Analysis of Hevesi Audit of the IDA's by Glenn Schleede

This is sad but not surprising. I discovered, when reviewing the April 19, 2007, energy announcements by New York's Governor, NYSERDA and NYSPSC, that the economic benefit and job benefits that were claimed were grossly overstated. (That's in my June 12, 2007, paper, "A Critical Evaluation of...."

In that case, whomever developed the claims made several fundamental errors in their economic analysis; that is:

a. They assumed that all the capital cost of the energy projects would be spent in the state or local area. As you know, in the case of "wind farms" well over 75% (probably close to 90%)of the capital costs goes for turbines, towers, blades and other components that aren't produced in NY (In some cases much of the capital cost -- and associated economic benefits -- are for turbines, etc. that are produced in other countries!

b. They assume that the full $ value of everything purchased locally provides a local economic benefit. In fact, it's only the value added locally that may have local economic benefit. (I used gasoline in the "critical evaluation paper to illustrate this error.)

c. Many of the jobs during construction (80% in one case study) are filled by people -- often people with special skills such as those who assemble turbines, towers, blades, controls, etc. for wind farms -- who are brought in temporarily to do the work. Some of the few jobs on wind farms that exist after operations begin are also filled by temporary "itinerant" workers. Quite likely, all the people who come in for short stints even pay income taxes elsewhere. Few of the construction and permanent jobs are filled by local people.

d. Money from rent payments may not be spent or invested locally. Depending on the land owners' financial situation, the rental payment money may be spent or invested locally or in may be spent or invested elsewhere. This is particularly the case with absentee landlords.

The net effect of the errors are huge. As indicated in the "Critical evaluation" paper, an objective analysis may show that the state and local economic benefits are less than the $295 million that NYSERDA plans to pay the three companies (none headquartered in NY) that own the 9 "wind farms" and the owners of the small hydro and biofuels projects. (The money NYSERDA is using comes directly from that 1.42% "system benefit charge" that the NYS PSC tacks onto your month electric bills!!)

I suspect that the same kind of errors are being made by the IDA's.

(Click to read Hevesi Audit of the IDA's)