Let’s hope scandal allows innovators to get their foot in the door in Buffalo

The price of doing business in Buffalo just went down, thus giving the Rust Belt’s favorite renaissance story a very big boost. Because of theindictments handed down last Thursday, future competition for public money will be cleaner, and waged with sharper pencils between those whose credentials will no longer include pledges of huge campaign contributions or hefty consulting deals for former political staffers or expensive jobs for spouses.

The rule book for what not to do is spelled out in the email trail left by Buffalo-based developer Lou Ciminelli and two of his top executives, indicating their personal involvement in rigging bids for Gov. Andrew Cuomo’s prized Buffalo Billion initiative.

Cuomo was emphatically not indicted by either state Attorney General Eric Schneiderman nor U.S. Attorney Preet Bharara, the prosecutors whom Buffalo commentator Alan Bedenko refers to as today’s “New Untouchables.” Indeed,Cuomo visited Buffalo on Friday to proclaim that the Buffalo Billion program – the transformative public investment to kick-start a new industrial economy in this iconic Rust Belt town – will proceed as surely as the wheels of justice will grind.

Like Eliot Spitzer before him, Cuomo set out to achieve the improbable – leveraging private investment in a city that was once America’s foremost center of innovation in aerospace and medical research, one of its greatest hubs of international trade and steel-making, and, long ago, even the “City of Light” when Buffalo became the first American city to electrify thanks to the original Nikola Tesla.

Now Cuomo is bringing the new Tesla to town in the person of Elon Musk and his SolarCity. Buffalo and Western New York need it. Though the latest numbers from the federal Bureau of Economic Analysis show that Buffalo’s diverse and resilient economy continues its modest “Obama recovery” expansion, the desperation for economic rescue is based in persistently negative realities. The regional population is down since 2000 and is actually below what it was in 1970. Half of the region’s African-American men aged 18-64 are out of the workforce, and the childhood poverty rate is growing. In recovering from the 2008 financial crisis, most of the new jobs pay less than $10 an hour. Almost 70 percent of taxpayers report less than $30,000 in annual income, and the median household income in Western New York counties is anywhere from about $8,000 to $16,000 less than the statewide median. Housing prices in a few census tracts are up smartly, but with the population stagnating and aging out, oversupply looms even as suburban sprawl marches every farther outward from the spiffed-up, photogenic Buffalo waterfront party center.

Every Buffalo-area elected official who gladly accepted campaign contributions from the now-indicted Ciminelli is fervently praying that Cuomo’s $750 million gamble on Elon Musk pays. Starting in 2017, the city will see new jobs, a new industry cluster, a new support for the “ecosystem” of engineers, manufacturers and follow-on entrepreneurs who will take advantage of Buffalo’s slice of the fastest-growing energy/industry shift since John D. Rockefeller and his friends started pumping oil out of Pennsylvania, just 80 miles away.

So the hopes are high that the factory Ciminelli built in Buffalo will still be successful even if this well-known political player goes to the big house. Ciminelli’s construction company’s signs are all over Buffalo, because along with the SolarCity plant, Ciminelli won the bids to build the $300 million dormitory project for Buffalo State College, the $300 million new campus of the Medical School, the $1 billion Buffalo Public Schools systemwide rehab project that turned into a $1.4 billion systemwide project, the $200 million Erie County infirmary project in Buffalo, and an as-yet-untallied redevelopment of an inner-city shopping plaza with public funds involved. Ciminelli’s name is as ubiquitous on public projects as it is on financial disclosure statements for public officials.

Ciminelli has long been a fulcrum of this bipartisan political economy. He was a major donor to Republican Gov. George Pataki, who appointed him to the head of the New York Power Authority. His younger brother Paul Ciminelli, who heads Ciminelli Development Corporation, was a major fundraiser for both Govs. Spitzer and Cuomo, and was an appointee to the Empire State Development Corporation board even while Ciminelli firms did business with the state.

Can it change? A scant $5 million was carved out of the Buffalo Billion for a business plan competition that has been resoundingly successful in raising the spirits of innovators here, and the hopes of Buffalo citizens who are depressed about the same insiders getting the same make-work projects. Everybody wants out from under the old deal, except, of course, the subsidy profiteers. The43North competition, now in its third year, is birthing a new sense of possibility. It’s modeled on the wildly successful competition that Pittsburgh used to leverage its own transformation from Rust Belt depression to an international knowledge and best-practice center for IT entrepreneurs.

The best hope for Cuomo, of course, is that despite his allies’ allegedly dirty hands,  his project of economic engineering succeeds.

But stay tuned. As one reads the email threads, it becomes clear that the former LPCiminelli executive, whom Ciminelli hired from the Buffalo Niagara Partnership (the local chamber of commerce), was completely guileless in editing the bid specs, as was his boss. The business community in Buffalo has long profited from the current ecology, in which they pronounce their hatred for government and then write checks to politicians whose staff go forth and bring back the Albany-financed projects.

Louis Ciminelli, now indicted, served as head of the Buffalo Niagara Partnership, which has long sponsored a lobbying campaign with the title Unshackle Upstate, whose principal advocacy is to get government off the backs of business here. The Buffalo Niagara Partnership has long taken its cues from Robert Wilmers, CEO of M&T Bank, who loudly denounced Wall Street manipulation of mortgage-backed securities as the 2008 collapse unfolded, yet whose own bank was found guilty of fraud in selling $275 million in mortgage-backed securities.

Buffalo’s culture of impunity is now on display. One hopes that a little sunshine interrupts its persistence long enough for the new, hopeful culture of innovation and entrepreneurship to grow.

Bruce Fisher is director of the Center for Economic and Policy Studies, and visiting professor in the economics and finance department at Buffalo State College.