In our estimation, this attempt to put the mayor out to pasture began in earnest with this months publication of James Heaneys three-part series, which documented the Masiello administrations squandering of federal aid money. We can wonder what took The News so long to identify the severity of the situation, but on the positive side, perhaps we should be saying better late than never.
Donn Esmonde has led The News in criticizing Masiello, but prior to the Heaney series, his columns always seemed to leave Tony with some wiggle room. Esmondes follow up column to the Heaney series, however, was blistering. Later that week, the editorial staff of The News published an editorial that was more genteel but essentially confirmed the obvious: The News will no longer continue to make excuses for Masiello. The Heaney series would never have been published as written if the editors at The News had any intention of allowing Tony to stick around for another four years.
We know from previous articles by Bob McCarthy, top political reporter for The News, that the business community has been desperately seeking an alternative candidate to support in next falls mayoral race. If Masiello does run, Byron Brown and Sam Hoyt will present him with determined competition for his job. Perhaps Joel Giambras prophecy that Tony will be the last mayor of Buffalo may be fulfilled with the elimination of the office altogether. Eliminating that office will take some doing, however.
Tonys Discreet Charms Finally Wear Off
When we look back, there is something particularly odious about the fulsome lies and nauseous flattery that filled The Buffalo News copious editorials in praise of Tony in election years past. But then, certain power brokers wanted a Governor George Pataki-dominated control board in charge of the citys finances. To arrive at that point, a good measure of malfeasance was necessary, and its obvious now that Masiello was equal to that task.
Several points need to be made about the Heaney series and Alts coverage of this story.
First off, when we attempted to obtain some of the information that Heaney presented, people in the local HUD office told us that no loans were in default. Then, our appeal to Washington for information on all current outstanding loans in full was returned as a partial list showing only good loans.
Grant + Loan = Groan
A source who wishes to remain anonymous and is very familiar with local development issues told Alt that this was merely a language issue. The Masiello terminology morphed the word default into aging. This is why there were no loans in default to be found.
This person related the following inside riddle about the Masiello crews chicanery: What do you call a cross between a grant and a loan? A groan. This little rib tickler implies that Masiello and company knew that, when they were gifting some of their developer friends with section 108 loans, there was an implicit understanding that they were really going to turn out to be grants in the long run. Hilarious, isnt it?
The partial information that this person was able to provide us with about some of the defaulted Section 108 loans was largely confirmed by the Heaney series. Many questions remain, however. First and foremost on our minds is that if there were a pattern of deliberate abuse for political payoffs, why isnt this a law-enforcement issue? Why isnt anyone even thinking about bringing the mayor and his cronies up on charges? We published a story about a very similar situation in Hoboken, N. J., which resulted in several convictions. Are we in Buffalo more corrupt than the folks in New Jersey?
Heaney presents an array of information that the Masiello administration had kept quiet, particularly the abysmal record of the HUD Section 108 loan program.
Favored Developers and Political Influence
There are points of interest that Heaney does not elaborate to our satisfaction, however. While the series avoids certain critical questions in our minds, we agree that it represents a good start in making people aware of what a terrible job the Masiello administration has done in managing federal aid intended to alleviate inner-city poverty, not to sock an already impoverished city government with even more debt.
A major problem with the series is that Heaney fails to mention developers by name, again and again. Who were these mysterious developers? Were they plugged into the mayors political campaign? Was there a pay to play understanding? Heaney sidesteps these questions.
Heaney failed to mention that the Buffalo Economic Renaissance Corporation pumped more than a quarter million into the Pillars hotel AFTER it was clear that the hotel was in default. The medical corridor was not Tonys brainchild. When it came time to secure capital for a pet project on the campus of Roswell Park, however, its doubtful as to whether Masiello could have refused or not. There was enormous political pressure to keep Roswell pumping money into political coffers, along with forecasts of irrational exuberance about the market for high-priced cancer treatment. No one questioned a government-sponsored hotel on the Roswell campus.
While naming several of these businesses and some developers, Heaney leaves some notable absences. He omits information on James Cosentino and Harry Williams, for example. Have they repaid their loans? There are ethical concerns with some of the recipients of Section 108 loans and their political and personal relationships with Masiello. Were these deals legal? Are there ethical violations that can be pursued against Masiello? Heaney fails to explore the nexus of political-business relationships that led to this sorry state of affairs and, therefore, in our opinion, misses the point of this story.
Bi-Partisan Complaints Are Ignored
Heaney shows that even a community activist such as Kim Harman and a Business big shot such as Andrew Rudnick can agree that Masiello has done a horrible job with the Section 108 program. This kind of agreement across the political spectrum is unusual these days. You would think that this would not bode well for any effort to re-elect Tony next year, but Tony doesnt seem to be too concerned.
"I wish we had more private-sector investment. It's coming in dribs and drabs, but it's coming," Masiello told The News.
Tony is satisfied.
Tony wishes that there were business investment. Its coming at some point in the future. Didnt Heaney ask for comment on specific deals? In how many instances did section 108 loans result in significant investment in nearby properties? We dont know because Masiello was not challenged on his assertion that many projects had significant spin-off.
Banko: Fox/Hen Housing Arrangement Not to Blame
Heaney stated, The loans must be approved by the Common Council, development agencies controlled by the mayor, and the federal Department of Housing and Urban Development. Cities are responsible for paying them off, using block grant funds, in the event a developer defaults.
This is pretty accurate. The system of checks and balances, however, was not as rigorous as it might first appear. The mayor had allies in the Common Council and, since block grant funding was important to the pet projects of councilmembers, there was little resistance to the mayors section 108 initiatives. In addition, after Masiello Chief of Staff Steve Banko was put in charge of HUD, there was no longer an arms length negotiating distance. In effect, the mayors 108 loans were generally rubber stamped.
Bankos statements are enlightening: "The problem in Buffalo is developers have it backwards
Everywhere else, they put the deal together, get what they can from private sources, and come to the government if they have a gap. In Buffalo, they all come to the city first what can you give me? - then they go get their financing." Is this because developers here are a breed apart, or is this because they know that this is the way the game is played?
Bankos explanation shifts the blame from the Masiello administration, of which he was an integral part, and onto the community as a whole. Its the culture of Buffalo thats the problem, not the specific funding decisions that were made. We share communal guilt and change is unlikely. The they to whom Banko refers arent really identified by name. They are the same developers whom Heaney, for the most part, does not mention by name. From our experience, they are often the same people who supported Masiello and are an integral part of the political process. They are frequently hostile to outside investors out of fear of losing control of local development money that the mayor has spent so generously.
Tonys Theme: A Legacy of Learned Helplessness
"Many of these (section 108 loans) were gap financing; no one else wanted to help," Masiello told The News.
The other way to look at this lavish lending is as politically driven. Masiellos so-called gap financing statement was made to avoid the embarrassment of default. Loans made to the right people were allowed to age gracefully. In accounting terms, this is called knowingly presenting a false picture of financial information to investors. What do we call this in Buffalo? Heaney calls it a half billion dollar bust, which is a surprisingly polite euphemism for fraud, if you think about it.
The last article in Heaneys series concerned the Masiello administrations bad debts in the Theatre District. We here at Alt lovingly refer to the 600 Block of Main Street as Mayor Masiellos Potemkin Village. The term came from a Russian politico, Grigori Potemkin, who created fake villages at huge expense to show Catherine the Great, Empress of Russia, how happy and prosperous the peasants were. The peasants in Russia, like their modern Buffalonian counterparts, were neither prosperous nor happy with the hand that was dealt them by their imperial overseers. As Masiello himself said a few years ago, We need a revolution.
Casino Buffalo Chairman Masiellos Long March Continues
Masiellos idea of revolution appears to be more of the same, however. There are more section 108 loans being queued up. Heaney reported that, One, of about $3 million, would be used to redevelop Central Park Plaza. Plans to convert Memorial Auditorium into a Bass Pro store call for a $7.3 million loan through the Section 108 program, plus an additional $2 million through another program.
Heaney didnt mention that Bass Pro has ties to casino gambling, in Las Vegas or that certain power brokers, such as Carl Paladino, would like to see a casino in downtown Buffalo. If this is going to be Tonys last term, he might as well go out with one last big Ka-ching for himself and all of those friends of his whom no one else seems to want to help.
This could bring abuse of the Section 108 program up to a whole new level. Heaney reminds us in his first installment of this series that the HUD program was supposedly intended to alleviate poverty. How a massive fishing superstore (and possibly an inner city casino) would accomplish this goal is a mystery. Maybe its all part of Tonys revolution.
Pull quotes: Loans made to the right people were allowed to age gracefully.
They are often the same people who supported Masiello and are an integral part of the political process. They are frequently hostile to outside investors out of fear of losing control of local development money