Andrew Cuomo and Elon Musk are the faces of a $750 million plan to revitalize Buffalo's economy with a factory for SolarCity. There’s little reason to believe in their vision so far.
This post is part of a CityLab series on power—the political kind, the stuff inside batteries and gas tanks, and the transformative might of mass movements.
Whether it was Buffalo’s early prosperity or its failed attempts to fight off decline since, New York Governor Andrew Cuomo sees something there that has held his fascination as long as he’s been governor of New York State.
The seat of Erie County now has fewer residents inside its boundaries than it did in 1900, thanks to an exodus of well-paying, low-skill manufacturing work and the rise of suburban sprawl. But after winning the 2010 gubernatorial race, Cuomo started checking in on the area far more often than past governors. While he’d won the city, he lost Erie and all surrounding counties to Carl Paladino, a local developer who repeatedly stoked white working-class nostalgia and fear during his own campaign, promising to “take a baseball bat to Albany.” Supporters put sign on their lawns that read, “I’m mad as hell, too, Carl!”
In 2012, Cuomo offered up $1 billion in public money and tax breaks that regional leaders could decide how to use . Western New York committed $750 million of the offering into a single venture: a factory. Most of the so-called "Buffalo Billion" (which grew beyond the initial $1 billion) went to a SolarCity solar-panel production facility backed by Elon Musk, the Silicon Valley super-tycoon behind Tesla and SpaceX.
It’s estimated that Buffalo’s SolarCity factory will create 1,460 jobs, 500 of them in manufacturing. While the facility continues to face delays, SolarCity as a company has performed questionably so far. It has repeatedly missed earnings projections and saw its stock intermittently crater before being acquired by Musk’s electric-car company, Tesla, in November as part of a more than $2 billion deal.
That same month, Donald Trump was elected president (Paladino served as his honorary New York State campaign co-chair). Since then, the outlook for solar power has been touch-and-go; Trump has appointed climate-change deniers to his cabinet and largely rejected his predecessor’s push for clean energy. Federal subsidies for solar electricity—a substantial industry boost—may be in serious doubt. But after Musk was appointed to Trump’s strategic and policy forum of business leaders, the combined Tesla-SolarCity stock soared. Analysts want to believe a good relationship with the president is cause for hope, but much uncertainty remains, especially surrounding solar tax credits.
Before the election, nine Cuomo associates and donors were charged with corruption in pay-to-play schemes involving the Buffalo Billion and other state projects after a federal probe* into possible conflicts of interest and issues with bidding on construction contracts, including SolarCity's manufacturing facility. Despite the scandal, Cuomo recently announced a doubling down on the Buffalo Billion, claiming another $500 million will come to the city via state stimulus. As with the first round of funding, local leaders will choose how the money is spread. Now, as the next round of money is allocated, it’s worth examining the mindset Buffalo brought to the first billion.
“We had an extraordinary number of work groups and public meetings,” says Howard Zemsky, who heads the state’s economic-development agency, Empire State Development. “Western New York is the most heavily diagnosed and prescribed economy in the country.”
Zemsky, a respected Buffalo executive, was asked to take over Buffalo Billion projects like SolarCity that were tainted by the corruption scandal. His firm, the Larkin Development Group, has a track record of redeveloping forgotten pockets of town, including a historic district of former industrial buildings now known as Larkinville, and favoring creative placemaking in the process.
The Larkinville redevelopment represents a bright spot in Buffalo’s fitful post-industrial comeback. The city has long been eager to recapture the energy of its manufacturing heyday: After the completion of the Erie Canal in 1825, the this region transformed into one of the world’s largest grain-transport and milling hubs. Just a few miles north in Niagara Falls, the world's first large-scale alternating current electric generating plant was built in 1896, supplying power to the region’s factories and dazzling visitors at the Pan-American Exposition in 1901.
But after Ontario’s Welland Canal was enlarged for ships in 1932 and the full St. Lawrence Seaway from the Great Lakes to the Atlantic was finished in 1959, Buffalo’s shipping traffic declined, and its spectacular collection of grain elevators decayed along the Buffalo River. National products like windshield wipers were also produced in the area for decades. But as manufacturing declined across the Northeast, Buffalo fell hard. When its Bethlehem Steel factory—which had once employed as many as 20,000 workers—closed in 1983, the city's economy took an especially hard punch. Buffalo has been trying—and mostly failing—to fight its way back since.
A Risky Bet
SolarCity is now rising on the footprint of Buffalo’s old Republic Steel plant, which closed in 1984. The site’s location speaks to the region’s fixation on restoring its industrial economy, says John Kaehny, executive director of the state-government watchdog group Reinvent Albany.
“The idea was to recreate this manufacturing base with these very, very high-risk silver bullets,” Kaehny says. “It’s a masculine-mystique thing to spend money on a giant, shiny factory. Or because Republic Steel was once there, we’re going to be a solar panel center. There’s no evidence for that. What Buffalo has in abundance is space and power and people who need jobs. That has not previously translated to a manufacturing revival.”
Other Buffalo Billion initiatives have been viewed more favorably. The Northland Corridor Redevelopment Project brings a $44 million workforce training center to Buffalo’s hollowed-out East Side to prep workers for advanced manufacturing and energy jobs. And 43North, a $5 million startup competition, has been viewed with hope over its first three years as it tries to lure a new class of businesses to Western New York.
Still, Buffalo is hardly alone in wishing back more impressive factories. Trump rushed to power with promises of bringing manufacturing jobs back to the United States. Major Buffalo players, who, like Cuomo, often lean Democratic, argue the SolarCity factory isn’t a Trumpian exercise in industrial nostalgia: It’s part of the clean-tech future of American manufacturing, they say. And Buffalo can play a key role in feeding the supply chain of a green-energy revolution.
“The notion that manufacturing has passed in America or Buffalo is a grotesque oversimplification,” Zemsky says. “We have thousands of small and medium manufacturing companies. We punch above our weight on clean energy because we have wind projects and tons of hydropower.” (Wind turbines now dot the former Bethlehem Steel site.)
Numerous prospective workers think similarly. A public meeting was held in December for potential employees at an East Side church. Afterward, attendees like Ahmal Dunbar said they felt glad Buffalo was getting into the solar industry. A Buffalo native, Dunbar spent 13 years working in Las Vegas but returned after the recession. He now works in assembly for a Home Depot contractor. Solar “is only gonna get bigger,” he predicted. “It’s not going anywhere. It’s the future.”
Pay rates will start at $12.50 per hour, HR representatives told the roughly 50 people in the room. Employees will work in 12-hour shifts, they said, and there won’t be a 401(k) contribution match because the company is still working to be profitable. Angel Reyes, who moved from Puerto Rico to Buffalo at 17, wasn’t certain the job’s pay, benefits, and long-term prospects would be solid. “It’s up to them if they’re good jobs or not,” he said. “It’s not up to us on the bottom.”
There are a lot of questions about exactly what SolarCity and Elon Musk (whose cousins Lyndon and Peter Rive founded SolarCity) can do for Buffalo. Musk’s pioneering electric-car company has earned much praise from auto enthusiasts, but Tesla has what the business press calls “delivery issues.” According to a Wall Street Journal analysis, the company has failed to meet Musk’s financial-performance, product-launch, and production commitments more than 20 times since 2011.
More sobering for Buffalo, which is counting on him to produce local jobs, Musk has been clear that his ultimate goals are “lights-out factories” featuring “machines that build the machines.” He argues that the biggest gains in productivity will come from eliminating employees from assembly lines entirely. “You really can’t have people in the production line itself, otherwise you drop to people speed,” he recently told investors. (Musk declined to comment for this story through Tesla representatives.)
At SolarCity’s workforce development meeting, one man said the Buffalo factory where he currently worked would be shutting down at the end of 2016. The Tesla representatives couldn’t tell him when their company’s local jobs would start, although they said they expected sometime in 2017. “We’re literally waiting on one approval from higher-ups,” they told the would-be employees.
There have been positive signs. In December, Tesla and Panasonic announced an agreement to produce solar cells at the Buffalo plant beginning this summer. State leaders say equipment is now being moved in, and they expect hiring to begin within months.
Still, Musk’s delivery and production issues come on top of the solar industry’s risks. To protect New York’s investment, the state owns the Buffalo facility. That holds open the possibility that if Musk can’t make the model work, perhaps another company could take over in the same market.
Watchdogs like Kaehny are skeptical, citing the recent collapse of a related state-subsidized project, a high-tech chip-making facility in Utica, after the chipmaker pulled out. “If you’re nano-based,” Kaehny says, “your product can be obsolete rapidly.”
In the meantime, either Musk will show solar can be profitable or SolarCity will blow up spectacularly. If the promised jobs and economic revitalization never materialize, Buffalo and the politicians who crafted this billion-dollar stimulus will have to come up with another formula to fight for the city’s revival. It would not be the first time.
*Editors note: This article has been updated to clarify that SolarCity was not involved in the contractor selection process for its Buffalo facility.