April 28, 2014

The Update Desk: 30-year Bookstore PILOT

Back in July 2012 I did a post, To Pilot or Not to Pilot: the $64,000 Question, about a local developer asking the Syracuse Industrial Development Agency (SIDA) for a 30-year payment-in-lieu-of-taxes deal for a property that would house the SU Bookstore, other facilities for the university, and commercial retail space not affiliated with SU. Under the proposed pilot, the developer would pay the city $64,000 annually, or $1.9 million over the life of the deal.

I'm not a fan or this type of deal, as I've noted before.  I think the better way is for people to build things, hire people, sell things, and so on -- and once they start doing that regularly and successfully, we can give them a break.

In this case though, SIDA approved the deal, making it only the second time they've approved a 30-year deal - the first being the Carousel Mall/Destiny project.  I had half forgotten about this one, until I saw the paper the other day doing some catch-up reading. Seems the developer has not yet gotten this project off the ground.

In an article (written by Rick Moriarty) posted on Syracuse.com, we learn that Cameron Development is, for the second time, on the verge of losing the PILOT because of a lack of activity on the project.  Here's the scoop, according to the article:
The Syracuse Industrial Development Agency's directors asked their lawyer last month to look into the status of the $20 million project after noticing no construction occurring at the project site at the northeast corner of University Avenue and East Adams Street.  The same agency declared the developer, Cameron Group LLC, in default of its tax deal in November because construction had not started by the August 21 deadline included in the deal.   
The August deadline stemmed from the PILOT requirement that construction begin within a year of the deal being signed. The article continues
Cameron Group 'cured' the default in December when it staked out the site, removed trees and pavers, and paid National Grid to remove power lines. The developer also parked a backhoe at the side, but it has sat idle since December. 
The developer responded to the industrial development agency with a letter earlier this month saying bad weather and structural changes requested by the university delayed  construction during the winter. With ground now thawing, work will start on the building's foundation shortly, the company said. 
The company is committed to getting the building completed by May 2014, they said in their response to SIDA's attorney, so that the facility can open as scheduled in June 2015, and that
In light of our investment and in light of our compliance with the construction schedule set forth in the Agency Lease and the PILOT Agreement, we believe there should be no issue with respect to the SIDA approvals for this project.  We will continue to develop this project in accordance with all of the approvals that SIDA, the City Administration, the Common Council, the University and we worked so hard and so long to bring about.
I understand that SIDA board members may be frustrated with the length of time that this project has taken, but we will complete the project as promised.
Want to know what else the developer said, as quoted in the article?
No one wants to get it going more then me, but this isn't costing anyone anything.
I have to respectfully disagree with that last comment.  Listen, I'm sure the project will be completed, and likely on time.  As noted, Cameron Group has spent $2.5M of their own money on this project since 2006, so they're invested in its success.  But to say that this isn't costing anyone anything isn't true.

The 'cost' is in public faith in the economic development process.  Remember, this is only the second time SIDA has done a 30-year deal, and the first one did not turn out exactly as planned.  Mall developer Bob Congel declared his project done, he didn't build everything he said he would (including a hotel), and now he's back with hand outstretched looking for -- wait for it -- a deal to build a hotel.

That type of behavior, and the seemingly cavalier attitude of this developer, are among the reasons why people who don't know a lot about economic development (and, frankly, people who DO know a lot about economic development) don't like this type of deal.

We see developers asking for help to build things we don't know or don't agree we need, projects that are so critical that they simply cannot be built if an IDA or other governmental agency doesn't cough up cash or tax breaks. We get commitments and promises and disingenuous "golly, why don't you trust me to build what I said I was going to build?" attitude from developers. We're told that if they don't get the deals they ask for, they won't build anything and then the City won't get any money at all, so we're basically supposed to be thanking our lucky stars that the developers are willing to undertake these projects.

We lose faith in the system when we see the projects not get off the ground, when we see delays, when we see construction equipment parked on the building site but nothing happening. It leaves a bad taste in our mouth, because we've been down this road before.

That, Mr. Developer, is the cost that we are incurring now, and will continue to incur, until your backhoe starts up.