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

Hearing Event Notice:

Archived Video:



 2  ----------------------------------------------------


 4             In the Matter of the
          2017-2018 EXECUTIVE BUDGET ON
 6  ----------------------------------------------------

 7                           Hearing Room B
                             Legislative Office Building
 8                           Albany, New York
 9                           February 1, 2017
                             9:37 p.m.


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

16           Senator Liz Krueger 
             Senate Finance Committee (RM)
             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 
             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
             Senator John DeFrancisco
             Assemblyman Michael Cusick
             Senator Roxanne Persaud
             Assemblyman Harry B. Bronson
             Senator Elaine Phillips
             Assemblywoman Addie Jenne
             Senator Timothy Kennedy
             Assemblyman J. Gary Pretlow
             Assemblyman Raymond W. Walter
             Assemblyman Billy Jones
             Assemblywoman Carrie Woerner
             Senator Thomas D. Croci
             Assemblywoman Rodneyse Bichotte
             Assemblyman L. Dean Murray
             Assemblyman Steven F. McLaughlin


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


 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
    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
    Daniel Walczyk
14  Professor, RPI, and Director,
    NYS Center for Automation 
15  Technologies and Systems
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



 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
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


 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 


 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 


 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.


 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.  


 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 


 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 


 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 


 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 


 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, 


 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 --


 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 


 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 


 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.


 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.


 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 


 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 


 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 


 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 


 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 


 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?


 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 


 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 


 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.  


 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.


 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, 


 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 


 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.


 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.


 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.  


 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 


 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 


 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 -- 


 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 


 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 


 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 


 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.


 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 


 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.  


 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.  


 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.  


 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 


 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 


 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 


 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.  


 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.  


 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.  


 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 


 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 


 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 


 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 


 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.  


 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.  


 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 


 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.  


 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 -- 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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

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 


 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 


 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 


 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 


 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."  


 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 


 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?


 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 


 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 


 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 


 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 


 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 


 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 


 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. 


 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 


 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.


 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 


 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 


 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 


 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 


 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.


 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.  


 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 


 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 


 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 


 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.  


 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?


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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.  


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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, 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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.  


 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.


 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 


 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.  


 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 


 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.


 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 


 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 


 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, 


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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, 


 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.


 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 


 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 


 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 


 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.


 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, 


 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 


 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 


 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 


 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.


 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, 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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.


 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 


 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 


 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 


 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, 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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.


 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.  


 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, 


 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, 


 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.


 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 


 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. 


 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 


 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 


 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.  


 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.)