Economic Planning: More than One Agency Can Handle

Early in 2007, New York's mammoth Empire State Development Corp. appeared to be on the brink of a new and more productive era. After making major campaign promises to create a new economic development strategy, incoming Governor Eliot Spitzer reorganized the agency across the top, canning the longtime chief, who was better known for attending cocktail parties and doing political favors than for serious economic development efforts; creating a "co-president" for the chronically depressed Upstate areas; and naming a new co-president for Downstate. Both served under the unpaid chairman of the board, but it all seemed very promising.

Two-and-a-half years later, the corporation has become a bigger public relations disaster than it was before. And the turmoil there is a good lesson in the biggest hazard any big state economic development agency faces--becoming too political and just too complicated.

Spitzer resigned as governor after a little more than a year in office. His Downstate co-president left soon after, followed by the Upstate czar, Daniel Gundersen, who committed a big gaffe by looking for a house near Albany after promising publicly he would live in Buffalo.

David Paterson, who succeeded Spitzer as governor, said he wanted to rethink the agency's approach because it lacked "coherence." But last June, a year into Paterson's administration, the team Spitzer had put together was essentially gone. The unpaid board chair departed along with the much-heralded co-presidents.

Meanwhile, as a cost-cutting move, the legislature is decommissioning dozens of state economic development enterprise zones (known as "Empire Zones"). The agency is deeply embroiled in the controversial Atlantic Yards development project in Brooklyn, and Empire State Development is one of dozens of state agencies that now must get the state comptroller's approval for any contract over $1 million.

As the umbrella economic development agency in one of the most powerful states in the nation, Empire State Development doesn't deserve this fate. It is, after all, the successor to the once-mighty New York Urban Development Corp., which engaged in lots of innovative efforts in the 1960s and 70s. (Indeed, Paterson's surprise choice for lieutenant governor, 76-year-old Richard Ravitch, was once head of the UDC.) Empire State Development is the keeper of the state's longstanding and still popular "I Love NY" branding campaign. And it oversees just about every business and development assistance program in the state.

So why the unending problems? It would be easy to chalk up the agency's woes to the weaknesses of the two most recent governors. Spitzer promised too much and had too little time in office to deliver, even if he had been capable of it. Paterson often seems overmatched on this issue, as on so many others as governor. But there is another answer, as well: The state's breadth and diversity may not jibe well with a uniform approach to economic development.

New York's recent governance problems have only highlighted these issues. Even compared to California--whose movie-star governor, endless ballot initiatives and eternal budget deficit make the state seem more and more like a banana republic--New York has been a political embarrassment lately. Legislative leaders maintain dictatorial control over their fiefdoms. Republican legislators must be ordered by judges just to show up. And even Paterson's appointment of Ravitch touched off a political firestorm over whether the governor has the power to fill a vacant lieutenant governor position. In such a hothouse of political power, anything with money or influence attached is going to become highly political--and make any statewide economic development problem that much more difficult.

But the sheer size and complexity of the state may be the most intractable problem. Does the Atlantic Yards project in Brooklyn really have anything to do with a factory in Buffalo? Or with a public-relations campaign to promote the idea of climbing the 56 high peaks in the Adirondacks?

Take, for example, Google's recent decision to build a data center in Lockport, near Niagara Falls. Access to cheap state power at the Falls was a major factor, as was the Buffalo region's emerging economic development partnership. But Empire State Development appeared to be a minor player--and perhaps wasn't needed at all.

Maybe the bottom line is that in a state as big as New York, a statewide economic development strategy simply doesn't make sense. Governors like to take credit for things, but no governor wants a mess like the one Paterson currently has on his hands. Perhaps by organizing the major economic development efforts on a more manageable region-by-region basis, a big-state governor like Paterson might have a better chance of taking the credit for some successes, rather than the blame for a failure like Empire State Development.