Grains of Salt (v35): Throwing Good Money After... Good?

Grains of Salt

Regular readers of veritable pastiche likely have seen that I'm not a huge fan of how governments, including Onondaga County and the City of Syracuse, make economic development deals.

You know the kind I'm talking about, right?  The ones where we give money to profitable companies who would have us think that, absent a taxpayer subsidy, they would be unable to move less than a mile to new office space, for example. The post I've linked has several other examples of how happy this stuff makes me.

So - knowing I'm a fan, you can only imagine my delight upon learning that we're now giving even more money to two city projects that have already tapped the taxpayer well. The Syracuse Industrial Development Agency (SIDA) voted unanimously to the increases

One of the projects is the State Tower Building renovation, which created 61 apartments and new office and retail space; the project was originally budgeted at $27.5M, but had overruns of $14.2M.  The Pioneer Companies, the project's developer, blamed water damage, asbestos caulk, and repairs to part of the building's iconic features as main contributors.

Across the city, costs on a project by BVSHSSF Syracuse LLC (an offshoot of the country's largest builder of luxury student housing) to build 244 student housing units rose from the initial $66.6M - a bad omen right there - to $71.5M, because they spent more on materials, furniture and the like than budgeted, and because the pesky Syracuse Fire Department made them bury their overhead power lines.

So - the State Tower Building project's exemptions went from $803,886 to $1.4M, and the alphabet soup LLC's exemptions were bumped up to $1.72M from $1.36M.

Rents at the State Tower building are not cheap. According to this preview,

Monthly rents range from $1350 - $1500 for the studio apartments, from $1450 to $2200 for the one-bedroom units, and from $2700 to $3200 for the two-bedroom units. In addition, there is a $100 monthly 'amenity fee' which provides wi-fi, cable TV and access to a roof terrace and fully-equipped fitness center.

For student housing units, rents run upwards of $900 per bedroom, with some projects getting prices similar to the State Tower apartments - per bedroom.

I get that we benefit from having our downtown buildings renovated, repurposed, and rejuvenated - I really do. But what are these projects 'creating' other than a profit for the developers at some point, assuming they manage them better than they managed the projects?  OK, that was a little harsh, I know, but you get the point, right?

Yes, we'll have more people downtown, and they'll spend money at the bars and restaurants and they'll have their groceries delivered from Wegmans, and they'll call their Lyfts and Ubers and all that. And we'll probably get some property tax dollars from these projects. But they're not creating any significant number of jobs for the long term, or opportunities for entrepreneurs. And sometime, maybe not all that far off, we'll reach the point where the benefits of center city vibrancy will be far outweighed by the poverty that's already pressing its nose up against the windows.

And up on the SU hill, where for decades there's been a cottage industry of renting to students - whether it's landlords buying properties and renting the entire house, or folks like my grandmother back in the day, who rented rooms in her house on Stratford Street to grad students, forming lifelong connections with many of them - progress for builders and developers is not necessarily progress for us all.

Hopefully, SIDA and economic development professionals will get to a place of comfort saying no to rewarding cost overruns, and with saying yes, differently, on development projects. We'll look at that last part in an upcoming post.