Shepstone Management Company, Inc.
Andrew Cuomo’s Buffalo Billion sinking of taxpayer monies into Elon Musk’s solar scam has been written down to 8 cents on the dollar; an $884 million loss.
Imagine you build a new house in Upstate New York for $300,000. It’s got the latest in appliances and a modern heating system. The place is nicely landscaped and well maintained. But, six years later you have to sell it because you’ve taken a new job in Texas. You go to a realtor who tells you it’s now worth a mere $24,000. Sound far-fetched? Well, no, that’s what just happened with Andrew Cuomo’s “Buffalo Billion” investment of $958.6 million in the SolarCity scam engineered by Elon Musk and his cousins to exploit Andrew Cuomo.
We’ve been covering the SolarCity debacle for some time now (see here, here and here as examples). It’s been one unending story of hucksterism by the world’s greatest snake oil salesman ever, Elon Musk. The Buffalo Billion “investment” of nearly a billion dollars in other people’s money by Andrew Cuomo into the scam is nothing less than an astounding success in marketing by Musk. Now, six years later, we learn the truth, which is laid out in a superb piece by David Robinson in the Buffalo News.
The Fort Schuyler Management Corporation is a state created non-profit designed to funnel taxpayer monies to Andrew Cuomo’s pet projects; his designated winners under the perverse economic development strategies he has has crafted for his Empire State. The Corporation manages the Buffalo Billion “investment” if you can call it that. Like any non-profit, the Corporation must be audited and the one performed by KPMG for 2018 is a doozy; an indictment of Andrew Cuomo’s economic failures. Here are the relevant parts with emphasis added:
(3) Economic Development Projects
In connection with the Corporation ‘s mission to support the economic development activities that relate to the research and educational mission of SUNY, the Corporation is a party to various arrangements in which New York State grants are made to the Corporation to construct, hold title, and lease facilities and equipment to corporate enterprises with the aim of, among other things, promoting job creation and investment in New York State. Such economic development projects generally create jobs and corporate investments in the communities of New York State, however, periodically a direct financial return is not received directly by the Corporation. For financial accounting purposes, at inception of the project, the Corporation assesses the economic development program and whether the direct financial consideration to be provided to the Corporation by corporate parties will support the invested value of the property and equipment for financial report ing purposes. If it is determined that the direct financial benefits associated with ownership of the property and/or equipment is not likely to support the capitalized cost, such assets are reduced to the estimated cash flows and residual value that the Corporation reasonably expects to directly receive over the life of the property.
In September 2014, a Strategic Alliance Agreement (Agreement) was entered into between the Research Foundation and Silevo, Inc., predecessor to Tesla, Inc. (hereinafter Tesla). The stated purpose of the Agreement was to create a research and development collaboration and mutually beneficial economic arrangement focused on the U.S. based manufacturing expansion and commercialization of certain Tesla hybrid solar technologies and the establishment of Tesla manufacturing, business, and related operations in Western New York. To achieve this, New York State provided funds through ESD and DAS NY to the Corporation totaling $958.6 million, of which $660.1 million was for the purchase of land and the construction of a manufacturing facility and $298.5 million was for the acquisition of manufacturing equipment to be used in the facility. The real property on which the manufacturing facility was built consists of approximate ly 88 acres located in the City of Buffalo.
Under the terms of the Agreement, Tesla agreed to lease the manufacturing facility and equipment from the Research foundation or its designee, the Corporation, each for an initial period of 10 years for consideration of $1.00 per year. Tesla also agreed to spend or incur approximately $5.0 billion in combined capital, operational expenses and other costs in New York State during the initial 10 year term, while also agreeing to employ a specified number of positions for manufacturing operations and support of downstream sales and installation activities within New York State. The Agreement also provides that the Corporation and Tesla may mutually renew the lease arrangement in accordance with defined terms that include Tesla committing to spend or incur at least $3.0 billion in additional combined capital, operational expenses and other costs in New York State during an additional 10 year period in exchange for continued use of the manufacturing facility, inclusive of the manufacturing equipment, for $1.00 per year.
The Corporation substantially completed the facility for occupancy and equipment installation in 2018. The Corporation assessed the lease arrangement and upon consideration of its various terms, including the intended New York State economic development objective, the limited direct financial consideration to be provided to the Corporation by Tesla over the initial lease term and potential renewal period, and the estimated useful ‘life of the facility and associated equipment, the Corporation determined it will not likely receive the direct financial benefits associated with ownership of the manufacturing facility and equipment and accordingly recognized a cumulative $883.8 million reduction of net assets to write-down the cost of the facility and equipment from project inception through June 30, 2018, of which $17.0 million was recognized in the 2018 statement of activities as economic development project cost The estimation of fair value for accounting purposes at project inception was primarily determined based upon contractual and estimated lease cash flows (Level 3 fair value measurements) .
In November 2018 , in order to preserve the property tax exemption, the title to the property on which the manufacturing facility resides was transferred from the Corporation to ESD and leased back from ESD for a term of 10 years. After the 10 year lease period, ESD is required to transfer the property back to the Corporation...
In connection with the preparation of the 2018 consolidated financial statements, the Corporation determined that the cumulative write-down for the economic development projects discussed… above should have been recognized at inception of the program, when it was determined by the Corporation the expected direct economic benefits associated with ownership of the assets do not support the Corporation‘s expected project costs for financial reporting purposes. Historically, such impairments (write-downs) would have been recognized upon commencement of the lease, which generally occurs later than commencement of the economic development project. In instances where such identified projects are still being constructed, future capital costs will be impaired through the construct ion period. The Corporation has corrected its financial statements to recognize such write-downs at the outset of the project. The following summarizes the cumulative effect of this correct ion to elements of the June 30, 2017 consolidated financial statements:
Plainly put, the Buffalo Billion has been a bust. The Buffalo Billion has been a taxpayer ripoff to the tune of $883.million. Not only this but consider the following from David Robinson’s article:
Tesla and its partner, Panasonic, have around 800 people working at the factory, with an April 2020 deadline looming for employment to reach 1,460 people or else Tesla could be hit with a $41.2 million penalty by the state…
Tesla’s subsidies, if it meets its mandate to employ 1,460 people, amount to $657,000 per job in Buffalo.
Everything about the Buffalo Billion deal was a cruel joke on taxpayers by Andrew Cuomo, who also has denied Upstate New York the free opportunity to benefit from natural gas development, while cutting off urban gas customers from access to this clean inexpensive fuel. He is well on his way to turning New York, the Empire State, into Empirezuela.
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