Silicon Alley U

Safety School? As Stanford Says ‘See Ya!’ Bloomberg Hops in Bed with Big Red

How New York City got a better deal by going with the less prestigious choice.
aerial e1324425215648 Safety School? As Stanford Says See Ya! Bloomberg Hops in Bed with Big Red

Gleaming the cubes.

On Monday, the lobby of the Weill Cornell Medical College, which resides on a particularly gray stretch of the Upper East Side, was crawling with men and women in wooly blazers dotted with “carnelian” buttons—the technical name for the maroon hue that invariably moves Cornell students to chant some version of “Go Big Red!”

Inside the auditorium, as an assembly of press, pols, and local technorati waited for Mayor Bloomberg to appear, a giant projector flashed a mosaic of the Cornell University logo.

The news had been leaked to every major news outlet by midnight on Sunday; there was no point in being coy.

“Today will be remembered as a defining moment,” Mayor Bloomberg told the crowd, officially announcing that a 50-50 joint proposal between Cornell and the Technion-Israel Institute of Technology had won the $100 million grant to build a new engineering mecca and applied sciences campus. The project is designed to help New York surpass Silicon Valley as a global innovation capital, creating 30,000 jobs and as much as $1.4 billion in tax revenue.

For the next hour, a stream of political operatives, from New York City Economic Development Council president Seth Pinsky to councilmember Jessica Lappin, who represents Roosevelt Island, where the 2 million sq. ft. build-out will stand, took to the podium to express their breathless excitement at the scope of the $2 billion initiative.

Cornell president David Skorton debuted a video of an aerial rendering of the gleaming net-zero energy building. Set to a dramatic score, it looked like a CGI version of a utopian future—you know, the part in the sci-fi flick before the apocalypse sets in. “There are visions of sugarplums dancing in my head right now,” said New York City Public Schools Chancellor Dennis M. Walcott in response to the bit about Cornell and Technion instructing 200 of his teachers in science education every year.

“Of all the applications we received, Cornell and the Technion’s was far and away the boldest and most ambitious,” Mr. Bloomberg said of the sweeping offer, which included a $150 million venture capital fund, startup accelerator, and ambitious plans to construct 300,000 sq. ft. by just 2017—as close to the end of his third term as the mayor was likely to get.

But what should have been an effortless victory lap for the city’s yearlong plan to remake its economy for the coming century was clouded by a note of confusion. Stanford, after all, was pegged the front-runner at least as far back as March, when Mayor Bloomberg gave a speech in Palo Alto, noting, “We’re particularly pleased that Stanford—which has a top-flight engineering school—is considering the idea.” Stanford batted its eyelashes back by launching a Tumblr—native technology!—featuring a video of Larry Page and Sergey Brin talking up the Mayor’s initiative.

Indeed, as late as Friday morning, the school’s negotiating team was still locked in meetings with EDC officials; a few hours later, news hit the wire that Stanford had withdrawn its bid. And not long after that, Cornell issued a hastily-written press release revealing that it had received a $350 million anonymous donation. The largest gift in the school’s history was announced late on a Friday afternoon.

At the time, it was hard to say what was chicken and what was egg. Was Stanford trying to save face with a preemptive break-up, or did Cornell win by default? Surprisingly bitter recriminations followed from the various players as everyone tried to spin the narrative in their favor.

Part of the difficulty of understanding where negotiations broke down is a silence clause stipulated in the request for proposal (RFP). But numerous sources, who spoke under condition of anonymity, painted a picture of tense discussions and onerous demands that left several schools wary, including Stanford.

Cornell, eager to increase its presence in New York City, was more compliant at the negotiating table and better versed in what it took to get city approval, including fundraising before commitments were made. Sources said the $350 million gift, for example, had been secured for months. “We need to expand beyond Ithaca,” President Skorton said plainly from the podium.

“Cornell needed it more. But NYC Tech needs Stanford more,” tweeted New York City–based venture capitalist David Pakman, alluding to the latter’s prestige within tech circles and facility with spinning out successful startups. (There’s a reason China and Russia are trying to build their own Silicon Valley.)

In the end, it seems the city got a better deal for taxpayers by going with the one that wanted it more, rather than the one it was supposed to want.

A university source familiar with the negotiations said Stanford’s decision to drop out wasn’t based on any one issue, but rather due to “a whole host of things that held them liable for factors outside of [their] control,” such as big-ticket penalties for missed construction deadlines and the city’s desire “to indemnify themselves for any toxicity” at the Roosevelt Island site. Although a Phase II study was commissioned this year, a full scale analysis of the medical dump under the hospital cannot be done until the building is razed. Should serious hazards be uncovered, the school will be on the hook not only for the clean-up but also potentially for resultant delays.”You had a lot of institutions that wouldn’t even apply because of the terms, and they got even more severe in the negotiation process,” said the source.

City officials counter that such stipulations are par for the course. “If we didn’t include these types of commitments, there would be a chorus of people saying: How could the city write a blank check to a university that in five years could just decide it wasn’t into it?!” one official said. “It’s standard in any kind of long-term land lease or land sale that the city would ask the recipient to agree to certain benchmarks.” (Cornell and Technion are leasing the land for the next 99 years, at which point they can pony up $1 to buy.)

However, legal representation for schools besides Stanford also balked at the contract. “The legal document that we got was essentially, if you signed it, it would require you to build even if you didn’t hit the [fundraising] target,” another university source said. “If you state that by this date, you’re going to have this much faculty and this much building completed, and you don’t get it completed, you’re left open to a legal challenge. It was enough for our general counsel to raise a red flag to say they are not comfortable with signing this.”

Even institutions that have negotiated to build in New York City before hadn’t encountered this level of vulnerability to legal action. “There wasn’t any contract we signed that if our endowment goes to Madoff and then goes to nothing, we’re required to build,” said another source familiar with land use issues in New York.

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  1. SJ says:

    While Stanford has greater prestige than Cornell, I think it’s foolish not to consider the general incentives at play with a Stanford-NYC partnership. Would Stanford send their best professors to NY? their best students? their best start-up opportunities? Would they allow NYC to eclipse the mothership at Silicon Valley? I find it doubtful, and the attitude of their BOT, students, and community reflected that sentiment. This is Cornell’s crown jewel and they have every incentive to see it succeed and eclipse SV. I think this analysis played a large part in NYC preferring Cornell.

    1. Nitasha Tiku says:

      Thanks, SJ. That jibes with what I heard too. Charlie Kim from Next Jump mentioned wondering if Stanford was conflicted about the Mayor’s plan to eclipse Silicon Valley. But it’s hard to reconcile that with the million or millions they invested to get to the point of applying (on legal, PR, architecture, etc.). Stanford’s has many offers before to build campuses around the world and this time the trustees voted 100 percent to apply. It’s not to say they weren’t wary or didn’t change their minds or listened to rumblings from the student body, but the notion of bettering Silicon Valley is right there in the RFP and they signed up.