Tags: | Andrew Cuomo | New York | governor | Elon Musk | Buffalo | Solar City

Tesla Motors' Elon Musk Wheels and Deals to Save NY Gov. Cuomo

Image: Tesla Motors' Elon Musk Wheels and Deals to Save NY Gov. Cuomo
(Lucy Nicholson/Reuters/Landov; Hans Pennink/Reuters/Landov)

By    |   Thursday, 18 Dec 2014 03:24 PM

It's easy to see why Barbara Walters named billionaire Elon Musk one of 2014's most fascinating people.

In the waning days of his 2014 re-election campaign, Gov. Andrew Cuomo turned to Musk to bail him out of a $1 billion economic development deal that was going down in flames — and could very well take Cuomo's political ambitions with it.

Cuomo had already done Musk a favor, successfully working with the state Legislature to grandfather-in five service centers owned by Musk's Tesla Motors when a bill was in the works to outlaw car sales that take place outside of traditional dealerships.

The legislative director for Cuomo's father, former Gov. Mario Cuomo, helped Tesla's lobbying efforts.

Months later, Cuomo and Musk were together again, this time to announce that Musk would move another high-tech firm, SolarCity, into beleaguered Buffalo, New York.

That news did more than support Cuomo's claim that he would make New York business-friendly. And it did more than make Cuomo look technologically savvy. It rescued Cuomo from a high-profile disaster that began when he promised Buffalo voters — who had voted overwhelmingly for his opponent in the 2010 election — that he could single-handedly halt their city's decline.

In the end, Cuomo, a Democrat, won re-election this year. Musk's SolarCity gets a $750 million factory for $1 a year in rent. And New York residents? They'll pay the bill.

"It just shows that Elon Musk knows how to operate politically to get major grants," said Ed Cox, son-in-law of President Richard Nixon and chairman of the New York Republican State Committee. "He is an absolute pro at getting political money."

Once a thriving city, Buffalo is the second most populous in the state, but residents have been moving out, driven by a decades-long industrial slowdown. About a third of the area's residents live below the poverty line.

"Four years ago, Cuomo lost big in Buffalo; he knew that was where he was vulnerable," said Cox. Since the 2010 election, Cox said, Cuomo "has pampered Buffalo and showered it with projects."

On Nov. 21, 2013, Cuomo announced an ambitious plan to revitalize the third-poorest major city in America. Dubbed the "Buffalo Billion," it included construction of two green-energy plants on the site of an abandoned steel mill on the shores of Lake Erie — 275,000 square feet turned into high-tech manufacturing creating 850 permanent jobs and 500 more in construction. Each of the two companies would, Cuomo said, spend $750,000 to help retrofit the buildings in the start-up phase.

The two key tenants were Soraa, an LED light manufacturer, and Silevo, a solar manufacturer. Both would relocate from California's Silicon Valley.

The cost to taxpayers: $225 million.

Cuomo announced the deal in 2013 but came back with updates in a March 28 press release — the same day he announced that Tesla could still sell its luxury electric cars in New York.

"When I first heard about this, it seemed strange," Cox said. "I had never heard of these companies, so we researched them. They were both small, young companies and neither had raised more than $100 million in the private market."

But three months later, in the thick of a governor's race against Republican Rob Astorino, Cuomo abruptly declared that another Musk company, SolarCity, would be buying Silevo and constructing a solar factory on the site. Silevo's price tag was $200 million with the potential of a $150 million payout pertaining to company performance in allowing it to run as a subsidiary.

"This announcement was flawed from the start," Cox contended. "How could a company that was purchased for $200 million put out $750 million in costs? Cuomo had to have known this never would have come to fruition. He needed to get bailed out of this or it would have been a failure before the election. We were about to disprove it."

And instead of a $225 million incentive, taxpayers would be paying three times that much to build a much larger facility — 1 million square feet, almost four times the original size. And the state would technically own the building, saving SolarCity property taxes.

What do taxpayers get for their investment? SolarCity agreed to spend $5 billion in the state over the next 10 years. The company's promise to create 4,900 jobs means taxpayers are paying $153,061 per job. If all goes according to plan, SolarCity can sign on for another 10 years with the same deal.

It's not clear why Cuomo's office bet on companies that would ultimately bail on the Buffalo project. Cuomo's office did not return calls seeking comment.

Clues to how the Silevo are contained in a SolarCity SEC filing dated Sept. 23, a document filed to announce major events to shareholders.

"Silevo has historically incurred net operating losses, generated a net loss of approximately $18.8 million for its fiscal year ended Dec. 28, 2013, and had an accumulated deficit of approximately $61.2 million," the report stated.

SolarCity spokesman Jonathan Bass said any speculation that Musk did Cuomo a favor is false, but refused to elaborate on why Musk wanted to open a facility in Buffalo when their business is located in California and Nevada.

"SolarCity acquired Silevo, a company that already had a deal in place with New York to locate its manufacturing facility in Buffalo prior to the acquisition," Bass said in an email. "SolarCity honored Silevo's commitment to keep the facility there."

SolarCity has financial challenges of its own. Its 2013 year-end SEC filing shows the company posted $55 million in losses and in 2012 lost $99 million. For the first nine months of this year, it lost $52 million. The firm is backed by various investors and relies on decreasing government tax breaks designed to boost green-energy projects.

With this new venture, SolarCity will take Silveo's technology from a small-scale Chinese plant to develop a U.S.-made and more efficient solar panel. The plant will manufacture 1 gigawatt worth of product annually — one billion watts, or the amount of solar energy generated in the entire state of New Jersey.

Critics point out that Musk's new factory — on paper, the largest factory of its kind in the Western hemisphere — will also benefit from U.S. tariffs on cheaper Chinese solar panels.

"So basically, Cuomo is using $750 million of taxpayer supplied funds to build a factory for a company largely owned by a billionaire," Cox said. "In addition, this enterprise is very risky because this new technology is untested in a factory of this size. That is a huge and dangerous investment for New York. It's a Solyndra waiting to happen. In fact it is worse than Solyndra, they only defaulted on $535 million of U.S. government loan."

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In the waning days of his 2014 re-election campaign, Gov. Andrew Cuomo turned to billionaire Elon Musk to bail him out of a $1 billion economic development deal that was going down in flames — and could very well take Cuomo's political ambitions with it.
Andrew Cuomo, New York, governor, Elon Musk, Buffalo, Solar City
1112
2014-24-18
Thursday, 18 Dec 2014 03:24 PM
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