WTF, ESDC? Recession Twists State’s Economic Development Arm

c brownesdcpaterson 2h WTF, ESDC? Recession Twists State’s Economic Development ArmIn February, eight months after M&T Bank chief executive Bob Wilmers was installed as chairman of the Empire State Development Corporation, the state’s main economic development agency, a new organizational structure was announced in a staff memo.

It shifted lines of command: Second from the top in a hierarchical chart, apparently overseeing the agency’s high-profile downstate projects and initiatives, was the “downstate president” job. There was a “TBD” for the name, six months after a similar position for upstate initiatives had already been filed.

Today, the TBD remains.

The long-standing vacancy is one symptom of broader troubles at a once powerful state agency that was a driving force for the agendas of the last two governors. Now, more than a year into the Paterson administration and half a year since Wall Street’s collapse, Mr. Wilmers and his CEO, Marisa Lago, have a relationship marked by infighting, according to numerous people familiar with the situation; marquee projects are stalled or dramatically scaled back; and upstate business groups haven’t seen funding levels they once expected.

More generally, the economic development agenda in the state seems murky, something that many business leaders and others who deal with the ESDC attribute to both the state’s fiscal crisis and to a lack of clear, visible leadership and prioritization of economic development by any key figures in the Paterson administration. (State officials reject this notion, pointing to numerous projects and initiatives that have advanced despite enormous budget deficits and one of the worst recessions in decades.)

With an executive branch that has “undergone constant change,” said Andrew Rudnick, president of the Buffalo Niagara Partnership, “you have turmoil in the immediately external environment, which significantly impacts an entity that, while called a corporation, is really handled by the second floor like any department in state government.”

Still, Mr. Rudnick offered praise for the efforts of Mr. Wilmers, who has long been a supporter of his organization, and also attributed constraints on the agency to the state’s fiscal problems and the paralysis of the real estate market. “Those environmental issues, whether they be second floor,” Mr. Rudnick said, referring to the executive branch’s offices in the State Capitol, “or economic recession, have limited the extent to which he can go beyond what he’s doing already.”

Economic development efforts in the state, of course, have been the subject of perennial criticism, particularly in struggling upstate areas. A key example: Empire Zones, a business development incentive that costs hundreds of millions annually, which has long been derided as wasteful and ineffective despite numerous attempts at reform. The Paterson administration has proposed to sunset the program next year but has not yet devised a successor program to go in its place.

“New York State needs an effective and strategically targeted economic development program, which we haven’t had for 20 years,” said Kathryn Wylde, president of the Partnership for New York City.

“The fact that they’ve taken the first step in phasing out the Empire Zone program but have not replaced it with an effective set of tools for Empire State Development to work with is the heart of the problem,” she said, adding that with the austere fiscal environment, “there was no appetite from the budget office for launching a new program this year.”

 

IN TERMS OF management at ESDC, numerous executives and others who deal with the agency said that power seemed to be bifurcated—or unclearly delegated—between Mr. Wilmers, who is an unpaid, part-time chairman given his full-time job at M&T Bank, and Ms. Lago, who is based in New York City. (M&T has received incentives through ESDC. The Paterson administration has said Mr. Wilmers would recuse himself from specific decisions affecting his company, though he has been active in guiding policy on reforming incentives.)