data.

18 specifically, NYSTAR. They collect that data

19 from all of the Centers and they aggregate it

20 and they have that data --

21 SENATOR KRUEGER: So they have it on

22 their site that there's a --

23 DR. WALCZYK: I don't know, but I

24 would imagine they do. Or I could at least

286

1 give you the name --

2 SENATOR KRUEGER: Yeah.

3 DR. WALCZYK: Matt Watson, for

4 example, is head of NYSTAR, so he's somebody

5 you could talk with.

6 SENATOR KRUEGER: Okay, I can check,

7 then. Thank you very much, gentlemen.

8 DR. WALCZYK: You're welcome.

9 CHAIRWOMAN YOUNG: Thank you.

10 CHAIRMAN FARRELL: Questions?

11 ASSEMBLYMAN SCHIMMINGER: Yeah. Not

12 so much a question as a comment, but perhaps

13 you want to respond.

14 In the past few years there's been

15 word about in the land about how wonderful

16 this brand-new program is that was just

17 created in the current administration,

18 START-UP NY, which brings together the

19 universities and the business sector and

20 entrepreneurs and startups. Isn't this

21 amazing?

22 When the public listens -- and I wish

23 more had listened to your testimony -- you've

24 been doing it for decades. The Centers of

287

1 Advanced Technology and the Centers of

2 Excellence, which have their origins

3 literally decades ago here in New York State,

4 have been bringing together university and

5 business, creating jobs, innovating.

6 And I just wonder what might have

7 worked out a little better if perhaps some of

8 that $53 million we spent promoting this

9 START-UP program might have been spent

10 promoting the Centers of Advanced Technology,

11 Centers of Excellence, to draw more interest

12 and bring more companies into your realm.

13 Just a comment. But if you wanted to

14 respond, you might.

15 DR. WALCZYK: I -- I don't disagree.

16 But, you know, the START-UP NY program was

17 something that was proposed, and I suppose

18 any new program should be vetted and allowed

19 to succeed or fail.

20 I'd rather not comment because I know

21 what I know. I know about these -- the CATS

22 and the COEs. And for return on investment,

23 they're a bargain. And that's what I'm here

24 to promote.

288

1 ASSEMBLYMAN SCHIMMINGER: They are a

2 bargain, and they're an amazing success

3 story, and I thank you for your involvement

4 in it.

5 DR. WALCZYK: Thank you.

6 CHAIRMAN FARRELL: Thank you.

7 CHAIRWOMAN YOUNG: Thank you very

8 much.

9 SENATOR KRUEGER: Thank you very much.

10 DR. WALCZYK: Thank you very much.

11 DR. HOFFMAN: Thank you.

12 CHAIRWOMAN YOUNG: Appreciate your

13 sharing.

14 ASSEMBLYMAN SCHIMMINGER: Thank you

15 very much.

16 CHAIRWOMAN YOUNG: Our next speaker is

17 from the New York State Community Development

18 Financial Institution Coalition. And that's

19 Tristram Coffin.

20 MR. COFFIN: Thank you. Good

21 afternoon, Senator Young, and honorable

22 members of the committee. My name is

23 Tristram Coffin. I'm the CEO of Alternatives

24 Federal Credit Union in Tompkins County,

289

1 New York, and I'm speaking on behalf of the

2 New York State CDFI Coalition.

3 The coalition represents approximately

4 70 community development financial

5 institutions, or CDFIs for short, across the

6 state. And though they may be organized as

7 banks, credit unions, loan funds, or venture

8 capital funds, CDFIs by definition are

9 dedicated to giving people a helping hand up

10 the financial ladder by providing loans,

11 technical assistance, and financial education

12 to borrowers in underserved communities

13 throughout the state.

14 CDFI is a designation provided by the

15 U.S. Department of the Treasury to financial

16 institutions that meet strict criteria in

17 primarily serving low-income communities. At

18 the federal level, CDFIs have competed for

19 grants made by Treasury and funded by an

20 annual budget appropriation since the

21 mid-1990s. And these awards, which are made

22 through a competitive process on the basis of

23 performance, leverage private dollars to help

24 CDFIs build the capacity necessary to carry

290

1 out their mission of helping communities

2 rebuild.

3 And because of the extraordinary

4 impact of CDFIs in New York, the state passed

5 enabling legislation in 2007 to create a

6 New York State CDFI Fund modeled after the

7 successful Treasury Department program.

8 However, to date it has not received a penny

9 of state funding, making it New York's most

10 underutilized resource in your efforts to

11 revitalize our economy.

12 The coalition respectfully requests

13 your consideration of a modest $15 million

14 budget appropriation to the New York State

15 CDFI Fund, from which certified financial

16 institutions would compete for grants that

17 help carry out our mission for economic

18 development by providing business, mortgage

19 or consumer loans to borrowers who are

20 underserved by traditional lenders. While

21 modest by the standards of the New York State

22 budget, this funding would be a game-changer

23 for CDFIs who have demonstrated their

24 capability to change lives and now seek to

291

1 broaden their community impact.

2 CDFIs are a tried and proven

3 methodology for effectively allocating

4 capital to lower-income communities. Empire

5 State Development has demonstrated the

6 interest and willingness to administer a

7 New York CDFI Fund, and we are confident that

8 the use of CDFIs as a tool of economic

9 development strategy will position New York

10 as a national model and leader.

11 Part of the reason for the success of

12 CDFIs is the manner in which they leverage

13 resources for economic development. The

14 Treasury Department's CDFI grant program

15 requires non-federal matching resources, so

16 New York CDFIs receiving state grants would

17 be immediately eligible to use them as the

18 basis for federal awards. State-funded CDFI

19 grants would provide an essential asset that

20 can leverage other sources of funding, such

21 as banks, foundations, and other impact

22 investors.

23 Estimates for the ratio of private

24 capital leveraged by CDFI investments have

292

1 ranged from 10 to 1 to 20 to 1. So

2 therefore, a $15 million allocation for

3 New York CDFIs could attract an additional

4 $150 million to $300 million of private

5 capital to be deployed in underserved

6 communities throughout New York.

7 Small businesses have been responsible

8 for two out of three jobs created in the last

9 two decades. But while the economy continues

10 to improve on paper, there continues to be a

11 lack of lending to small business. In fact,

12 whereas CDFIs continued making small business

13 loans after the 2008 mortgage meltdown, many

14 of the largest banks dramatically scaled back

15 their lending.

16 The experience of my CDFI,

17 Alternatives, is instructive in this regard.

18 During a period of retrenchment for the

19 financial industry in which business lending

20 declined dramatically, Alternatives increased

21 its annual business loan volume fourfold

22 between 2007 and 2010.

23 Empire State Development Corporation

24 manages a small CDFI Assistance Program that

293

1 benefits those CDFIs who work with small

2 business. And we have proven ourselves to be

3 effective stewards of this assistance, using

4 grant funds to build effective collaborations

5 to promote successful small businesses.

6 CDFIs provide a range of affordable

7 loan options to micro-entrepreneurs, with a

8 heavy concentration on women and minority

9 business owners, along with training and

10 educational support to help those businesses

11 succeed.

12 Discussions of small business lending

13 to underserved communities often center on

14 prodding larger banks to do more. And while

15 this is understandable, given the amount of

16 money that they have at their disposal, the

17 potential of smaller institutions should not

18 be overlooked. By expanding lending programs

19 through community-based lending institutions

20 such as CDFIs, it is possible to provide the

21 hands-on support necessary to help small

22 businesses grow. After all, smaller loans

23 are the core of smaller lenders' business

24 model.

294

1 The business loans Alternatives makes

2 average about $25,000. So the businesses we

3 help, while successful, are not the type of

4 venture capital startups that promise hefty

5 future returns. And whereas businesses like

6 those we work with will have to grow much

7 larger before becoming attractive to large

8 banks, CDFIs consider such loans to be the

9 reasons why we exist. And our experience

10 shows that microloans are often what

11 underserved rural, women and minority

12 entrepreneurs need.

13 These types of programs, and the

14 one-to-one coaching necessary to help

15 borrowers succeed, is more effectively

16 delivered at local scale. Small business is

17 integral to economic development, and by

18 extending capital to community lenders

19 through an appropriation to the State CDFI

20 Fund, we can create thousands of jobs in

21 underserved areas.

22 We have first-hand experience with the

23 challenges and opportunities of making small

24 business loans in general, and loans to

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1 minority and women-owned businesses in

2 particular. In fact, more than 53 percent of

3 Alternatives' business loans over the past

4 three years are made to minority and

5 woman-owned businesses. And with appropriate

6 support, CDFIs would lend even more. The

7 experience of Alternatives and other CDFIs

8 shows that more can and should be done to

9 make loans available to qualified

10 lower-income entrepreneurs.

11 There is a story behind each and every

12 one of the loans we make, but here is a prime

13 example of how community-based lenders can

14 work with government to expand lending

15 opportunities. While working for a catering

16 company, Lancelot Brown was injured and

17 unable to work. Though he had dreams of one

18 day owning a restaurant, he had no experience

19 in running a business. Lance said, "I did

20 not have a strong financial base. Since my

21 accident, I had been on public assistance and

22 had limited funds. I had to do something to

23 get off the system, to pull myself up."

24 Thankfully, Lance found his way to a

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1 CDFI, which helped him finance a successful

2 restaurant in Brooklyn. And as Lance

3 explained, "The loan from Accion has allowed

4 me to enter the second phase of my business.

5 I've been able to purchase enough equipment

6 and expand operations Monday through Saturday

7 for lunch and dinner. We've really been able

8 to grow."

9 It's crucial that economic development

10 strategies include CDFIs. We don't need to

11 be prodded to do more. We're here to help.

12 Give us the opportunity to do so.

13 We finance the American dream. And as

14 you consider ways to develop the state's

15 economy, the importance of stable communities

16 cannot be overstated. CDFIs are also leaders

17 in financing homes for low-income people.

18 Some, such as CDFI banks and credit unions,

19 successfully provide mortgage loans to

20 underserved borrowers while maintaining

21 delinquency and loss ratios that are superior

22 to those of mainstream financial

23 institutions. Loan funds often provide the

24 necessary bridge financing that enable

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1 large-scale construction. A predevelopment

2 loan in September of 2015 from a CDFI,

3 Leviticus 25:23 Fund, set the foundation for

4 a comprehensive neighborhood revitalization

5 effort in upstate Otsego County, New York. A

6 non-profit developer will create 20 units of

7 affordable rental housing for families and 40

8 affordable units for Seniors among 14

9 scattered sites. The $516,000 loan made by

10 Leviticus is financing the predevelopment

11 costs for the project, which will eliminate

12 blight, rehabilitate a vacant building, and

13 transform underutilized vacant lots.

14 The properties that comprise Oneonta

15 Heights are just north of the downtown core

16 of Oneonta. The City of Oneonta has

17 committed funding in recognition of the

18 revitalization potential of Oneonta Heights

19 to change the landscape of the community and

20 stimulate new economic investments in the

21 city's core. "As a regional lender, Leviticus

22 is proud to direct financing to such an

23 innovative project in the City of Oneonta,"

24 said Greg Maher, Leviticus's executive

298

1 director. "This development will revitalize

2 an important part of the city's core and will

3 provide the residents with viable bus

4 transportation options and accessibility for

5 shopping, healthcare and jobs."

6 With the ability to compete for state

7 CDFI grants, Leviticus, a small CDFI that has

8 only four employees, would be in a position

9 to catalyze more development projects of this

10 type.

11 In the aftermath of the recent

12 mortgage meltdown, CDFIs have demonstrated

13 indisputable success in providing home loans

14 to low-income borrowers. Recognizing the

15 excessive risk taken by lenders in the recent

16 mortgage meltdown, New York State has taken

17 the initiative to pursue legal action against

18 certain banks.

19 And to the extent that proceeds of

20 those settlements are incorporated within the

21 budget process, we believe it's fair and

22 reasonable that a portion of those funds be

23 directed toward our requested $15 million

24 CDFI Fund appropriation. After all, it's we

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1 CDFIs who have been and are still doing the

2 work of remediating the collateral damage

3 done to lower-income communities, offering

4 responsible loans and financial counseling

5 that helps provide the community stability

6 requisite for economic development.

7 We are a delivery system for today.

8 Any effort by the state to encourage greater

9 small business lending, in particular, must

10 take a holistic approach, recognizing the

11 need for more mission-driven funding for

12 underserved individuals and communities.

13 CDFIs work hands-on in local communities to

14 address some of our most vexing economic

15 development challenges. We provide pathways

16 to success for individuals and businesses

17 whose needs are not being met by mainstream

18 lending institutions.

19 Recognizing the acute pressure on

20 state financial resources, we stand proudly

21 as a more efficient delivery channel to

22 transform public capital into private jobs.

23 We create market-based solutions that provide

24 investment to chronically underserved

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1 communities. We leverage federal and private

2 dollars to create an outsized community

3 impact.

4 We are locally controlled and

5 accountable to our target market, both

6 through board governance as well as the

7 reporting we provide to the U.S. Treasury.

8 And as such, CDFIs are positioned to be more

9 flexible and responsive to the needs of the

10 communities we serve. Many traditional

11 economic development models have required

12 top-down priorities set by government. CDFIs

13 leverage public resources in a more

14 decentralized manner that is uniquely

15 positioned to meet the most pressing

16 challenges within the local communities that

17 we serve.

18 Frankly, with more government comes

19 the risk of more bureaucracy, which makes it

20 that much more expensive and difficult for

21 community-based lenders. For example, even

22 though SBA loans are often pointed to as a

23 model of how lending partnerships should

24 work, its requirements are so cumbersome to

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1 comply with that only 26 credit unions in New

2 York make SBA loans, and nationwide, only

3 about 200 do so. So we don't need new

4 government lending structures. What we need

5 is more targeted investments in the community

6 development finance entities we have, in

7 particular CDFIs.

8 Now, you may not be familiar with

9 CDFIs. We are in some ways a well-kept

10 secret. However, we cover every county in

11 New York State. And with over $3 billion of

12 outstanding loans, the CDFIs of New York

13 State have a demonstrated capability to

14 allocate capital effectively, to create and

15 protect jobs, stabilize communities, and help

16 low-income consumers build and utilize

17 credit.

18 However, so much more is possible.

19 Recognizing this opportunity, 10 years ago

20 our state had the foresight to create the

21 first state-specific CDFI Fund in the nation.

22 Unfortunately, a financial and banking crisis

23 happened, derailing our economy and putting

24 aside any plans to invest in this

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1 groundbreaking fund for the betterment of

2 New Yorkers. Ten years on, we have weathered

3 the storm of a crisis and recession, but the

4 work of building an inclusive prosperity

5 through which all New Yorkers can work toward

6 their dreams remains unfulfilled.

7 At a time in which the payout of

8 settlement funds to the state stands as

9 evidence of the failed approaches of the past

10 decade, and as the state considers strategies

11 that place local and regional economic

12 development solutions at the forefront, the

13 imperative to utilize the New York State CDFI

14 Fund has never been clearer. So we

15 appreciate your consideration of our

16 budgetary request.

17 Thank you very much for giving me the

18 opportunity to speak today. CDFIs were

19 created out of a recognition that not

20 everyone has equal access to financial

21 services, and we're ready to work

22 constructively with other stakeholders,

23 including ESDC and the Legislature, to make

24 sure all New Yorkers can get the loans that

303

1 they need to start and grow a business,

2 purchase a home, or meet other borrowing

3 needs.

4 CDFIs are a tried and proven solution

5 to the problem of providing access to capital

6 in underserved communities. We help grow and

7 sustain small businesses that create jobs and

8 pay taxes. We provide pathways to financial

9 empowerment for individuals that result in

10 greater self-sufficiency and help alleviate

11 strain on other social service resources.

12 However, just as the individuals and

13 businesses we serve require capital to

14 succeed, so too do CDFIs require capital in

15 order to fulfill their mission of community

16 economic development. And so while modest in

17 relation to the industry's overall funding

18 base, public investment from the U.S.

19 Treasury CDFI Fund has made an essential

20 difference in our ability to serve our

21 borrowers, providing a funding source that

22 can efficiently leverage private investment

23 to achieve maximum impact.

24 Ten years ago, our Legislature showed

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1 great leadership in creating the nation's

2 first state CDFI fund. And today, the need

3 to strengthen our communities and create jobs

4 is as great as ever. CDFIs are making a

5 difference each day for hundreds of thousands

6 of New Yorkers who aspire to a better future

7 for themselves and their families. Please

8 don't deny the CDFIs of our state of the

9 capital we need to meet today's opportunity.

10 Please say yes to our request for a

11 $15 million appropriation to the New York

12 CDFI Fund.

13 Thank you very much for your

14 consideration.

15 CHAIRWOMAN YOUNG: Thank you.

16 Senator Savino.

17 SENATOR SAVINO: Thank you, Senator

18 Young.

19 Thank you, Mr. Coffin, for your

20 testimony.

21 If I recall, last year when we did the

22 hearing on MWBEs, et cetera, I think you

23 testified.

24 MR. COFFIN: I did.

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1 SENATOR SAVINO: And I'm just trying

2 to recall at the time your -- the CDFIs, they

3 play a role in providing funding to many of

4 them, but I think there was an issue. What

5 is the default rate on loans that your

6 lenders provide?

7 MR. COFFIN: It's very low. It's less

8 than 25 basis points.

9 SENATOR SAVINO: It is less than --

10 yeah, I couldn't remember exactly what it

11 was.

12 So you're providing -- I guess you're

13 filling a hole that the community banks

14 really are supposed to provide. That lending

15 does not seem to be happening; correct?

16 MR. COFFIN: Correct.

17 SENATOR SAVINO: Okay. Just wanted to

18 clarify. Because I knew the default rate of

19 one was high and one was low. So yours is

20 low. It must the community banks' is high.

21 MR. COFFIN: We're effectively taking

22 on loans that on paper may seem to be more

23 risky than others, because we're working

24 oftentimes with borrowers that are

306

1 credit-challenged or new to business or

2 whatnot. But we've become very adept over

3 time at identifying those folks who are most

4 positioned to succeed and then provide sort

5 of the supportive ecosystem in the form of

6 advice, coaching, and technical assistance

7 that really kind of work hand-in-glove with

8 the capital to help those business owners

9 become successful.

10 SENATOR SAVINO: Thank you.

11 CHAIRMAN FARRELL: Assemblywoman

12 Hyndman.

13 ASSEMBLYWOMAN HYNDMAN: Hi.

14 MR. COFFIN: Hi.

15 ASSEMBLYWOMAN HYNDMAN: I must say I

16 do think CDFIs are a well-kept secret. I

17 just heard about them recently because

18 downtown Jamaica, in Queens, where I live, is

19 undergoing a vast amount of development. So

20 there are a couple of bids who are now also

21 working with local community groups to form

22 CDFIs.

23 So I just -- it's more of a comment.

24 You know, I would like them to get more

307

1 information, because we feel a lot of the

2 banks, the major banks, are not loaning to

3 small businesses, especially women

4 businesses. And a lot of them are

5 intimidated by the MWBE process of how to

6 become certified, and those that do become

7 certified have problems getting loans from

8 major banks.

9 So in Southeast Queens we have an

10 issue, so there are quite a few groups who

11 are trying to start this. Is there any

12 advice you could give them, or give me to

13 give them, in how to go about making sure

14 that they explore this opportunity? Other

15 than getting the appropriation in the budget,

16 what other ways could I give them?

17 MR. COFFIN: There's a wealth of --

18 within the CDFI field, we all sort of help

19 each other. You know, we're -- I mean, some

20 CDFIs have a for-profit model, but we all

21 kind of share the same -- most of us are

22 nonprofit, and we all share the same type of

23 community development mission, so we

24 collaborate and share resources all the time.

308

1 So I would say there are resources

2 from trade associations, like Opportunity

3 Finance Network, or the National Federation

4 of Community Development Credit Unions, that,

5 depending upon the type of CDFIs, can help

6 groups that would like to organize one in

7 their community.

8 Certainly the New York State CDFI

9 Coalition, of which I serve as board chair,

10 is a convenient forum for networking,

11 information sharing, kind of putting people

12 together with peers who can help them get

13 started. And we'd love to do more, to launch

14 more successful CDFIs in communities all

15 across New York State.

16 ASSEMBLYWOMAN HYNDMAN: Thank you,

17 Mr. Coffin.

18 MR. COFFIN: Thanks.

19 CHAIRWOMAN YOUNG: Senator Krueger.

20 SENATOR KRUEGER: So 10 years ago we

21 created a fund, we've never funded it. You

22 say in your testimony Empire State

23 Development likes the idea. Fifteen million

24 dollars is a lot of money to you and I, but

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1 it's sort of petty cash in what ESDC has been

2 pouring out for years and years and years.

3 Why do you never get the money?

4 MR. COFFIN: Well, partly it's on

5 ourselves because we never really were

6 organized as a group to be able to advocate

7 for that.

8 And obviously the resources of the

9 state are under acute pressure, and so, you

10 know, to the extent that we're something new

11 at a time when the emphasis maybe within the

12 state has been to preserve things that

13 already exist in the budget process, that's

14 probably how we weren't funded.

15 Folks who are industry veterans who

16 were there at the 2007-2008 launch of the

17 fund can share stories about how literally

18 the market was crashing right at the time

19 that the ink was drying on the legislation,

20 and that kind of derailed some of the efforts

21 at that time.

22 But that said, I think over that time,

23 we've demonstrated our capacity and our

24 capability. As you mentioned, ESDC does have

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1 a very small $1.5 million appropriation each

2 year for CDFIs that specialize in small

3 business, and that's been an extremely

4 successful program. It's helped us launch

5 some really kind of groundbreaking

6 collaborations to be able to build our

7 capacity.

8 And like you say, we're not asking for

9 a huge amount here with the $15 million, but

10 I think that would give us an opportunity to

11 demonstrate our success and probably give you

12 a feeling of comfort that --

13 SENATOR KRUEGER: And you mentioned

14 that there's some matching funds that we

15 can't get unless we put money up. So is it a

16 one-to-one with the feds? How does that

17 work?

18 MR. COFFIN: So the federal CDFI Fund,

19 that would be a one-to-one match, that's

20 correct. So for every dollar we apply for

21 from the U.S. Treasury, we have to have a

22 dollar of non-federal match, which this

23 clearly would provide.

24 SENATOR KRUEGER: And other states are

311

1 participating, and they have data showing

2 it's been successful?

3 MR. COFFIN: Actually, other states

4 have not created their own state-specific

5 CDFI funds the way that New York had the

6 foresight to do 10 years ago. So this is

7 really kind of a groundbreaking -- or was a

8 groundbreaking policy innovation at the time.

9 SENATOR KRUEGER: So the feds aren't

10 spending any of their money, it's a

11 hypothetical at their level also?

12 MR. COFFIN: Say again, I'm sorry?

13 SENATOR KRUEGER: You said it needs to

14 be a state match. So if no states are

15 investing, is anybody getting these federal

16 matching funds?

17 MR. COFFIN: Oh, yeah. So the

18 non-federal match can be -- typically comes

19 from grant money that's provided, say, by

20 foundations, by individual philanthropy --

21 depending upon the business model of the

22 CDFI, can even, for some, come from the

23 retained earnings of the CDFI itself.

24 So we can and do have -- you know,

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1 provide documentation of the non-federal

2 match to Treasury when we apply for these

3 grants. However, you know, having the

4 non-federal match from New York would

5 certainly provide an immediate opportunity

6 for one-to-one leverage just from Treasury

7 and then -- notwithstanding the 10-to-20-to-1

8 ratio of leverage that can be created through

9 those other funding sources -- private

10 foundations, corporations, individual

11 investors, and so forth.

12 SENATOR KRUEGER: And most of your

13 members are credit unions?

14 MR. COFFIN: Nationwide, about

15 50 percent of CDFIs are community development

16 loan funds, so these are organizations that

17 acquire capital from philanthropic sources.

18 The earliest ones were started by nuns

19 looking for ways to invest their own

20 retirement funds on a socially responsible

21 basis, but have expanded in different ways.

22 About 25 percent are credit unions,

23 like the organization that I work for, and

24 about 25 percent are community development

313

1 banks.

2 SENATOR KRUEGER: And that's true in

3 New York State? You gave national data, but

4 we sort of follow the national --

5 MR. COFFIN: I would have to parse the

6 data a little, but I would say roughly that's

7 probably close to --

8 SENATOR KRUEGER: I ask because for

9 years the credit unions have been coming to

10 us saying if New York State just puts some of

11 its money in the credit unions, we would have

12 the money to do these kinds of loans at the

13 local community level.

14 So it sounds like that would be

15 another funding stream that could assist with

16 this kind of program.

17 MR. COFFIN: Yeah. I mean, municipal

18 deposits could provide a source of capital

19 for community development credit unions,

20 specifically, in New York. Obviously the

21 broader universe of CDFIs wouldn't benefit as

22 much from that.

23 SENATOR KRUEGER: Got it. Thank you

24 very much.

314

1 MR. COFFIN: Thank you very much.

2 CHAIRWOMAN YOUNG: Thank you.

3 CHAIRMAN FARRELL: Thank you.

4 CHAIRWOMAN YOUNG: Thank you for your

5 testimony.

6 MR. COFFIN: Okay, thank you.

7 CHAIRWOMAN YOUNG: Next up we have the

8 film unions -- Motion Pictures Editors Guild;

9 International Alliance of Theatrical Stage

10 Employees Local 52; Screen Actors Guild-

11 American Federation of Television and Radio

12 Artists; Directors Guild of America, Inc.;

13 and Broadway Stages.

14 Representing them will be President

15 Thomas O'Donnell from the Theatrical

16 Teamsters Local 817 and board chair from the

17 Post New York Alliance, Yana Collins Lehman.

18 Welcome.

19 MS. COLLINS LEHMAN: Good afternoon,

20 Senators and Assemblymembers. My name is

21 Yana Collins Lehman, and I am the board chair

22 of the Post New York Alliance.

23 The Post New York Alliance is

24 comprised of over 65 post-production

315

1 facilities from all over the State of

2 New York, and more than 600 individual

3 post-production professionals working in film

4 and television. These professionals work as

5 editors of sound, picture, music, as foley

6 artists and in visual effects, among other

7 titles. Post-production workers represent a

8 highly skilled workforce engaged on a project

9 for many months after the production

10 component is concluded.

11 I would like to thank the committee

12 for the opportunity to describe the

13 unparalleled success of the Empire State

14 Post-Production Film and Television Tax

15 Credit. This tax credit is a $25 million

16 suballocation of the Empire State Film and

17 Television Tax Credit. We testify today in

18 support of the three-year extension of the

19 tax credit contained in the Governor's

20 proposed Executive Budget.

21 In 2016, the Post New York Alliance

22 commissioned a report from HR&A to better

23 understand the economic impact of the

24 Post-only part of the Empire State credit on

316

1 the economy of New York State, and what we

2 discovered is that the post-production tax

3 credit has proven to be both a jobs creator

4 and an economic winner for the state.

5 Over 40 percent of the jobs in what

6 New York State traditionally defines as the

7 post-production industry do not require a

8 bachelor's degree, and over 90 percent of

9 those offer on-the-job training.

10 In 2015, the post-production ecosystem

11 generated $128 million in state tax revenues,

12 including individual income, corporate

13 income, sales, selective sales, and other

14 taxes. Thirty-five percent more people work

15 in the post-production ecosystem today than

16 did in 2004, when the whole tax credit was

17 put into place. Twenty percent of U.S.-based

18 post-production firms now call New York State

19 home. 11,260 people work in the

20 post-production ecosystem, including 4,470

21 freelancers.

22 Local 700, the Editor's Guild,

23 reported at the end of 2015 that pension and

24 health benefits are up 92.8 percent over

317

1 2009. These are audited numbers.

2 This tax credit is greatly responsible

3 for making New York State a national leader

4 in the post-production industry.

5 And as an aside, in 2016 the Post

6 New York Alliance partnered with Empire State

7 Development to provide post-production

8 fellowships to 20 New York State college

9 students, and these fellows came from nine of

10 the 10 economic regions in New York State.

11 The Governor's proposed extension of

12 the credit will ensure that projects which

13 otherwise would site elsewhere come to

14 New York State and, with these projects, the

15 many thousands of jobs as well.

16 Additionally, the extension ensures the

17 continuation of the millions of dollars of

18 tax revenue for the State of New York being

19 generated by this tax credit.

20 Thank you again for this opportunity,

21 and I look forward to any questions.

22 CHAIRWOMAN YOUNG: Thank you very

23 much.

24 You may have heard me speak with

318

1 Chairman Zemsky earlier about the film tax

2 credit. And for example, movies such as

3 The Natural were filmed in Buffalo and in

4 South Dayton, in my district. I hail from a

5 very rural part of New York State in Western

6 New York.

7 Is there -- he didn't really know off

8 the top of his head how we market New York

9 State for different sites and locations for

10 filming. Do you know how that is handled?

11 MS. COLLINS LEHMAN: I do know that

12 ESD is trying to combine tourism with the

13 marketing of the film industry. And I can

14 tell you that a wonderful film was shot in

15 Buffalo that will be coming out in September

16 called Marshall, a biopic about Thurgood

17 Marshall. And that was fully shot there and

18 did its post-production in New York.

19 CHAIRWOMAN YOUNG: Thank you.

20 MR. O'DONNELL: Senator Young,

21 Assemblyman Farrell, my name is Tom

22 O'Donnell. I am the president of Theatrical

23 Teamsters Local 817.

24 Before testifying in support of the

319

1 extension of the Empire State Film and

2 Television Tax Credit, I would like you to

3 know that I'm also testifying on behalf of

4 three other film and television unions: The

5 Screen Actors Guild-American Federation of

6 Television and Radio Artists; the Directors

7 Guild of America; and Local 52 IATSE.

8 Our unions are united in strong

9 support for the three-year extension of the

10 Empire State Film and Television Tax Credit

11 included in the Governor's proposed 2017-2018

12 budget.

13 For those of us representing labor, at

14 its core the film and television tax credit

15 is first and foremost a job creator. Since

16 the inception of the tax credit, our unions

17 have experienced an enormous increase in new

18 members, and our members have experienced an

19 enormous increase in days worked.

20 In 2004, at the inception of the first

21 iteration of the tax credit program, New York

22 State was hemorrhaging film work. There was

23 a smattering of feature films, mostly

24 shooting location scenes only, the Law and

320

1 Order franchise, and little other television.

2 We simply could not compete with Canada and

3 other locales that had lucrative financial

4 film incentives in place.

5 With New York State's tax credit,

6 coupled with the incredible depth of talent

7 that lives and works here, New York is now a

8 world hub for film and television production.

9 Studios are spending millions of dollars to

10 expand sound-stage capacity as New York has

11 truly entered into a golden age of television

12 production. It is the Empire State Film and

13 Television Tax Credit that has been the

14 difference maker.

15 In regards to my union, since 2010,

16 the Teamsters' work force has grown from

17 1,045 to 1,659 members. Gross wages have

18 nearly doubled, increasing from $94 million

19 to over $181 million. This increased

20 economic activity in our industry has

21 impacted our benefit funds, which has doubled

22 the number of recipients able to take

23 advantage of health, pension, and scholarship

24 benefits.

321

1 Similarly, SAG-AFTRA reported in 2015

2 that in the last 10 years the Guild has

3 experienced a 116 percent increase in the

4 number of SAG-AFTRA jobs going to New York

5 State residents. Last year alone, 52

6 scripted television series were produced in

7 New York State, employing workers under a

8 SAG-AFTRA contract, such as The Americans,

9 Billions, Elementary, Mr. Robot, and Orange

10 is the New Black.

11 In addition to wages and residuals,

12 SAG-AFTRA performers also receive

13 contributions to pensions and healthcare.

14 The Directors Guild of America reports

15 that the tax credit has led to unparalleled

16 growth in employment and economic activity

17 for its members in New York State. From the

18 creation of the tax credit in 2004, to 2015,

19 the number of scripted television series shot

20 in New York City rose by 300 percent, and DGA

21 members employed in scripted series in

22 New York went from earning $14 million to

23 $63 million -- a 350 percent increase. With

24 an extension of this tax credit, the DGA

322

1 expects these trends to continue.

2 And with regards to Local 52 IATSE,

3 over the last seven years IATSE has

4 experienced a 45 percent increase in

5 membership, with hundreds more applicants in

6 the pipeline, and an 89 percent increase in

7 the total hours worked by crew members. The

8 jobs for IATSE members created under this tax

9 credit make excellent salaries with excellent

10 benefits, including employer-funded medical,

11 a defined benefit pension, and annuity plans.

12 The union has full employment of its

13 membership.

14 In addition to my job as president of

15 Local 817, I serve as the director of the

16 Motion Picture and Theatrical Trade Division

17 for the International Brotherhood of

18 Teamsters for North America. I am well

19 versed in the construct and impact of film

20 tax credits.

21 Take out the art and, at its core, the

22 film industry is about manufacturing content.

23 In fact, it is easily the most mobile

24 manufacturing industry in the world. It can

323

1 as easily move to a fertile environment as it

2 can move away when an environment becomes

3 infertile.

4 The argument that New York State will

5 always have its fair share of film work due

6 to its locations and creative appeal is a

7 fallacy. Without the film tax credit, the

8 work would leave -- especially television,

9 which seeks the budgeting predictability that

10 a stable tax credit program affords. The

11 state has empirical evidence of such on

12 record.

13 In summation, as I stated in my

14 preface, the Empire State Film and Television

15 Tax Credit is a jobs program. Clearly the

16 unions mentioned have benefited greatly. The

17 other film and television unions can say the

18 same. But not just the unions have

19 benefited -- a multitude of ancillary

20 workers, hotels, restaurants, and other

21 suppliers to the industry have reaped the

22 benefit of the film tax credit program as

23 well.

24 So for these reasons on behalf of my

324

1 brothers and sisters in the labor movement,

2 we urge you to approve the Governor's

3 proposed extension of the Empire State Film

4 and Television Tax Credit.

5 I thank you for your time and

6 consideration.

7 CHAIRWOMAN YOUNG: Thank you very

8 much, Mr. President. And it's great to hear

9 that your members are working and that jobs

10 are growing.

11 Senator Savino.

12 SENATOR SAVINO: Thank you, Senator

13 Young.

14 I want to thank both of you for coming

15 in. And, you know, there's been a lot of

16 discussion today about the success or failure

17 of some of our economic development programs.

18 I would have to say, though, I am probably

19 the biggest cheerleader of the film tax

20 credit. I think it is the must successful

21 one that we have, and you can see it on the

22 ground every day. All you have to do is

23 visit Steiner Studios in Brooklyn and you see

24 what's happening there. As we speak, you

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1 know, Staten Island is becoming, I think,

2 ground zero for the film industry. There are

3 more television shows filled there. Gotham

4 is on the ground right now. The Black List

5 films there regularly. Boardwalk Empire I

6 think filmed half of their time there.

7 So we're seeing it. And it's not just

8 the fact that your members are working, it's

9 when they're on location in parts of New York

10 City and other parts of New York State,

11 they're also spending money in the local

12 economy. You know, so we were able to

13 protect and save good, solid union jobs, and

14 they are then reaping the benefit in the

15 local communities.

16 So I think it's something that has

17 been tremendously successful, and I think we

18 need to do everything possible to continue to

19 support the film tax credit because it is not

20 just a good economic development program, but

21 it is reaping benefits for the city and the

22 state all over. And I support the idea of

23 let's try and get some more upstate. I mean,

24 there's got to be some films that want to be

326

1 shot in the rural parts of New York State.

2 My prayer would be that one day we

3 could get, I don't know, HBO to bring Game of

4 Thrones here. I think we could recreate

5 Ireland in upstate New York. What do you

6 think, Assemblyman O'Donnell? We could find

7 a space up there that looks like Ireland,

8 don't you think so?

9 ASSEMBLYMAN O'DONNELL: Whatever you

10 say, Senator. Whatever you say.

11 (Laughter.)

12 SENATOR SAVINO: Thank you.

13 CHAIRWOMAN YOUNG: Thank you.

14 CHAIRMAN FARRELL: Mr. O'Donnell.

15 ASSEMBLYMAN O'DONNELL: Mr. O'Donnell,

16 welcome. Thank you very much for being here.

17 You made a distinction or added

18 language into your testimony about scripted

19 shows. Does the tax credit apply to

20 nonscripted shows as well?

21 MR. O'DONNELL: It does not apply to

22 documentaries and reality television at this

23 time.

24 ASSEMBLYMAN O'DONNELL: Well, that's

327

1 good, because I don't like those shows.

2 MR. O'DONNELL: Neither do I.

3 ASSEMBLYMAN O'DONNELL: So fake news.

4 I don't like the fake news shows.

5 And you're here testifying in support

6 of the extension of the credit. I presume,

7 if we were to extend it beyond the three

8 years, you'd be fine with that too. Yes?

9 MR. O'DONNELL: I'd be even more

10 pleased than I am now.

11 ASSEMBLYMAN O'DONNELL: Well, I'm

12 looking to make you pleased, Mr. O'Donnell.

13 Thank you very much.

14 CHAIRWOMAN YOUNG: Thank you.

15 ASSEMBLYMAN SCHIMMINGER: Are you

16 related?

17 ASSEMBLYMAN O'DONNELL: No. No

18 relation, no.

19 CHAIRWOMAN YOUNG: Sincerely, we

20 appreciate you being here today. Thank you

21 for your input.

22 MS. COLLINS LEHMAN: Thank you very

23 much.

24 CHAIRMAN FARRELL: Thank you.

328

1 CHAIRWOMAN YOUNG: The next speaker is

2 Kristen McManus, Association for the

3 Advancement of Retired Persons, AARP.

4 Welcome.

5 MS. McMANUS: Hello.

6 CHAIRWOMAN YOUNG: Any time you're

7 ready.

8 MS. McMANUS: Okay. Good afternoon,

9 Senator Young, Assemblyman Farrell, and

10 members of the committee. Thank you for the

11 opportunity to testify today.

12 I am Kristen McManus. I'm the senior

13 program specialist for AARP New York. AARP

14 is a social mission organization, and we have

15 over 2.6 million members in New York State.

16 My statement today is going to focus

17 on two areas of importance for the financial

18 security of older New Yorkers. I'll start by

19 discussing the Executive Budget proposal to

20 combat financial exploitation of older

21 adults, which is unfortunately a growing

22 problem in the state and across the country.

23 A 2016 study from the Office of

24 Children and Family Services shows that in

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1 New York State the number of reported cases

2 of financial exploitation for older adults

3 has increased 35 percent between the years

4 2010 and 2014.

5 The estimate is that 5 million older

6 adults across the country are impacted by

7 financial exploitation every year. In

8 New York State, Lifespan of Greater Rochester

9 estimates that 260,000 older adults fall

10 victim every year. But this is an incidence

11 that widely goes underreported. So for every

12 one case that is detected and brought to the

13 attention of the authorities, they estimate

14 that approximately 23 go undetected.

15 OCFS has estimated that the total cost

16 of financial exploitation for older adults is

17 $1.5 billion every year. This is the cost

18 that's to the state and to the individual

19 victims.

20 The Executive Budget proposal provides

21 training and education for banking

22 institutions that will allow them to better

23 detect incidents of financial exploitation of

24 older adults. Banks would be able to act

330

1 quickly to place a hold on a vulnerable

2 adult's account if they have reason to

3 suspect that they are a victim of financial

4 exploitation. The adult will also still be

5 able to access those accounts and funds for

6 ongoing living expenses and for emergencies

7 if necessary.

8 AARP supports this initiative, and our

9 recommendation is that the Legislature

10 include this language in the enacted budget.

11 I would also like to take a moment to

12 talk about increasing access to retirement

13 savings accounts. AARP has been a supporter

14 of the Secure Choice Savings Program Act, as

15 championed by Senator Savino and Assemblyman

16 Rodriguez. This would create a

17 state-facilitated retirement savings option

18 for private-sector workers who have no way to

19 save for their retirement through their

20 employer.

21 We know that there are about

22 3.5 million people in the private sector who

23 have no way to save for their retirement at

24 work. This is more than half of the state's

331

1 private sector. If we take a look at that

2 number and break it down further by race and

3 ethnicity, we see the lack of access to

4 retirement savings programs grows

5 substantially. About 67 percent of our

6 Hispanic and Latino workforce, 52 percent of

7 the African-American and black workforce, and

8 60.5 percent of Asian-American workers have

9 no way to save for their retirement on the

10 job.

11 We also know that employees are

12 15 times more likely to save if their

13 employer gives them a way to do so.

14 AARP believes that New York can help

15 workers save for their retirement through the

16 Secure Choice program. It establishes a

17 highly effective, automatic enrollment

18 option, which we have seen shows a result of

19 a participation rate of 90 percent in

20 retirement savings programs.

21 This creates a convenient way for

22 employees to save on the job, and it's a

23 portable option, so they can take it with

24 them from job to job if they decide to change

332

1 jobs.

2 It's also cost-effective for

3 businesses. We know that many businesses,

4 particularly small businesses, want to be

5 able to offer this type of benefit to their

6 employees, but they often find it too costly

7 or that the administrative burden is too much

8 to bear.

9 AARP recently did a study of small

10 businesses across the state. Two-thirds of

11 them said that they support the idea.

12 Moreover, 80 percent of them believe that the

13 Legislature should support this idea.

14 This is a benefit to the employees, to

15 the employers, but also to the state. It is

16 designed to be self-sustaining and not rely

17 on any ongoing state funding. And by making

18 it easier for people to save for retirement,

19 they'll be less likely to need

20 taxpayer-funded services and safety-net

21 programs down the line.

22 We think the Secure Choice Savings

23 Program Act is one of the most effective ways

24 to ensure that New Yorkers have the tools

333

1 that they need to be financially secure in

2 their retirement. We ask that the

3 Legislature include this language in the

4 enacted budget.

5 That's all I have for you. Thank you

6 for the opportunity to testify, and I am

7 happy to take any questions.

8 CHAIRWOMAN YOUNG: Thank you.

9 Any questions?

10 ASSEMBLYMAN OAKS: Thank you.

11 CHAIRMAN FARRELL: Thank you.

12 CHAIRWOMAN YOUNG: You gave a very

13 comprehensive presentation. Thank you so

14 much.

15 SENATOR SAVINO: Thank you for

16 supporting the Secure Choice Retirement Plan.

17 MS. McMANUS: Thank you for sponsoring

18 it.

19 CHAIRWOMAN YOUNG: Next speaking is

20 Rose Marie Cantanno, associate director of

21 the Consumer Protection Unit for the New York

22 Legal Assistance Group.

23 Thank you for coming today.

24 MS. CANTANNO: Good afternoon, Senator

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1 Young, Chairman Farrell, members of the

2 Senate and the Assembly. My name is Rose

3 Marie Cantanno. I'm the associate director

4 of the Consumer Protection Unit at the

5 New York Legal Assistance Group, known as

6 NYLAG, and I also supervise the Foreclosure

7 Prevention Project. I appreciate you letting

8 me speak to you today about the effect that

9 the elimination of foreclosure prevention

10 funding will have on the state.

11 For the past six and a half years, I

12 have had the privilege of representing

13 New York homeowners in the five boroughs of

14 New York City and long Island. And though we

15 have made great strides, unfortunately the

16 foreclosure crisis that began in 2008 is

17 still far from over. At this time

18 foreclosures still comprise 26 percent of our

19 civil docket in New York State. And in 2016

20 alone, 34,000 new foreclosures were filed and

21 72,000 cases are still pending.

22 For the past five years, monies from

23 the National Mortgage Settlement have funded

24 a coalition of legal service providers and

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1 housing counselors in every county of

2 New York State, the Foreclosure Prevention

3 Services Network. Unfortunately, this

4 revenue stream is now exhausted. As of

5 September 30th this year, there will be no

6 more funding.

7 In 2016, this network served

8 approximately 34,000 families in New York

9 State. Legal service providers represented

10 struggling homeowners who were involved in

11 complex litigation in order to save their

12 homes.

13 I just listened to my colleague from

14 the AARP. Unfortunately, our rising

15 population that we are seeing now are senior

16 citizens with reverse mortgage foreclosures

17 and tax lien foreclosures, we are seeing

18 people ranging from 70 years old to -- we

19 just met a woman recently who just had her

20 100th birthday who is in danger of losing her

21 home.

22 In addition, we also represent clients

23 in short-sale transactions. These are people

24 that as much as they would love to stay in

336

1 their homes, it's just not feasible. Either

2 they can't afford if or they owe hundreds of

3 thousands of dollars more than what their

4 house is worth. Unfortunately, the banks

5 make it almost impossible for them to get out

6 of it.

7 When we get involved, we negotiate

8 with the banks so that the banks will accept

9 market value for the house and forgive the

10 difference. This allows people to move on

11 and allows these homes to be sold to other

12 members of the community. Part of our goal

13 is to try to see communities stay strong. So

14 when an investor buys a home in a foreclosure

15 auction and then it just sits there and

16 nothing happens, or a bank takes it back and

17 boards it up and it just sits in the

18 community, it hurts the entire community.

19 In 2016, there were sweeping reforms

20 in the foreclosure world. The Legislature,

21 for example, has the settlement conference

22 part, which is the part of our core process

23 where litigants are able to come in, whether

24 or not they are represented by counsel, and

337

1 they actually get to sit down with a referee

2 or a judge and they try to negotiate some

3 kind of loan modification or some kind of

4 home retention option.

5 At this time we have legal service

6 providers and housing counselors in all of

7 the courts. Either people can get assistance

8 right then and there, or we have legal

9 clinics set up so that people can come back.

10 One of the new legislations that we have that

11 we had, as a foreclosure advocate, been

12 trying to get for a long time, is that our

13 litigants are now given 30 days from the time

14 of the first settlement conference to put an

15 answer into their foreclosure complaint.

16 A lot of our clients, they receive the

17 legal documents in the mail, they're not sure

18 exactly what to do, they don't respond in

19 time. This gives them the opportunity, once

20 they get into court, to put in their legal

21 answers. We're there now to do these answers

22 for these people right while they're there.

23 We're also there to make sure that the

24 banks do what they are supposed to do. Some

338

1 people will say to me, "Well, you're just

2 trying to get people a free house." And that

3 is absolutely not what we're trying to do.

4 We are trying to work something out so that

5 the lenders will get back the money that they

6 are supposed to get, our clients are able to

7 stay in their homes and are able to also live

8 and not have to leave their communities.

9 A lot of my clients, when they just

10 can't work something out, they end up leaving

11 the state. And then I have other clients who

12 will come in and say, Well, I owned a

13 laundromat and my business is down 50 percent

14 because one-third of the neighborhood is

15 gone.

16 For example, the mayor in Mastic Beach

17 invited me up, and she said, "Come up, and I

18 want to drive you around." She said, "Every

19 third house is boarded up, because people

20 just left."

21 And that's part of the problem with

22 the zombie properties. We work very closely

23 with DFS to let them know -- now that the

24 banks are responsible for taking care of

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1 these zombie properties, we want to make sure

2 that we stay there and that we keep them

3 accountable. I'm a big fan of

4 accountability.

5 So at this time we are asking for

6 $10 million in the budget. As I said, our

7 funding ends September 30th, so we are

8 looking for $10 million for the last six

9 months of this year and a $20 million

10 allocation for the following year. At this

11 time the program is running at $20 million a

12 year.

13 Thank you.

14 CHAIRWOMAN YOUNG: Thank you.

15 Any questions?

16 ASSEMBLYMAN OAKS: Thank you.

17 MS. CANTANNO: Thank you very much.

18 CHAIRWOMAN YOUNG: Thank you very much

19 for your testimony. We truly appreciate it.

20 Our next speaker is Lara

21 Kasper-Buckareff, director of foreclosure

22 prevention for Legal Services of the Hudson

23 Valley.

24 MS. KASPER-BUCKAREFF: Good afternoon.

340

1 CHAIRWOMAN YOUNG: Good afternoon.

2 MS. KASPER-BUCKAREFF: Your Honors, my

3 name is Lara Kasper-Buckareff. I am an

4 attorney and the director of foreclosure

5 prevention at Legal services of the Hudson

6 Valley, or LSHV. LSHV is a nonprofit law

7 firm which provides free, high-quality

8 foreclosure prevention legal services to low-

9 and middle-income residents of Westchester,

10 Rockland, Putnam, Orange, Sullivan, Dutchess,

11 and Ulster counties. With the exception of

12 Rockland County, we are the only nonprofit

13 law firm in the aforementioned counties that

14 provides free foreclosure prevention legal

15 services.

16 Our Foreclosure Prevention Unit

17 consists of nine attorneys and four

18 paralegals.

19 In 2016, LSHV provided foreclosure

20 prevention legal services to 767 households

21 and prevented 104 mortgage foreclosures.

22 Legal Services of the Hudson Valley prevented

23 additional foreclosures due to unpaid taxes,

24 homeowner or condominium association fees, or

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1 cooperative association maintenance fees.

2 The Homeowner Protection Program, or

3 HOPP, the principal source of foreclosure

4 prevention funding upon which we have relied,

5 is ending in September 2017. Without a new

6 source of funding to fill this gap, every

7 year LSHV will be forced to turn away

8 hundreds of Hudson Valley residents in danger

9 of losing their homes to foreclosure.

10 Without LSHV, these homeowners will be more

11 likely to lose their homes because they

12 cannot afford to hire an attorney.

13 The mortgage foreclosure rate in

14 New York State remains very high as compared

15 with the rest of the nation. The Mortgage

16 Bankers Association reported in November of

17 2016 that in the third quarter of that year,

18 New Jersey and New York had the highest

19 percentage of loans in foreclosure, at 5.79

20 and 4.32, respectively.

21 Foreclosure cases represent nearly

22 26 percent of the Supreme Court's civil

23 caseload. The mid-Hudson region has been hit

24 particularly hard. The mid-Hudson region and

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1 Long Island have the greatest number of

2 pending mortgage foreclosure cases in

3 New York. For example, one in every

4 44 housing units is in foreclosure in

5 Rockland County, and one in every 48 housing

6 units is in foreclosure in Putnam County.

7 Legal Services of the Hudson Valley

8 collaborates with HUD-approved housing

9 counseling agencies, also funded by HOPP, to

10 prevent foreclosures. The positive effects

11 of preventing foreclosure are well-known.

12 Homeowners who save their homes from

13 foreclosure have incentive to pay their

14 property and school taxes and other municipal

15 bills. They are also more likely to maintain

16 their homes, which increases the value of

17 other homes in the neighborhood and property

18 assessments for tax purposes. Zombie

19 properties are associated with crime and

20 nuisance activity, increasing the costs of

21 police and fire departments.

22 During the 2016 legislative session,

23 new legislation was enacted to prevent

24 mortgage foreclosures and address the bane of

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1 zombie properties. Continued funding of

2 legal services and housing counseling will

3 ensure robust implementation of this

4 legislation.

5 Unfortunately, reverse mortgage

6 foreclosures are increasing. The Office of

7 the New York State Attorney General is

8 investigating reverse mortgage servicing

9 companies' practices -- in particular,

10 whether the businesses employed tactics that

11 pushed elderly borrowers into foreclosure.

12 In our experience, many seniors are facing

13 reverse mortgage foreclosures that can be

14 resolved through repayment plans or

15 Chapter 13 bankruptcy plans, but they need

16 legal advocacy to obtain this relief.

17 Tax foreclosures are also a growing

18 problem, and HOPP legal services providers

19 are integral in resolving these cases through

20 repayment plans or Chapter 13 bankruptcy

21 plans. In both cases, the county and school

22 district taxes are repaid, along with

23 interest.

24 Mortgage foreclosure cases are harder

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1 to resolve today than they were even a couple

2 months ago. Homeowners need attorneys

3 advocating for them, now more than ever. The

4 federal Home Affordable Modification Program

5 ended in December 2016. While HAMP was not

6 perfectly executed, with respect to loan

7 modifications, it created some structure and

8 accountability. Additionally, the sale of

9 distressed mortgages by federal agencies

10 means tougher negotiations with private

11 Wall Street investors.

12 I would like to share with you a

13 couple of success stories from last year.

14 These are illustrative of the foreclosure

15 prevention work that we do every day at

16 Legal Services of the Hudson Valley under

17 HOPP funding.

18 In 2015, a Putnam County resident whom

19 I will call Mary contacted Legal Services of

20 the Hudson Valley seeking our help in

21 stopping the imminent foreclosure auction of

22 her home. Mary is a veteran, a domestic

23 violence victim, and a working single mother

24 of a disabled child. LSHV filed a motion for

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1 a temporary restraining order, and the TRO

2 was granted. As a result, Mary was able to

3 apply for and obtain a loan modification last

4 year, enabling her to avoid foreclosure and

5 save her home.

6 In 2016, a Sullivan County resident

7 whom I will call John contacted Legal

8 Services of the Hudson Valley. He was in

9 danger of losing his home to foreclosure and

10 was concerned that he, his wife, and their

11 three children would become homeless. The

12 company that serviced John's mortgage loan

13 offered him a loan modification, but it

14 required him to sign the deed to his home

15 over to the lender at the time of

16 modification. The loan modification was also

17 not affordable.

18 LSHV appeared as John's attorney in

19 the foreclosure action and negotiated a loan

20 modification for John that did not include

21 transfer of the deed. The modification also

22 included loan forgiveness of over $127,000,

23 which resulted in a more affordable mortgage

24 payment.

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1 Without HOPP funding, LSHV would not

2 have been able to help Mary and John save

3 their homes. We strongly urge you to fill

4 the gap that will be left when HOPP funding

5 ends in September 2017 by allocating

6 $30 million in funding for foreclosure

7 prevention services over the next two state

8 fiscal years -- S10 million for 2017-2018 and

9 $20 million for 2018-2019 and going forward.

10 Thank you.

11 CHAIRWOMAN YOUNG: Thank you.

12 Senator Krueger.

13 SENATOR KRUEGER: Hi. Just one quick

14 question. I'm a strong supporter of this

15 program.

16 Which section of the budget does the

17 existing funding come from? Where do the

18 contracts come out of?

19 MS. KASPER-BUCKAREFF: The existing

20 funding comes from the Homeowner Protection

21 Program, which is a program of the New York

22 State Attorney General's office. That

23 funding ultimately came from the settlements

24 that the New York State Attorney General

347

1 reached with some of the big banks.

2 Before HOPP funding, there was funding

3 that was allocated to the New York Homes and

4 Community Renewal Agency. So we're

5 suggesting that may be an appropriate vehicle

6 for this funding.

7 SENATOR KRUEGER: That's exactly where

8 I was going.

9 And again, I think it's very important

10 testimony from both you and the previous

11 speaker. This is the Economic Development

12 Hearing, obviously, so I was just trying to

13 put it in the context of my own brain of

14 where we should really be looking at it for

15 landing it in the budget.

16 And I agree, I think the Division of

17 Housing and Renewal is the obvious place.

18 MS. KASPER-BUCKAREFF: Very good. And

19 thank you for your support.

20 SENATOR KRUEGER: Thank you.

21 CHAIRWOMAN YOUNG: Thank you.

22 Anyone else?

23 Okay, thank you for your

24 participation.

348

1 CHAIRMAN FARRELL: Thank you.

2 CHAIRWOMAN YOUNG: Our final speaker

3 of the day is Jay Flemma, staff attorney for

4 Legal Aid Society of Mid-New York.

5 MR. FLEMMA: Thank you, Senators. And

6 thank you, Assemblymen. My name is Jay

7 Flemma, and I'm a lawyer with the Utica

8 office of the Legal Aid Society of

9 Mid-New York, where I've worked in the

10 Mortgage Foreclosure Defense Practice Group

11 for the last three years.

12 And I just want to underscore the

13 urgency of the alarm bell that we're ringing

14 here. There's a desperate need for the

15 prompt funding for foreclosure prevention

16 services through the New York Homes and

17 Community Renewal program, HCR.

18 We are in the direst of fiscal

19 emergencies, and that means every homeowner

20 in New York is. And that means all of your

21 constituents as well. Without lawyers and

22 housing counselors, these people face

23 mortgage foreclosure lawsuits alone, an all

24 but hopeless task.

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1 To give you an example of who we are

2 and what we do and why the funding is so

3 critical, please consider that in the last

4 two years alone, under HOPP, my organization,

5 the Legal Aid Society of Mid-New York, has

6 averaged per year closing 192 cases,

7 preventing foreclosure in 122 cases, given

8 counsel and advice on another 104, and in

9 doing so has saved homeowners over $3 million

10 in modifications, reinstatements and payoffs,

11 and saved another $2.1 million in principal

12 forgiveness.

13 We are always within our fiscal

14 allotment and comfortably outperform our

15 yearly goals. Perennially, we and the

16 servicers as a whole are one of the best

17 bargains in the budget. We could not perform

18 a more important service at a more

19 competitive price.

20 Foreclosure affects everyone -- of all

21 ethnicities, socioeconomic backgrounds,

22 religions, and political ideologies.

23 Foreclosure doesn't care if you're young or

24 old, black or white, Christian or Muslim,

350

1 Democrat or Republican, rich or poor. It

2 cuts its devastating swath across all walks

3 of life. And I know all of you recall the

4 stomach-churning terror of the last crash

5 with dread and how once proud and prosperous

6 neighborhoods evaporated into blight.

7 Sadly, the crisis is still with us and

8 shows no signs of abating. Every metric I

9 study indicates a second crash is coming,

10 more devastating than the first.

11 As you all know, HOPP ends

12 September 30th and the AG was explicit that

13 they will no longer fund it. Subsequent bank

14 settlements are now subject to the budgeting

15 process, and right now they don't include

16 funding for foreclosure prevention services.

17 However, prior to HOPP, HCR funded the

18 statewide network, and it's that program we

19 ask you to please recreate. There are three

20 critical reasons. First, foreclosures are

21 steadily increasing still. Second, the

22 housing market is now enduring similar

23 triggers to those that precipitated the 2008

24 crash. Another is likely. And third,

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1 mortgage foreclosure law is so complex and

2 voluminous, unrepresented defendants are

3 incapable of adequately defending themselves.

4 Just three weeks ago, OCA announced

5 there were 33,000 new foreclosure cases filed

6 in 2016, well in excess of the levels we saw

7 at the beginning of the crisis, about 26,000.

8 Right now, as you know, there are 72,000

9 pending foreclosure cases in our courts, a

10 whopping 26 percent. One out of every four

11 cases in New York is a mortgage foreclosure

12 action. No one can say this crisis over.

13 Sadly, these numbers look to increase

14 as several foreclosure prevention programs

15 have vanished while crisis-triggering

16 practices, once forbidden, are being

17 permitted.

18 As you know, HAMP helped 1.5 million

19 homeowners keep their homes, but it ended

20 December 30th and nothing yet replaces it.

21 This leaves homeowners only with their bank

22 or servicer's internal modification programs,

23 many of which are severely limited. This was

24 a huge blow to mortgage foreclosure defense.

352

1 Worse still, recently enacted federal

2 subprime programs are creating new

3 generations of risky loans. Early last year,

4 Fannie Mae rolled out the HomeReady program,

5 a replacement to their notorious "My

6 Community Mortgage" subprime program. For

7 the first time, applicants with subprime

8 credit scores as low as 620 can, for 3

9 percent down, apply for loans based on the

10 income of non-related non-borrowers who may

11 or may not be living in the household.

12 This is dangerous because three of the

13 biggest indicators of likely default are

14 reliance on outside income, low down

15 payments, and low credit scores. Doubling

16 down on this risky approach appears to be in

17 the works, as there's green-lighting now of

18 NINJA loans, the acronym for the dreaded no

19 income, no job, no assets. Please forgive me

20 for saying so, but that's textbook urban

21 dictionary definition of insanity --

22 repeating a mistake and expecting a different

23 result.

24 Along with that, the raising of

353

1 interest rates last December translates

2 roughly to an average mortgage having an

3 additional $75 added per month for the life

4 of the 30 years.

5 Finally, and I can't stress this

6 enough, mortgage foreclosure law is as deep

7 in its complexity as it is voluminous in its

8 breadth. I have to be both a

9 transactionalist and a litigator

10 simultaneously. We all have to have a

11 mastery of all the areas of law that

12 intersect with foreclosure -- bankruptcy,

13 wills and estates, tax, divorce, real estate,

14 land use, zoning, and disability, just to

15 name a few.

16 And the sheer number of sources of

17 mortgage foreclosure law is staggering.

18 Federal regulations, state statutes, court

19 rules, CPLR provisions, mortgagee letters,

20 investor guidelines, stock and bond

21 prospectuses -- thousands upon thousands of

22 pages governing the myriad types of loans,

23 none of which are identical to the other.

24 And the law changes on almost a daily basis.

354

1 In my 23 years as an attorney, I've

2 practiced in many complex areas of law.

3 That's why I ended up at Legal Aid in the

4 first place, because I worked in areas that

5 were known for prolixity, complexity, and

6 daily changes. But even intellectual

7 property and Internet law are not as

8 labyrinthine as the law and practice of

9 mortgage foreclosure defense.

10 And without lawyers to guide them, the

11 homeowners will be lost in the byzantine maze

12 the practice has become. They don't know

13 anything about appeals of denial,

14 escalations, notices of error. They won't

15 know when a servicer is following the

16 investor guidelines or not. And they don't

17 know how to file effective complaints to

18 protect themselves with the CFPB or DFS. And

19 most of all, they lack the leverage to

20 negotiate fair resolutions from the banks

21 that are ruthlessly trying to pry the last

22 possible cent from their already strained

23 wallets.

24 Worse still, without a network of

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1 skilled, dedicated mortgage foreclosure

2 defense providers, the homeowners will be

3 left to the mercy of the myriad mortgage

4 foreclosure scams that have devastated so

5 many unsuspecting borrowers.

6 I'm very proud to say that I've been

7 really good at getting back money from the

8 scammers. You'll see attached the testimony

9 of Lesley Vella, a client of mine, who lost

10 $6500 to two scammers -- but I did get it

11 back for her.

12 You good folks, our elected lawmakers,

13 admirably passed reforms that keep us ahead

14 of the rest of the nation when it comes to

15 protecting homeowners. We thank you for

16 that. The CPR 3408 revisions and the zombie

17 properties law are great strides.

18 Assemblywoman Weinstein and Senator Klein's

19 bills on reverse mortgages are a godsend to

20 the elderly borrowers formerly left

21 defenseless. And the consumer protections

22 enacted finally allow homeowners to strike

23 back at abuses.

24 But that's all for naught without the

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1 lawyers who have the skill to use these

2 protections. Without the lawyers, the

3 homeowners will be at their mercy. And as my

4 client Lesley Vella said so well in her

5 written testimony, everyone has a mortgage,

6 so everyone is at risk.

7 And I'm very happy to say Lesley came

8 to me with one day left to answer the

9 complaint for herself and her 70-year-old

10 father, who also got sued because he signed

11 on the note. They initially were denied

12 their mod. We overcame the denial. We also

13 got back $4,000 in costs and attorney fees

14 that were improper, and I retained the $6,000

15 out of the $6500 that she gave the scammers

16 as well. You'll read in her testimony that

17 her life was broken until she came to Legal

18 Aid. And now, happily, they have rallied.

19 As such, we implore you, promptly fund

20 the state's foreclosure defense service

21 providers through the HRC program. Without

22 us, the homeowners don't have a chance.

23 I'll take questions, please.

24 CHAIRWOMAN YOUNG: Thank you.

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1 Any questions?

2 I think we're all set. So thank you,

3 Mr. Flemma. Thank you for coming.

4 SENATOR KRUEGER: Thank you very much.

5 MR. FLEMMA: Thank you all very much.

6 CHAIRWOMAN YOUNG: We appreciate

7 everyone's participation today. And that

8 will conclude the Joint Budget Hearing for

9 2017-2018 on Economic Development.

10 And we have several hearings that will

11 be held next week, beginning with Mental

12 Health on Monday at 1 p.m.

13 Thank you.

14 (Whereupon, the budget hearing

15 concluded at 3:28 p.m.)

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