Noticing The Not-So-Subtle Way Cuomo's State Contracts Seem Rigged For His Donors

The pattern for how Cuomo and his associates rig bids for his donors gets some scrutiny in this Albany Business Review piece looking at a SUNY Polytechnic contract for a dorm:

Richard Gefell is always looking for potential business opportunities, so when he heard last year SUNY Polytechnic Institute in Albany needed dormitories for 500 students near its campus, he was intrigued.

Gefell, director of business development at Purcell Construction Corp. in Watertown, signed a confidentiality agreement to get the project specifications, a requirement 12 other companies also fulfilled, according to documents released to Albany Business Review under the state Freedom of Information Law.

But his interest waned when he read the Request for Proposal, or RFP, and realized developers must have their headquarters or “major operations” in the Albany region. Watertown is 175 miles west, near Lake Ontario.

He was also dismayed to see the college preferred the dorms be built within a 10-minute walk of campus.

“The way the RFP was written, you could kind of tell they had already selected their site,” Gefell said. “The more research I did down there, there’s really one site that was suitable.”

He added, “They had very tight parameters on where the site could be located, and a very short window of time to secure it. It appeared there weren’t that many sites that met that criteria.”

Another builder said the deadline to submit proposals — just 43 days after the RFP was issued — made it impractical to get control of land near the campus on time.

“We thought someone had an inside track,” said the builder, who asked not to be identified because of concerns it could threaten future dealings with SUNY Polytechnic. “It was so highly specific. Unless you knew about it before the RFP was released, you would not have been in a position to respond.”

Only one developer submitted a proposal - Columbia Development.

If you guessed that Columbia Development was a Cuomo donor, well, you win a government contract from the Cuomo administration.

Here was Chris Churchill in the Times-Union back in September following some of the money around the Columbia Development/SUNY Poly dorm story:

SUNY Poly just awarded a contract for dormitory construction to Columbia Development, whose entities have given at least $175,000 to the governor's campaign fund since the start of 2014.

...

June 2014: The Times Union learns that Columbia is the developer for the so-called ZEN building, a $191 million project that is still under construction. Columbia will be also be a ZEN tenant.

July 2014: We learn that Columbia is buying homes on Loughlin Street, just south of the SUNY Poly campus. "Nobody here has any idea what that's about," Gretzinger said at the time.

March 2015: SUNY Poly issues a request for proposals to construct dorms. The school asks that the dorms be within a 10-minute walk of campus, and it requires that the developer be based in the Capital Region and have experience in dorm construction.

The requirements seemed perfectly suited for Columbia, but SUNY Poly head Alain Kaloyeros cautioned against jumping to conclusions. "It would be an erroneous assumption to presume at this point that we have a preferred developer or location," Kaloyeros said then.

September 2015: We learn that Columbia has, indeed, won the bid and will develop three dorms and parking on land that includes Loughlin Street. SUNY Poly is negotiating to buy the land from the developer. The project architect is EYP, which is headquartered on the SUNY Poly campus.

OK, so take that timeline and overlay it with what I found on Monday while searching the Board of Elections online records.

August 2013: A Columbia entity gives $25,000 to Cuomo's campaign fund. It's the company's first donation to Cuomo in the database.

June 2014: Two Columbia entities — Ridgehill LLC and 25 Monroe LLC — give $50,000 each. All together, Columbia and related LLCs give $115,000 to the governor over the course of 2014.

July 2015: Six separate Columbia entities give a total of $50,000 to the governor on just one day, July 13. All together, Columbia has given $60,000 so far this year, according to state records.

The three-year total: $200,000.

That's a significant amount of money — and it's probably an undercount of Columbia's contributions. It's so difficult to ferret out all the various Columbia-associated LLCs that it's likely I missed a few. Columbia President Joe Nicolla, who also is a SUNY Poly Foundation board member, could probably provide the precise number, but he declined comment Monday.

Churchill went on to note the similarities between the Columbia Development/SUNY Poly dorm story and the Buffalo Billion/LP Ciminelli story:

In Buffalo, a similar pattern was uncovered by the Investigative Post, a Buffalo-based online news outlet.

Jim Heaney, its editor, dug deep on the Buffalo Billion, a Cuomo economic development effort in which Kaloyeros is heavily involved. His reporting peeled away layers of secrecy to find that a request-for-proposals seemed written for LPCiminelli, which is owned by a major Cuomo donor.

This week we found what seems to be a similar RFP rigging from SUNY over a proposed for-profit charter school run by NHA - a Cuomo donor in the past.

I'm no lawyer, but I would imagine that this kind of pattern - RFP's seemingly tailored so only Cuomo donors can get the contract - will interest the U.S. attorney and his merry men and women looking into potential criminality, conflicts of interest and malfeasance in Cuomo's economic development programs.

It's Attorney General Schneiderman officially looking into this SUNY Polytechnic dorm proposal, but it's not like he and Preet don't talk, you know?

Will SolarCity Implode And Burn Governor Cuomo's Administration With It?

SolarCity, the company the Cuomo administration is spending $750 million in Buffalo Billion Project funds on, had an interesting week to say the least.

The NY Times had a long piece on the risks/rewards the SolarCity deal has for New York taxpayers - here is the reward angle:

Gov. Andrew M. Cuomo has committed up to $750 million to the project, the biggest economic development effort he has undertaken in his five years as governor.

In doing so, he has not just bet big on solar energy, a competitive and rapidly growing business, but also on the success of SolarCity, a fast-growing California company that will operate out of the factory that the New York State will own.

The potential benefits seem substantial: The state has said the 1.2 million-square-foot SolarCity factory, which is scheduled to open in early 2016, will create 5,000 jobs, with 3,000 of them in western New York.

If the demand for solar power grows, and the companies the state has attracted are able to capitalize on that, then it could be well positioned to profit. Companies lured to New York by generous state grants have created jobs, often in struggling regions or cities like Buffalo. The government hopes a virtuous cycle will follow, and public money will attract private investment.

Sounds swell, except that SolarCity hasn't turned a profit since the company was taken public in 2012, has lost money since 2008, has been plagued by short-sellers making money off its plunging stock prices, and is the target of a federal investigation.
  
Here's Jim Heaney of Investigative Post on the mounting losses and plunging stock prices SolarCity is enjoying these days:

The company disclosed it posted a net loss of $234 million in the third quarter. That’s the biggest quarterly loss in the history of the company and brings the year-to-date losses to a staggering $537 million.

That puts SolarCity on track to lose more than $700 million for 2015, compared with net losses of $375 million in 2014, $152 million in 2013 and $92 million in 2012.

...

SolarCity stock prices also took a nasty tumble Thursday, prompting Business Insider to declare “SolarCity is getting nuked.”

The bad news on earnings drove the company’s stock down to $31.15 in after-hours trading. A day earlier, the stock closed at $38.34. That’s down from a peak of $84.96 in February 2014.

Heaney writes that Solar City is also under investigation by the feds for inflating prices to max out reimbursements from the government and was caught using prison labor to make their solar panels for an Oregon installation while taking tax credits that imposed a “job creation and retention requirement" that would pump up the regional economy.

Instead of hiring workers from the region, Solar City paid prisoners 93 cents an hour to make their solar panels.

And of course SolarCity is a part of US Attorney Preet Bharara's investigation into the Buffalo Billion Project contracts, which may have been rigged to benefit Governor Cuomo's campaign donors:

In late June, federal prosecutors sent out several subpoenas for documents on how the facility’s construction contracts were awarded. One avenue of investigation, according to people briefed on the matter but not authorized to speak on the record, is whether a request for proposals was written in a way that would have favored a construction company whose chief executive had donated tens of thousands of dollars to the governor.

While it is not known if SolarCity is a focus of the investigation, the company’s chief executive officer, Lyndon Rive, said in an interview that his company had not been subpoenaed and does not believe it was a target.

The future does not get any easier for SolarCity either.  The company's tax subsidies are set to expire in 2017 and the company's CEO told investors this week that SolarCity will shift from growth to cost-cutting in order to save money in the short term. 

Bloomberg News reports on the challenges that poses:

A recurring slide in the company’s earnings presentations shows how the cost per watt of installed capacity has come down over time. In the past two years, SolarCity says, it has fallen from $3.26 per watt to $2.84, as you might expect for a company growing rapidly and achieving economies of scale.

What’s odd is that the sales and overhead piece of that has actually gone up by half in that time. In other words, while greater scale has helped cut the unit cost of actually installing panels by 28 percent, more than 40 percent of those savings have been eaten away by rising sales and back-office costs.

Fixing that is critical to SolarCity’s new strategy. Looking at its unit-cost targets for 2017, virtually all of the planned savings are in sales and overhead, effectively getting them back to where they were two years ago.

Thumbs up for the objective, especially as federal subsidies boosting demand for solar power may fall away starting in 2017. SolarCity says costs have risen due to upfront investment in anticipation of future growth and that the new strategy will help bring those unit costs down. Investors should watch closely for progress on that front.

So let's sum it all up - Solar City has lost $1.2 billion since 2008 and has seen those losses accelerate by the year, is the target of short sellers and lost a quarter of its stock value this week alone, will lose its generous tax subsidies in a couple of years which puts increasing financial pressure on the company, is the target of a federal investigation for price inflation and is caught up in another federal investigation into potential bid rigging and other corruption around Cuomo's Buffalo Billion Project.

Boy, this sounds like a mess, doesn't it?

Given the financial stake Cuomo has put into SolarCity and the Buffalo Billion Project investigation the feds have launched that appears to center around, if not target, SolarCity, there's an awful lot of downside for both SolarCity and Governor Cuomo here.