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Report: SolarCity/New York Government Alliance Puts Taxpayers at Risk

September 13, 2016

New York State’s effort to bring jobs to Buffalo by luring solar-panel manufacturer SolarCity to the city could cost the state’s taxpayers nearly $1 billion, according to a new study.

New York State’s effort to bring jobs to economically depressed Buffalo by luring solar-panel manufacturer SolarCity to the city could cost the state’s taxpayers nearly $1 billion, according to a June 29 study by the Empire Center.

SolarCity plans to build a solar-panel manufacturing facility in Buffalo using $959 million in state funds.

The Perils of Incentives

Economist John Bacheller, former deputy commissioner for policy and research at the New York State Department of Economic Development and author of the Empire Center report, notesa number of problems with the New York-SolarCity agreement.

“The existence of economic development incentives encourages businesses to game the system by claiming that, without government assistance, they might not locate within a state … or upgrade operations,” wrote Bacheller in the report.

Enticed by incentives to set up a factory in a state-designated location, Bacheller says companies can be tempted to exaggerate the number of jobs the project will create in order to seal the deal.

“[S]ome of the 5,000 promised new jobs to be generated in New York by the SolarCity project will be sales and installation positions that would be created in the state even if the same factory were constructed … anywhere else in the world. Bacheller wrote.

Even before ground was broken on the new factory, SolarCity reduced the number of jobs it committed to bring to Buffalo from an initial promise of creating 1,450 jobs at the factory to an estimated 500 jobs.

Taxpayers Left Holding the Bag?

“[B]ecause the company has not invested its own money in the facility, it has less reason to remain in Buffalo after the [10-year] lease period ends than if it had invested its own money,” wrote Bacheller.

Dan Simmons, vice president for policy at the Institute for Energy Research, says New York State’s relocation subsidies are harmful.

“New York has made its business climate so bad it has to offer massive subsidies to get companies to move there,” said Simmons. “These kinds of incentives are unfair and harm taxpayers.”

James Taylor, president of the Spark of Freedom Foundation, says even with the subsidies, SolarCity will need further government support to make it profitable.

 “The solar industry—and SolarCity in particular—already benefit from billions of dollars of sweetheart subsidies from federal, state, and local governments,” said Taylor. “Despite all these advantages, SolarCity still cannot attract customers without additional laws requiring utilities to purchase its power at above-market rates.

“Government plans to lure such a fragile, failing business to Upstate New York is a recipe for disaster,” Taylor said. “Gov. Andrew Cuomo should lift the state’s fracking ban, which would allow energy companies to access the state’s plentiful natural gas. That would revive the economy with minimal environmental impact.”

Bonner R. Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.

INTERNET INFO

John Bacheller, “Solar Subsidy: The Big Risk Embedded in Buffalo’s Billion,” The Empire Center, June 29, 2016: https://www.heartland.org/publications-resources/publications/solar-subsidy

Author
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
bcohen@nationalcenter.org