The Numbers Behind The SolarCity Deal
Lost amidst the excitement regarding today's announcement that SolarCity - a green energy solar panel manufacturer - is bringing 3,000 jobs to Western New York, is concern about the project's price tag to taxpayers.
New York State is financing the solar panel manufacturing facility, which will be located at the Riverbend site in South Buffalo, to the tune of $750 million. Presumably, this "investment" will attract 3,000 jobs to the region.
Assuming that this public-private partnership is indeed successful, New York State is forking over $250,000 per job for the privilege of manufacturing solar panels. That's more per job than the annual salary of the Buffalo Public Schools superintendent, who makes $217,500.
That's a staggering sum on a per-jobs basis and brings to question the wisdom of this deal.
When you consider that the median income in Buffalo is $30,052, the deal seems even more astonishing. At that rate, you could give away the median income of $30,052 to nearly 25,000 Buffalo residents and stimulate the local economy in unprecedented ways.
Even at $225 million - the original amount New York State previously announced it would invest in the solar panel facility in exchange for 1,100 jobs - the deal was deemed a "shakedown" by the Investigative Post's Jim Heaney. He writes:
The $225 million deal on the table in Buffalo is “generous, there’s no doubt about it,” LeRoy said. “I would urge the state to be cautious as to what else it does.”
Musk has the governor right where he wants him, however.
As he has done with all of the Buffalo Billion projects, Cuomo has raised expectations with his chest beating over SolarCity’s purchase of Silevo. The announced projects do have the potential to generate investment and employment in the long run, but thus far they have in fact produced only a handful of jobs, nearly three years after the governor announced his Buffalo Billion initiative.
Cuomo faces re-election in November, and while Republican Rob Astorino doesn’t pose much of a threat, the governor clearly wants to have a deal with SolarCity to tout. More precisely, he doesn’t want to have to explain his failure to deliver.
So overpay he might.
Here's some perspective on what $750 million could pay for:
- Give every man, woman and child in the City of Buffalo a check for nearly $3,000.
- Pay the salary of the Buffalo Public Schools superintendent for the next 3,448 years.
- Nearly pay for the entire general fund budget in the Buffalo Public Schools system.
It seems to me that $750 million in exchange for 3,000 jobs is a rather steep price to pay.
Hopefully, this partnership will bring us the desired outcome.
Whether this deal will turn into another Solyndra fiasco, or not, remains to be seen.
UPDATE: The Investigative Post has published a new piece with their take on the SolarCity deal. Excerpt:
My first blush impressions of the SolarCity deal announced Tuesday by Gov. Andrew Cuomo:
It’s a rich package. The state is committing $750 million – $350 million to build a manufacturing plant and $400 million in potentially forgivable loans to equip it – in exchange for creating 3,000 jobs, half of which would be employed by SolarCity, the other at firms in their supply chain. That works out to $250,000 to $500,000 per job, depending on how you do the math...
So, is the SolarCity deal a good one or not?
Well, there’s no denying it’s generous – quite generous. It’s not as outrageous as the deal Tesla Motors recently wrangled out of Nevada and it could have been had Cuomo agreed to grant SolarCity status as a Start-Up New York project. But still, we’re talking three-quarters-of a billion dollars and $250,000 a job. That’s big money, nearly triple the $225 million the state originally committed to at Riverbend.
Cuomo and his team did a poor job of explaining the details Tuesday. For example, there was a brief mention of the $400 million loan. Only when pressed, not once, but twice, did they acknowledge that SolarCity won’t have to repay the loan if they meet performance benchmarks. So it’s really a grant if SolarCity doesn’t mess up. I could cite other examples, but you get the picture.
What rankles me is all the hype, all the back slapping that made Tuesday’s event seem more like a campaign rally than anything else. Look, adding 3,000 jobs is a good thing. But it’s not a game changer, and Cuomo didn’t so much attract SolarCity to Buffalo as he did raid the public treasury to make them an offer they couldn’t refuse.
The thing is, you can throw that kind of money around once, maybe twice, but Cuomo’s approach is not financially sustainable. The governor said Tuesday he wants to take the Buffalo model and replicate it in other upstate cities, but it begs the question: How could he hope to pay for it?
Source: Investigative Post