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.

Grains of Salt (v47): Seize the Delinquencies

Folks here in the Syracuse area have been hearing, for longer than I can remember, about the battle between Onondaga County and the owners of the now nearly-empty ShoppingTown Mall in Dewitt.

In a nutshell, the mall owes the county over $9M in taxes, and refuses to pay. Well, let me correct that - they refuse to pay what they owe, but offered $10,000 as a good-faith payment while discussions and court cases continue on what their assessment should be and how much they really owe us. The latest salvo? A bankruptcy filing for the property, which will tie things up even longer. It's a mell of a hess, if you know what I mean.

And they're not the only business that's behind in their tax payments - for example, there's Great Northern Mall, another once-thriving retail center, which owes over $3M for their 2018 and 2019 tax bills.

But now, the County Legislature has a new plan for dealing with delinquent commercial properties like the malls. According to multiple media reports, including this one from WAER,

Onondaga County lawmakers have thrown their support behind a new strategy that could lead to the seizure of certain tax-delinquent properties. The county executive's plan to create the Onondaga County Accountability and Reinvestment Corporation is seen as another tool to go after commercial properties with the goal of future development.

The new corporation will be responsible for seizing delinquent properties when all other efforts have failed, and would hold the title while the Onondaga County Industrial Development Agency works to get the property re-developed. Some properties would continue to be auctioned off following current guidelines.

There's about $45M outstanding on commercial properties, the report notes, even though we mainly hear about the big ones like the two malls. Or, we hear about the vacant, tax delinquent residential properties in the City of Syracuse, which we'll discuss in another post.

Legislators expressed some concern about taking property from a private owner, but ultimately, it comes down to fairness.  Here's Legislator Miles Bottrill:

I certainly believe in a property right, and this is a very significant issue relative to property rights.. However, this is really an abuse to the taxpayer and to this community.

One parcel has already been identified for transfer to the county - the former Syracuse Energy Power Corp. plant in Geddes, near the Fairgrounds. There's about $1M owed, and the county had to get a court order to make sure the out-of-state owner didn't dismantle any more of the property and sell it off for scrap. There are developers interested in the parcel, it seems, and that helped convince legislators that transferring this particular property is a good deal. Legislature Chair Dave Knapp noted

There have actually been some phone calls to the administration saying that, when the time comes, there could be some interest. It's in an industrial zone right off a railroad. It's an attractive piece of property for industrial use. 

No properties will be transferred to the new corporation without the legislature's approval. In addition to the Geddes parcel, there are others, including industrial sites, a hotel, and a marina, that could be transferred if there's no resolution to the delinquency. According to County Exec Ryan McMahon,

Many of (the delinquent parcels) are performing commercial properties that are receiving revenue that are just not paying taxes. So, that's why we look for a carrot and stick approach, but at this point we're coming down with a stick on these property owners to force their hands.

If you ask me, this is the kind of program we need to have, and be willing to use. I get that $45M may not seem like a lot of money out of a $1.3B budget, but it's a whole lot of unfairness for residents and businesses that have been paying their property taxes all along. Having this option in the county's toolbox is a good thing.

The Update Desk: Vending Machine Tax Breaks

On a couple of occasions, I've written about a nefarious tax break referred to as the 485-a. The first time was in this Meanwhile Back in Albany post from August of 2018, in which I noted

According to reporting by Tim Knauss of the Post-Standard and Syracuse.com, here's what vending machines have to do with anything.

Three vending machines at a Syracuse apartment building dispense candy, chips and soda. And they serve another purpose. They have helped the building owner avoid more than $3 million in property taxes. 

The vending machines are the only visible sign of commercial activity at Copper Beech Commons, a sprawling apartment complex for college students.

Here's why that matters: the property owner gets a lavish tax break that is available only to renovated buildings that have both commercial and residential space.  

That's right -  vending machines can be considered 'commercial space' under this really tasty tax break. And not only that, but vacant lots can be considered historic buildings. Honest, I couldn't make this stuff up if I tried.

A few of them, though, are brand new buildings, placed on lots where older structures were bulldozed, which is clearly (to anyone other than a lawyer or developer) not the type of projects the law was intended to help. There are others, in addition to Copper Beech Commons, that are student apartments, including the largest one, Theory Syracuse, which stands to save over $9 million over the 12 year term of the exemption.

The second time I talked about this, it was to report that the assessors in Syracuse were inspecting the properties to ensure that there really is a commercial operation in the building, or to tell the developers to get one.

For Copper Beech Commons, however, it seems the leaves have fallen, or something. In an article last week on Syracuse.com, Tim Knauss followed up on his original story and let us know that  Syracuse city assessors have been out inspecting properties claiming the 485-a tax break "where commercial operations were not readily evident from the street."

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'm happy to do another update on this one: The NY State Assembly has passed a law designed to reign in abuses under section 485-a, as Bill Magnarelli, one of our local Assembly members (but not mine) announced on his Facebook page. Take a look:

Property Tax §485-a Property Tax Exemption Reform

Legislation passed the NYS Assembly today to stop abuses of the §485-a Property Tax Exemption Program. Assemblyman William Magnarelli, 129th District (D- Syracuse, Van Buren, Geddes) sponsored this legislation along with Assemblyman Sean Ryan, 149th District (D-Buffalo). Both Syracuse and Buffalo have seen some of the worst abuses under this program.

§485-a of the Real Property Tax Law allows municipalities to offer a 12-year exemption on property taxes to developers that renovate old buildings that include a mixture of commercial and residential space. However, localities have been granting exemptions to projects that should not receive them under the program. Examples of abuse include: projects with minimal or no commercial or residential uses, buildings that are nearly totally demolished and rebuilt, and projects built on vacant lots. These exemptions are costing participating localities millions of dollars each year and placing a heavier burden on other property taxpayers.

As the assessors have mentioned in the past, the law was so loosely written that they had very little guidance to go on, and at times felt their hands were tied. Going forward (assuming passage in the Senate and a signature by our Sonofa Gov), things will be different, according to Magnarelli.

The abuses under this program are egregious. §485-a exemptions should not be going to projects where the only commercial uses in the building are vending machines or storage units, or where the developer essentially demolishes the underlying structure for new construction. Local governments and assessors say the current law does not give them the authority to deny these applications. This bill gives them that authority. This program was developed to help our downtowns redevelop old buildings into useful mixed use structures. The bill passed today will return the §485-a program to this purpose. I also want to thank Assemblyman Sean Ryan for working with me to get this bill done this session.

Assemblyman Ryan echoed Magnarelli's thoughts.

Unfortunately, too often we've seen large development corporations take advantage of taxpayers by exploiting this program with facilities that clearly violate the intent of the original bill. The changes we've made will be instrumental in ensuring the redevelopment of our cities can continue, while protecting taxpayers from footing the bill for large developers who willingly misuse the program.

So, what's going to be different? Generally,

• there will be limits on the commercial purposes and uses that can quality, and they must be publicly accessible;
• at least 50% of an eligible building must be for residential units, and at least 15% of the space must have a commercial use;
• no 485-a exemptions will be given on land that was vacant prior to construction;
• at least 75% of the floor area of an eligible building must be a pure-existing structure;
• requiring the commercial portion of the building to be currently used as commercial, or to be 'in good faith contemplated' which would exclude the three vending machines in a room;
• 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.

These are common-sense changes that are needed to protect property owners in our aging cities, where local government economic development agencies and departments are too quick to offer huge property tax breaks with little regard to how that impacts residents.

Particularly here in Syracuse, where nearly 50% of our property is not taxable because the owners are eds, meds, and non-profits, we need all the help - and restraint - we can get. 

Grains of Salt (v38): A Personal Touch

Question: If you received a letter from your local government, and the envelope included a personal note, would it inspire you to open the letter?

And if, instead of the garden-variety form letter, you had a personal note from the mayor, would you maybe pay your past-due taxes?

Seems that's exactly what happened right here in Syracuse when Mayor Ben Walsh and others staffers sent handwritten notes to folks with outstanding taxes -- which brought in $1.47M over a four month period, according to this article.

The idea to send the notes came from the folks at the X Lab, a think tank at SU's Maxwell School of Citizenship and Public Affairs. The guys from the X Lab worked with the city on how to reduce foreclosures and increase tax collections, and came up with the idea trying a personal note after doing some research into how people respond to different types of communication.

Here's how it worked: around 1900 people got the standard government issue form letter, but another 3800 or so got a handwritten letter, some of which also included a note on the envelope. The purpose of the letters was the same: notify the property owner of the delinquency and try to get them to pay up.  The personal letters went further, explaining that if they didn't pay up they'd lose their homes, but the city didn't want that to happen. The letters also explained some of the city services that the taxes support.

The results were pretty impressive: people who received the note on the envelope paid 88% more than the control group, the ones who just got the form letter. Even the folks who got the letter without the note on the envelope paid 50% more than the control group.

Walsh, a Maxwell grad himself, noted

This partnership with X Lab helps both the City and our residents. It's the kind of positive outcomes that occur when you aren't afraid to innovate and try something new. By using evidence and data to improve government services, processes and initiatives, we are helping to balance the budget while at the same time improving the health and well being of our citizens. 

Delinquent taxes are a long-standing problem in the city, with some $30M outstanding on over 2700 seizable properties,where the owners are more than two years behind - before this project started. And, there's another $9.6M outstanding on this year's taxes.

Also long-standing problems? Housing instability and poverty. Which is why it's great that we're seeing innovative approaches to these problems, and that we're seeing collaboration between local governments, SU and other educational institutions, and organizations like the Allyn Foundation, which provided grants for X Lab collaborations.

And honestly, this is exactly why Ben Walsh was elected mayor - to find innovative ways to improve life in the city, to find and work with any willing partners to try and solve these long-standing problems, and to get us back on track financially. 

Kudos to everyone involved.

The Update Desk: Vending Machine Tax Break

A couple of weeks ago, in this Meanwhile, Back in Albany post, we learned about a really cool tax break - known as a 485-a - that developers can get when they put commercial space in their residential buildings.

In the case of the Three Vending Machines, it was a local project, Copper Beech Commons, built by a local developer who has made a difference with several of his properties over the years. But in this case, having the vending machines garnered the project some $3 million in property tax savings, and I think cost him a little bit of respect.

Now, clearly the NY Legislature didn't intend for this to happen -- as the prior post noted, we're burdened with a number of at least OK ideas put into law, only to have them identified as ripe for the picking by smart lawyers (or campaign donors, as the case may be).

For Copper Beech Commons, however, it seems the leaves have fallen, or something. In an article last week on Syracuse.com, Tim Knauss followed up on his original story and let us know that  Syracuse city assessors have been out inspecting properties claiming the 485-a tax break "where commercial operations were not readily evident from the street."

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 hope the developer finds a tenant, or refunds us all of the tax money he got illegitimately for all those years. 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 while they're sitting around waiting for their leaders to come up with next year's budget.

Meanwhile Back in Albany (v20)

Nathaniel Brooks/NY Times photo

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?

I talked about the fake condominium tax break that certain homeowners are able to take advantage of in the last MBIA post; if that wasn't enough, now we've got the 'three vending machines in a room'  plan, which apparently passes for 'commercial space' in converted buildings.

Folks who pay attention to how things are done in Albany, particularly when it comes to the budget, will recognize the 'three (somethings) in a room' concept; that's how our Sonofa Gov Andrew Cuomo, Senate Majority Leader John Flanagan, and Assembly Speaker Carl Heastie get together, hash out the budget, and make a plan to cram a bunch of legislative initiatives into the spending plan. In happier times, the three men in a room were The Three Amigos, according to Cuomo - except that two of them are now convicted felons. But I digress.

According to reporting by Tim Knauss of the Post-Standard and Syracuse.com, here's what vending machines have to do with anything.

Three vending machines at a Syracuse apartment building dispense candy, chips and soda. And they serve another purpose. They have helped the building owner avoid more than $3 million in property taxes. 

The vending machines are the only visible sign of commercial activity at Copper Beech Commons, a sprawling apartment complex for college students.

Here's why that matters: the property owner gets a lavish tax break that is available only to renovated buildings that have both commercial and residential space.  

Wait, wait -- vending machines count as commercial space?

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.  

Nice deal if you can get it, right? And, believe me, they are getting it: there are 39 other buildings in Syracuse that are getting the same exemption as Copper Beech Commons. The exemptions are worth millions to the developers.

It's important to note that many of the projects that are receiving it actually have legitimate commercial enterprises in them.The good guys have renovated buildings that are now home to restaurants, offices, community development agencies, and retail establishments. Many of them were the kind of buildings the law was intended to help: older structures that have sat empty, falling into disrepair, that are now great properties filling gaping holes in our neighborhoods.

A few of them, though, are brand new buildings, placed on lots where older structures were bulldozed, which is clearly (to anyone other than a lawyer or developer) not the type of projects the law was intended to help. There are others, in addition to Copper Beech Commons, that are student apartments, including the largest one, Theory Syracuse, which stands to save over $9 million over the 12 year term of the exemption.

As with the condo loophole, there is not enough guidance for assessors to follow, and so each makes their own decisions, including  whether or not to regularly determine if there's any actual commercial activity happening. 

Some say that this is the way things have to be done in order to get development, to increase the value of the properties in the city over all, and that this exemption, which is good for 12 years, is more than made up for by the price of the investments and the related activities that stem from the development. That's always easy to say, and frankly it's probably easy to prove - but it doesn't mean that we have to open our wallets every time someone finds a loophole in a law and takes advantage of it.

This is the kind of bill that needs to have some teeth added, which will hold developers - local ones like the guy who did Copper Beech Commons, as well as those from out of state - who are taking advantage of the poorly-crafted bills.

Options could include things like the ideas below::

• Adding clarity to what constitutes a qualifying commercial use, such as hours open, number of employees actually working, annual payroll or payroll taxes, and so on.
• Defining what a qualifying commercial space is, such as minimum square footage required, accessibility, etc.
• Strengthening the guidance for local assessors to install consistency.
• Limiting the length of time for which the exemption can be claimed, and reduce the amount of the exemption to a lesser percentage of the development's overall tax bill.
• Collecting full taxes up front, and rebating the to the developers the amount of the eligible exemption only after ensuring that there's actually a commercial operation in the building on a full time basis.
• And finally, limiting the sheer number of exemptions that a development can qualify for; surely all of these projects don't need the mortgage tax exemption, the sales tax exemption, the 485-a exemption, payments-in-lieu-of-taxes (PILOT) agreements, moving expenses, furniture allowances, and the like.

At some point, we need to draw a line in the sand and let these projects sink or swim on their own merits. And if you're building a student housing project where folks rent bedrooms for over a grand a month, maybe you don't need our tax dollars to help you be successful. 

Meanwhile, Back in Albany (v19)

Nathaniel Brooks/NY Times photo

People of a certain age will remember the old saying, "if you believe that, I've got a bridge to sell you," a tip of the hat to America's Greatest Conman, George C Parker. If you don't know George, he was the guy that 'sold' the Brooklyn Bridge to newcomers to the Big Apple back in the day; he also reportedly sold Grant's Tomb.

Our con men aren't as sneaky as Parker -  they do this stuff right under our noses, by taking advantage of poorly written laws and also by taking advantage of the people we elect to the New York State legislature.

One example of this - abuses of the condominium tax break - recently re-surfaced thanks to reporting by Michelle Breidenbach. In her article for the Post-Standard and Syracuse.com, we learn of two single-family homes on the same street in one of the wealthy eastern suburbs of Syracuse. The houses were purchased for the same price, are a quarter-mile apart, and one pays almost double the property taxes of the other. The lower-taxed house is a condominium under the carefully manipulated laws of New York.

A condominium, you say? Isn't that a bunch of connected units, like an apartment building? Yes, that's what most people think a condo is. But a condo is not a condo any more - at least, not according to the law.

From Breidenbach's article:

Savvy builders across New York are taking advance of a loophole in state law that allows all kinds of homes to be called condominiums. That requires them to be assessed at a lower value than traditional single-family homes.

More than 100,000 condos in upstate New York are cashing in on the tactic. Their owners are taking an average 36% discount on their assessments, according to a Syracuse.com analysis of thousands of assessment and sales records. 

Upstate condo owners avoid at least $330 million a year in property taxes, leaving their neighbors to pick up the slack to pay for schools and local government. 

Yep - at least $330,000,000 in property taxes that are not collected, all because some lawyers and builders figured out a way to screw their neighbors - completely legally.  Again, from the article:

This strategy has spread around the state to wherever builders know the trick -- from the Buffalo suburbs to the Trump National Golf Club in Westchester County. Yes, that Trump. 

The condo break has almost no public benefit. Yet it goes mostly unnoticed by neighbors, unchallenged in Albany and ridiculed by town assessors who struggle to administer it.  

Under the law, which was created half a century ago - back in the 1960s - to protect folks who lived in NYC apartments when their buildings went condo. The law says that a condo unit - including summer homes, ski lodges, and yes, single family homes - are to be assessed based on how much owners of these 'units' can make in rental income, rather than on the value if the 'condo' was to be sold.

Clearly, the average person can see that what's happening here in the Syracuse suburbs, on Trump's golf course, and across the state is both wrong and unfair.

Meanwhile, back in Albany, no one involved in the crafting of the legislation probably ever figured that it would be so abused; they probably never thought that anyone outside NYC would have paid any attention to the law, much less used it to such in such a detrimental fashion to the rest of us.  But, that's what always happens, isn't it?

We have a long history of laws that turn into private welfare systems for the wealthy and for corporations. It's almost an expectation that this will happen whenever we come out with legislation to protect someone, or to incentivize economic development, or to enable some other lofty goal.

Remember the Empire Zone program? You know, the one that allowed companies to file paperwork to rename themselves, and take credit for 'hiring' new people and garnering them fantastic tax breaks and in some cases, tax refunds?  Or, they'd hire one employee and voila, be eligible for the special deals? There's some great (shameful?) information on how this program ran amok in this Citizens Budget Commission report.

Or how about the Tax Free NY program? That one hurts companies like the one I work for, which in one way or another has been around for some 80 years, and instead favors a different class of companies and their employees with ridiculous tax breaks?  Here's are a couple of posts I've done on this program; you can decide if you think it's fair, or if it offers any true public value.

The bottom line? Legislation created by well-meaning Democrats and Republicans we send to Albany are being abused, in many cases by donors to those same legislators. And, whether it's because their afraid of losing their campaign cash or because they're just not strong enough to walk back something that's gone awry, we're stuck with these programs.

And not only that, they continue to create new ones at every turn; a perfect case in point is the whole 'competition' for economic development dollars promoted annually by our Sonofa Gov Andrew Cuomo. We all know what happened with that program, right? Criminal convictions of key players in the program, a close compadre of the governor, and developers from Syracuse and Buffalo - so far. You can read about that gang, pre-convictions - here.

It's long past the time for putting these gimmicky programs to rest, and it's time we put fairness back into our tax programs.

The Update Desk: Casino Gambling

Last November, I shared the news ( in this Meanwhile Back in Albany post) that New York's gamble on allowing private, non-Native American casino gambling was not doing as well as expected.

The majority of voting New Yorkers who remembered to turn over their ballots back in 2013 decided we would amend our constitution back in 2013 to allow for up to seven new casinos "for the legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues generated."

As I noted in that post in November, the first three casinos - del Lago Resort and Casino (Waterloo) Tioga Downs in the Southern tier (which has its own crazy story) and Rivers Resort and Casino (Schenectady) are all under performing, by some $200 million or so, according to projections.

Competition is increasing - the fourth of the 'up to seven' casinos will open in the Catskills later this spring. The new place, Resorts World Catskills, will have a 100,000 square foot casino, 2150 slot machines, and 134 table games, along with a hotel, spa, golf course, and multiple dining options.

Also opening soon is Point Place, the latest offering from the Oneida Nation, which owns Turning Stone Resort Casino in Verona (east of Syracuse) and another mini-casino in Chittenango. Point Place, in Bridgeport, is supposed to cater to folks in Onondaga County, where the Legislature doesn't want to be in the gambling business and repeatedly turns down even putting up an OTB parlor, as well as from the communities around Oneida Lake and points north.

As noted in this recent article on Casino.org,

When Point Place Casino near Syracuse opens on March 1, the boutique $40M, 65,000 square foot casino will feature 500 slot machines and 20 table games. And while that might be great news for area gamblers, it's not quite as welcomed by the competition.

New York gambling venues have been sprouting up across the state since legislators opted to legalize four commercial casinos in 2013. The result has been a increasingly crowded upstate market, with private and Native American gaming operators fighting for the same customer base. 

NY legislators and Governor Cuomo don't seem to be too worried. For example, here's a fabulously irresponsible comment from Senator John Bonacic, the Mount Hope Republican who happens to be chair of the Racing, Gaming and Wagering Committee in the state senate, who noted in effect that developers always lie to get approval for their projects.

It was a very competitive process for four casino licenses, and of course their consultants were going to put rosy projections in order to get the Gaming Commission to hopefully give them a license. 

Gee, thanks for the oversight, Senator -- you do know that means oversee, not overlook, right?

For his part, our ever optimistic Sonofa Gov noted about the new casinos

They've all been wildly successful in creating jobs and building beautiful complexes.

Which, as we know, counts for everything with him. The state is littered with beautiful buildings created as part of these economic development, money-for-schools or tax revenue generators (but that's a whole nother post.)

So as we look to March, and hundreds of thousands of square feet of new gaming space, we have this dreary outlook on Wilmorite's del Lago from Moody's, which landed on January 10th.

Moody's Investor Services downgraded Lago Resort and Casino, LLC's Corporate Family Rating today to Caa2 from B3 even while the company's Probability of Default Rating was lowered to Caa2-PD from B3-PD. At the same time, Lago's 1st lien revolver and term loan were downgraded to Caa1 from B2 and its 2nd lien term loan was downgraded to Caa3 from Caa2. The rating outlook is negative. 

In English, what does that mean (emphasis added)?

Key credit challenges include Lago's slower than expected ramp up, single asset profile, and the highly competitive nature of the market which it operates that may impede the company's ability to support its capital structure. There are five gambling facilities, including four racinos and one Native American full scale casino within 100 miles of del Lago's location...

The negative rating outlook considers Moody's expectation that, despite the likelihood that Lago will cover its cash interest obligations and remain in compliance with its financial covenants during the next 12 months, albeit marginally, without a substantial improvement in the rate and degree of ramp-up or an additional equity investment by the owners, Lago will not be able to achieve a level of performance that can support its existing debt capital structure. 

 Lago's rating could be lowered if it appears there will be debt restructuring that involves impairment to existing lenders..

Now, it would be unfair if I failed to mention spin-off economic benefits stemming from del Lago and the other new casinos. For example, the State of New York might be making some extra money.

Data obtained from the State Thruway Authority shows Exit 41 (del Lago is just across the Thruway from the toll booths) had a monthly average of 266,306 vehicles the year before del Lago opened, the casino says. Since the casino opened, average monthly traffic at Exit 41 has increased to 381,477 vehicles...

Another real success story is the Magee Diner, just down the road from del Lago. It's one of several local businesses where gamblers can use their rewards points. The diner's owner, Gary Schlegel, has seen sales increase 15% since the casino opened.

We see more and more new faces in our restaurant every day, and 80 percent of the time my customers tell me they are on the way to or from del Lago.

Schlegel plans on adding outdoor dining and said he's going to see about getting a liquor license, too. This is great news, but as with any other downstream economic effect, this will last only as long as del Lago lasts. Like those shiny under-leased or empty new buildings I mentioned above, hopes and dreams of small business owners are also scattered across the landscape.

I don't want the casinos to fail -- we're already over-invested in them. And I certainly don't want the small business owners who are seeing a bump in business go back to where they were, or worse - fail completely - should the casino 'trickle-down' revenue streams dry up. 

What I do want, though, is responsible stewardship and leadership from our elected officials. That, my friends, shouldn't have to depend on a roll of the dice or the luck of the draw. 

Grains of Salt (v21): Challenges for Syracuse's Next Mayor

Grains of Salt

Republican Laura Lavine, the unanimous choice of her party's committee members.

Democrats Alfonso Davis, Marty Masterpole, Andrew Maxwell, Joe Nicoletti, Juanita Perez Williams, all of whom might stick around for a primary. (Maxwell was first to my door with information, which was the impetus for this post.)

Party-less Ben Walsh, the first in the ring, but without a party choice.

It's likely that one of these folks will be the next mayor of Syracuse, since Stephanie Miner is term-limited and done at the end of the year,

Syracuse faces a number of challenges, some of which have been our challenges for a long time:

• Roughly half of the property in the city is owned by educational institutions and non-profits; these entities are not obligated to pay property taxes, but fully use city services. Over time, the city has negotiated service agreements with some, but not all, of these property owners.

• The city has somewhere in the neighborhood of 1800 vacant properties of all types - single family homes, multiple family homes, apartment buildings, commercial properties -- it runs the gamut. Some of them are 'tax current', but many are not. The Greater Syracuse Land Bank, through purchasing and reselling homes, helps generate almost $750K in property taxes annually. (I've written about the Land Bank previously, including our very positive experience with their efforts on the house next door.) Not all buildings can be saved; way up the street from me, three or four houses in a row were recently taken down, as was one a block or so up the road. I prefer the empty lots to what was there before, even as it pains me to say that; I'd much rather have a lived-in city, rather than one full of large stretches of driveway ends, going from the road to the sidewalk, showing us what once was. 

• That's another one of Syracuse's challenges: people leaving the city, stretching our population further and further, eating up more and more green space, leaving the city a shadow of her former self, and doing the same to the rolling hills and farmland that surround us. I get that people have the choice to live where they want, to build where they want, to sell their land when and toom who they want, even if it's to someone who's going to put up a development of half-million-dollar houses. I do get that. I just have long wished that people would make the investment in the city, live in the city, would stake their claim in the city, and help it thrive.

• And without people, without families, it's that much harder for our Syracuse City School District (SCSD) to thrive. We have made progress, it seems: we now have a Superintendent, Jaime Alicea, who knows the city, knows the students, knows the lay of the land, and who seems to have support from all constituencies.  Graduation rates for the SCSD  as a whole are the highest in a decade, although still lower than anyone would like. With a higher percentage of  English as a New Language (ENL) learners and special needs students than most of its area counterparts, the city has different challenges than suburban schools, even as its students are required to meet the same standards for gradation.  Another big challenge the schools face is poverty.

• We've all seen statistics and more statistics: Syracuse ranks 29th out of the 30 highest poverty major cities, and we had the highest concentration of black and Hispanic poverty in the nation. The poverty is undeniable, and it's probably higher than that. Similar to the 'real feel temperature' the 'real unemployment rate' we hear - numbers designed to make us feel worse than we do, there's 'official poverty' and 'real-feel poverty' the kind that kids and families feel every day, even if they don't meet an official threshold. And the fact that we actually maintain statistics for people going up to 400% of the Federal Poverty Level, well that says something in and of itself, doesn't it?  

• Poverty impacts everything - absolutely everything. For the individuals living in poverty, it can negatively impact their physical and mental health, educational outcomes, employment opportunities, future income, and, for many, the ability to break the poverty cycle for future generations. For the rest of us, it impacts our property values, the services our city can offer, and it impacts our 'social psyche', our pride of place, our sense of our home.  It impacts everything. 

Our next mayor, regardless of party, will have his or her hands full with these and other issues, including our aging infrastructure (a victim of all of the above) and the potential for/threat of consolidation via the Consensus plan or our Sonofa Governor's 'convoluted' plan to allow county executives to run roughshod over their constituents by unilaterally bringing consolidation plans to the ballot. 

Syracuse deserves a leader who is up to all of these challenges. It will be interesting to see who our choices are, and how they plan on rising to the occasion.