The Update Desk: The SU Bookstore

This one is the story that will never die, I'm afraid.

It was back in July of 2012 that I first wrote about the bookstore/fitness center/retail complex that was proposed by the Cameron Group LLC for a corner of the Syracuse University hill. The first post was on the question of offering a 30 year payment-in-lieu-of-taxes, or PILOT agreement. It was actually the second time that vote was being considered; the first time, it was pulled in the face of certain failure.

The second post, on the same day, was announcing the not-surprising outcome - approval of the deal by a "bitterly divided" council on a 5-4 vote. To get the approval, there were some binding attachments to the deal, including minority hiring requirements for the developer, and fitness programs for minors, to be developed by SU. If these requirements were not met, the PILOT could be revoked.

Fast forward to April 2014, when we next heard about the bookstore project - or, I should say, the lack of a bookstore project.

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.   

Say again?  The project was given only the second 30-year PILOT ever offered by the SIDA (Carousel Mall/DestinyUSA being the first) and nothing was going on at the construction sight? For the second time? Ah, but everything's OK, we were told. The developer promised to get the building completed on time, ready for opening in June of 2015, and there should be no concern, honest everything's fine.

Then, in June of 2014, SU fired Cameron Group, noting that

The developer has been unable to adequately address the University's concerns or demonstrate a credible ability to successfully complete the project as it had contractually agreed to do so.

Shortly thereafter, the university and the developer filed suits against each other; settlement negotiations began, and bike lanes remained blocked.

In August 2015, the University took steps to restore the construction site to its pre-development status, making it pretty again, opening up the bike lanes, laying sod and the like.

And now, we learn that SU is suing Bond, Shoeneck and King, their lawyers, for failing to include a clause in the contract with Cameron that would have required them to act a little more aggressively to get everything in order.  The missing clause notes that "time is of the essence" and, had it been present, SU feels they would have been able to fire the developer for lack of progress without being liable for anything.

And had time been of the essence for the developer, rather than for the Common Council who felt a special session was necessary to get this thing approved in the first place  back in 2012, we might have a thriving facility up on the Hill. Instead, we've got no development, no $64K a year in taxes, no new bookstore, no fitness programs for city kids, and so on.

We've got nothing.

The Update Desk: Bookstore Deal is Off

According to published reports, Syracuse University fired the developer of its new bookstore, the Cameron Group LLC. In a statement, the University noted that

The developer has been unable to adequately address the University's concerns or demonstrate a credible ability to successfully complete the project as it had contractually agreed to do so.

The bookstore was the recipient of a 30-year payment in lieu of taxes (PILOT), which was granted just shy of two years ago by a 'bitterly divided' Common Council.  The PILOT would have given the city all of about $64,000 per year, or less than $2M over the life of the deal.

Back in April of this year, the developer was for the second time in hot water over failure to progress with the project.  One default from last fall had been cleared when the developer took down some trees, put up some stakes, parked a backhoe and made it look like construction had started.  In April the developer assured everyone that they were going to go forward and that, while they were not making any progress, they were not costing anyone anything, a comment I found distasteful. There IS a cost when developers promise something and don't deliver, I noted:

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.

Now that the developer is out, we won't get the promised minority hiring and fitness programs for local kids that were included as binding contingencies in the deal.  And worse,  unless SU decides to build their new bookstore themselves without involvement from SIDA and the Common Council, we'll have to go through this agonizing process again, with our legislators deciding  once more whether it's worth it to waive tax dollars in the millions for promises in the thousands.

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.