MARKET BREAKDOWN
REGIONAL SPOTLIGHT: BUFFALO, NEW YORK
THE NEWYORK “BUFFALO BILLION” W hen New York state governor Andrew Cuomo first announced his Buffalo Billion Investment Development Plan, the “Buffalo Billion” for short, during his 2012 “State of the State” address, the initiative was met with excitement and trepidation. Cuomo’s plan was modeled after a similar initiative implemented in Albany, New York, and many skeptics criticized it immediately because of the huge amount of spending it would entail. The initial phase of the program was plagued by scandal when the governor ended up embroiled in several scandals associated with the program and how Buffalo Billion’s dollars were awarded. The waters only got muddier when solar pan- el manufacturer SolarCity received hundreds of millions of dollars through the program and then reduced the number and types of jobs it planned to create in the area. SolarCity was founded by Tesla CEO Elon Musk’s cousins and acquired by Musk for $2.6 billion in 2016 after the company’s stock had fallen more than 75 percent from its peak in 2014. Around the same time, the New York legislature pulled back a vote that, if passed, would have given an extra $500 million to the SolarCity project. Fortunately for Cuomo and, more impor- tantly, for Buffalo, while SolarCity might have been the marquee name on the Buffalo Billion project, it is certainly not the only player in the local economy. Perhaps even more important than whether Tesla makes solar panels, solar roofs, or solar-powered car parts in its Buffalo-based gigafactory is determining if other high-tech and energy companies will come along for the ride. “The real questions to ask are: How many jobs are being created? How many other com- panies are expanding into the area?” said Kathy Fettke, co-CEO of California-based investment group Real Wealth Network. Fettke’s decision to get involved in development in Reno, Nevada, was based partially on Tesla’s battery gigafacto- ry being located in that area. Investors tracking Tesla in Buffalo should be sure to also look beyond the gigafactory at the wider economy.
Buffalo’s housing inventory has fallen substantially since the beginning of 2017, but the market is likely to remain relatively more affordable than other similarly sized metro areas throughout 2018.
displaced many residents and hurt the local economy. The trend lasted. In 2015, the U.S. Census labeled Buffalo the 16th- poorest city in the United States with more than 30 percent of the population living below the poverty line.
Fuller, who cited a number of relatively recent changes to state policy and both public and private employers for the market’s recent upswing. By 2016, Buffalo’s population of residents living in poverty had fallen by three percentage points (by comparison, poorest-city Flint, Michigan, was substantially worse off with a four-point increase during the same time period), and local unemployment rates had fallen more than a full percentage point from the year prior. Investors should note, however, that the New York State Labor Department labeled September 2017 as one of the worst months
for hiring in the area in seven years despite the same department’s report that unemployment numbers were the best that they had been in the past 10 months (4.9 percent unemployment vs. 4.1 percent nationwide). Local economists explained the conundrum by citing a local labor shortage in key areas. John Slenker, the New York Labor Department’s regional economist, made a public statement to that effect. “It’s a tight labor market,” he explained. “We’re bumping up against a labor shortage.” The department also published research indicating that the local labor pool is expanded for the first time in about 18
months during September while hiring lagged, which could require the jobs market to play “catch up” if those individuals have the appropriate skill sets to meet local market needs. This explanation is plausible. Thanks in part to an initiative called the Buffalo Billion championed by governor Andrew Cuomo, the Buffalo area has been the beneficiary of a vast array of state grants and tax breaks intended to spur economic development (see sidebar, p. 47). While the program has had its share of stumbling blocks thanks in large part to investigations tied to how the governor awarded certain grants and tax breaks to changes in ownership, management, and vision at the Tesla-owned SolarCity solar panel “gigafactory,” which received $750 million from the Buffalo Billion program, this has not deterred a number of high-tech, energy, and medical- tech companies from moving to the area, nor has it prevented Cuomo from attempting to initiate a second phase of the program. At present, of Buffalo’s top 10 private employers, four are in healthcare or healthcare-related sectors, two offer financial and banking services,
THE BEGINNINGS OF THE SHIFT
By 2016, however, things had begun to change visibly and significantly, although local investors argue that these changes had actually been in the works for quite some time. “We have been investing in Buffalo since the housing crisis,” noted
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