The Update Desk: Vending Machine Tax Breaks (Again)

Time for another update on the section 485-a tax exemption New York State offers to developers of historic buildings.

That's the one that's designed to get historic buildings repurposed into mixed use properties and back on the tax rolls. Here's the chronology of my posts on this subject, starting with this Meanwhile Back in Albany post back in July 2018.

Got a vending machine? Get a tax break!  Wouldn't that make a great billboard along the highways leading into all of the cities, towns and villages in upstate New York, instead of those silly signs we have on the Thruway?

Can you imagine anything so silly? Of course you can - it's economic development incentives we're talking about, and we're in New York.

State law created the tax break to help turn old and underused buildings into the kinds of places that filled downtowns in the old days. The idea was to restore the buildings with upper-floor apartments and street-level businesses - restaurants, offices and stores - to bring back the bustle of urban life.  

For Copper Beech Commons, vending machines did the trick. Without the tax break the owner would pay $560,000 a year in property taxes. With the vending machine incentive, the annual bill comes to less than $33,000.  

There were 39 properties in Syracuse getting the 12-year exemptions, the first eight years of which are fully exempt. Many of the properties here do have legitimate commercial enterprises, located in renovated historic properties - others, however, don't have commercial space and/or are in brand new properties built on land where historic structures were demolished.

In August of 2018, I had my first update on this, talking about Copper Beech Commons again.

A small office at the property has been cleaned up, with new doors added, to try and entice a small business to lease the space and preserve the tax break. Why? Well, as city assessment commissioner David Clifford noted,

Vending machines are not a commercial use, especially when they're owned and operated by the building owner. As far as I'm concerned, that's just like having a washing machine in the basement.

The assessors last warned the developer that the vending machines did not count for the exemption four or five years ago, so there should have been no surprise that there could be problems once the last (and only) tenant of the space moved out in 2015.

I wished the developer well in finding a tenant, but

More importantly, I hope we can count on city officials to consistently be good stewards of our tax dollars, and that our legislators can find a way to correct these 'good ideas gone bad' laws...

In the second update, I let you know that the NYS Assembly passed a bill submitted by local Assemblyman Bill Magnarelli to cut opportunities for abuses.  Among the changes?

• limits on the commercial purposes and uses that can quality, and they must be publicly accessible;
• at least 75% of the floor area of an eligible building must be a pure-existing structure;

• annual certification of properties to ensure the developer is in compliance; and

• revoking the tax benefits of non-compliant properties, as well as penalties if someone makes a material misstatement on their application for the tax break.

 And today, we learned (again from reporting by Knauss) that the Syracuse Common Council took action:

The council voted unanimously to amend local law by giving the assessor more explicit authority to reject applications for the so-called 485-a exemption, which the city first adopted in 2010. The amendment specifically aims to exclude projects that involve demolishing old building to make way for new construction. 

You know - projects like those brand new luxury student apartments, for which the developers get around $4M a year in 485-a tax breaks.

The amended Syracuse law says the assessment office should "narrowly construe" the 485-a exemption by excluding "projects that primarily consists of demolition of the existing real property (i.e. 60% or more of the existing building.)"

The second measure passed by the council Monday asks state legislators to further clarify the law on 485-a exemptions. 

This is a good step, even though it will only apply to new development, not the existing abusive properties. Mayor Ben Walsh is said to support the legislation; but won't make a final decision on the bill until after an upcoming public hearing.

Now, if the State Senate can get it passed (fingers crossed), we'll get this fixed for good.

Working and Paying Taxes

Today is my 24th 'work anniversary'. It was way back on March 12, 1990 that I stopped being a temporary worker at, and became a full time employee of, what eventually became upstate NY's largest regional health insurance carrier.

Over the years, I've been a claims processor, an analyst, a trainer, an analyst, a process improvement analyst, a manager, a business integration expert, a director, an analyst, a process expert, an analyst, a process manager, a requirements analyst, and a compliance program administrator.

I've been trained on lots of practical things (specifically related to our business, products, and the like) as well as how to run effective meetings, how to communicate effectively, how to lead effectively, how to use software effectively to me look smarter.

I've had Lean/Six Sigma training, and learned about the Six Thinking Hats, and Maslow's Paradigm, and where to find my cheese now that it's been moved, and how to find my strengths. I know how to lead from where I am, and how to row in the same direction as everyone else.

I'm a Change Agent. I'm a Communicator. I'm a Participant.

I'm the kind of person you might want working for you, if you were coming in with one of those new tax-free businesses where the employees don't have to pay income taxes for 10 years.

Yesterday, the Onondaga County Republicans entertained and were entertained by The Donald, His Hairness, Mr. Trump himself.  He chatted up the crowd for just over half an hour, but did not announce his intentions to run for Governor, although he did say on a radio show that he would announce by the end of the week. (We'll see whether that happens).

I'm not a fan of Trump. I think he's an obnoxious blowhard, and a master self-promoter, which in some respects makes him sort of like a politician but a little more like the Duck Dynasty Dudes.  But even Trump realizes the craziness of  the Tax-Free NY program, which makes a separate class out of those of us who work for employers like mine and folks who come in to new companies that, because of a crazy idea cooked up by our Sonofa Governor Andrew Cuomo and business lobbyists, don't have to pay income taxes.  Trump calls publicity for the program, which he says he saw running during his golf tournament, political ads that should have been paid for by the Cuomo campaign.

Even State Senator John DeFrancisco realizes that this is a bad idea, and that it's unfair competition for existing businesses.

One guy who doesn't get it is my guy, Assemblyman Bill Magnarelli, who thinks the plan is fantastic because the new businesses will not be in direct competition with existing businesses, they'll be focusing on new technology and leveraging our educational system, blah blah blah.  We get that part, Bill.

However, these new businesses will need people who have skills in some traditional areas that businesses need to focus on, like finance, and human resources, and compliance, and so on.  They'll have to come from somewhere, either with the business that moves here, or from the existing workforce, or be outsourced to some other company.  And if they come with the employer, or leave a local company to work for the new kid on the block, those people will be here, using state services, for free.

And me, with 24 years and counting at my now 78-year-old company, well, I'll be helping pay their way. Happy Anniversary to me.

Hell Hath No Fury...(Part 3)

...like an economic development project scorned.

In the first two parts, I discussed the reactions of Onondaga County Executive Joanie Mahoney and former Syracuse City Auditor Minch Lewis to a column by SU professor David Rubin, who had a few words to say about how it appears Syracuse is being treated by our Sonova Governor Andrew Cuomo when it comes to economic development cash.  Compared to Buffalo, and to Albany, it seems we're getting a different kind of attention. Rubin feels we're getting short shrift, and wasn't shy about saying so.

Assemblyman William Magnarelli (who happens to be my guy in Albany) represents Syracuse's Northside, Valley, West Side and Eastwood, as well as the towns of Geddes and VanBuren.  He's been in Albany for over a dozen years; he was also on the Syracuse Common Council.  Basically, he's a hometown guy who's devoted much of his life to public service.

He too took exception to Rubin's column, noting that he

was startled to read the column...which painted a misleading, inaccurate and distorted picture of Syracuse and Central New York's economy.

We have cranes in the sky, Magnarelli noted, and shovels in the ground.  He also specifically called out the CNY Biotech Accelerator at Loguen's Crossing, which opened early last year.  So far, that's the only development that's happened at the Loguen's Crossing site, although, according to Magnarelli

In addition to the accelerator, the Kennedy Square neighborhood now has new life, supported by state funds, as it is to be redeveloped with office buildings, residential and retail space...

Some of that remains to be seen -- we still don't know what COR Development and Upstate have planned for the site; we now know that at least for the near term, there won't be a stadium there.

Magnarelli pointed out that under the Cuomo administration, Central New York has received over $264 million, through the Central New York Regional Economic Development Council (REDC):

• In 2011, our region received $103.7 million, including $3M for the Inner Harbor, $3M for the Syracuse Center of Excellence, $1.95M for the Biotech Center, and smaller amounts for 71 other projects across the region.
• In 2012, we got $93.8 million; big winners were an expansion of the Syracuse Community Health Center ($3.1M), development of the Sibley's building, a key property connecting Armory Square and Salina Street ($2.5M); LeMoyne College medical product development labs ($2M), the Inner Harbor (another $1.5M), and Kennedy Square/Loguen's Crossing (another $1M).
• In 2013, the award was $66.9 million. Among the larger projects are new facilities for Inficon ($3M), renovations of the vacant NYNEX building across from City Hall ($2.5M), the Inner Harbor ($1.3M), an expansion for GA Braun ($1.5M), the Inland Port project ($1M), a warehouse on the Near West Side ($1M), expanded facilities for Hanford Manufacturing ($1M). There were also a number of smaller awards. 

In the overall scheme of things, 264 million bucks is a lot of money to get in a short period of time, and it's a good thing that we're getting it.  Being a top performer two years out of three, some key opportunities for local businesses, and additional funding for some of our better known project like the Inner Harbor and, again, Loguen's Crossing, the proposed home for our no-longer-likely stadium project -- these are all good things. 

But Rubin's point was about the apparent disparity between what we're getting here and what the other areas are getting.  In that regard, here's how Buffalo and Albany did over the past three years:

• In 2011, $100.3M to Buffalo, and $62.7M went to Albany
• In 2012, $52.8M to Buffalo, $50.3M to Albany
• In 2013, $60.8M to Buffalo, $82.8M to Albany

So, $213.9M to Buffalo, and $195.8M to Albany -- looks like were the big winner right?  Well, no.  The REDC money is in addition to to the Buffalo Billion and the Albany nanotech investments which are in the same billion-dollar neighborhood. Doesn't that look like a disparity?

Magnarelli went on to talk about the Lakefront plan, calling it "visionary" when it's really not. It's not completely without benefit -- there's a lot of money for infrastructure to help attract new businesses to the area -- but it does allocate about half of the money on a seasonal concert arena (think OnPAC, like CMAC or SPAC).  That, too was one of Rubin's points. Is a new concert venue (and a fair-weather one at that) going to help drive our economy forward, given the current state of our cultural affairs? It's a valid question.

We are making some progress, to Magnarelli's point - but like Minch Lewis before him, and Joanie Mahoney before him, he faults Rubin for not being a joyous go-along.

There are cranes in the Syracuse skyline, shovels in the ground in the Inner Harbor and a new energy. And for much of this, we can thank the state for its focus on this region. Instead of complaining and distorting the facts, we should be working together to build on the progress and continue to bring vital investments to Syracuse and Central New York. 

It's good to celebrate opportunities that are coming our way, but it's also good to maintain a healthy skepticism when politicians start throwing around tax dollars. It's good to get the dollars, but it's also good to challenge our leaders to make sure we're getting the most bang for those bucks.

The underlying theme that ran through all three parts of this series was the criticism that Rubin took for offering an opposing and, admittedly somewhat sarcastic, view on economic development in our area. He brought no shame or harm to our community by saying what he said, but instead got people talking, the dissenters and champions alike. I'd hazard a guess that more people heard of Loguen's Crossing in the past two months than at any time other than the first couple of days after the project was announced a few years back.

But in the final analysis, doesn't if feel a little like our politicians are afraid that Rubin's column may have had the potential to shut off the tap for Syracuse and Central New York, to damage our chances for future projects funded by Albany's largess?

I hope that's not the case -- because if it is, we are in much worse shape than Rubin ever imagined.