July 9, 2012

To PILOT, or not to PILOT: the $64,000 question

Courtesy Cameron Group LLC,
published in the Post-Standard
This afternoon, at a special meeting of the Syracuse Common Council, there will be a vote on whether to give a developer a 30-year payment-in-lieu-of-taxes (PILOT) deal on a project to build a new mixed-use facility housing a new Syracuse University bookstore, a fitness center, and a handful of retail outlets. 

Given the angst we're going through after our last (and only) 30-year PILOT, for Carousel Center/Destiny USA, there's quite a bit of consternation surrounding this one.

Here are the key players:
  • The Cameron Group LLC, a Syracuse developer whose management team includes a number of Pyramid Companies alums.  Pyramid, of course, is the Destiny USA mall developer.
  • Syracuse University, owner of the half acre lot on which the complex will be built; SU will lease the land to the developer for $1 a year, and will also pay $1.48 million annually to lease the building for its bookstore and the fitness center.
  • Syracuse Industrial Development Agency (SIDA), the gang that handles financial incentives and bonding for Syracuse economic development projects, and who narrowly approved the PILOT which now comes before the Common Council.
Needless to say there are lots of opinions on this. Many feel that getting $64,400 per year, roughly $1.9 million over the 30-year life of the PILOT, is worth it to the city, which is hampered by a significant portion of properties city having not-for-profit tax exempt status. 

And, maybe developing this little lot on the SU hill will help open the door for other creative development projects in the area. And, if SU were to independently develop the building, the entire property would be tax exempt and the city would get nothing. Editorial writers at the Post-Standard, back in March, suggested that the Common Council saying no to the deal would be the equivalent of cutting off their nose to spite their face.

On the other hand, there's a legitimate question as to why the PILOT needs to be so long - why 30 years, why not 20 or 15? And what about the impact to other businesses on the Hill, those who have to compete with the SU bookstore and also pay full property taxes?  Should we be offering better deals to new businesses, and leave existing ones in the lurch?  And is $64,400 enough to cover the cost of basic city services for the building? Is it fiscally responsible for a city with our issues?

The last time the PILOT was to be voted on by the Common Council, it was pulled at the last minute when it was clear that it would fail. This time, there's a special session for the vote, which under Council rules means that the majority for passage is only five votes instead of six.  I can only imagine supporters on the Council think they have the votes, otherwise I'm surprised they'd bring it forward again.

If I had to vote today, boy I don't think it would be easy. Previously I've suggested that developers should show us theirs - build something, open something, hire some people, make a go of it -- before we show them ours -- PILOTs and other incentives -- as we've been burned several times in the past. We've seen lots of pretty pictures of pretty buildings, and have had our share of developers promising pie-in-the-sky projects that never amount to anything.  Or, like Destiny USA, amount to less than what we were promised - but still deliver something.

In this case, there's nothing for the developer to show us.  So we're asked to approve a 30-year deal, on a project that is not be viable without the PILOT?  How would you vote? 

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