The conflict between the City of Syracuse and Onondaga County over tax abatements for the development of the Inner Harbor of the city has raised questions about the working relationship between the mayor and the county executive. On this week's edition of the Campbell Conversations, host Grant Reeher discusses this conflict with both Mayor Stephanie Miner and County Executive Joanie Mahoney, in their first joint appearance to discuss the issue. In a spirited but respectful conversation, the two executives set forward their views of what was done, what should have been done, and why.
Editor's note: Read some observations on this interview written by host Grant Reeher
Grant Reeher (GR): Welcome to the Campbell Conversations. My guests today are Syracuse Mayor Stephanie Miner and Onondaga County Executive Joanie Mahoney. Recently, their offices have been in a disagreement over the development of the Inner harbor of Syracuse, but they’ve agreed to discuss that project here. The project also raises some broader questions about business development, tax breaks and political jurisdictions and we’ll consider those as well. I should also note that they’ve both been on the program together before but thanks to both of you for agreeing to come back on the program again today.
Stephanie Miner (SM): Thanks for having us.
GR: For the benefit of our listeners who may not have been following the controversy over this particular development project, let me start by very briefly sketching out what I understand to be the central facts and seeing if I’ve got this correct in your views and then from there we’ll go on to questions. Here is the story: A developer of a mixed use construction project negotiated in 2012 with the city, for the sale of land in the inner harbor area of the city. According to the city, the developer named COR, promised that in exchange for the land deal, it would not seek subsequent tax breaks from either the city or the county. Construction started on the project and then the developer sought and was granted a payment in lieu of taxes or a PILOT agreement from the county’s industrial development agency which was worth an estimated $44.5 million dollars to the company. Citing the violation of a verbal agreement, the city sued the developer to stop the project and to seek damages and also put a lean on the land and sought to reclaim the land that was sold. The city further objected to the fact that there were no provisions in the tax abatement for the developer to train and hire local residents for some of the jobs created by the project. The judge in the lawsuit allowed the damages for fraud to continue but removed the lien and dismissed the suit to reclaim the property thus allowing the developer to continue to work on the project. Negotiations among the parties are currently going on to try to resolve the case. Do I have that about right?
SM: About right, the only issue I have is it was not tax breaks, it was a PILOT agreement because the project actually did get mortgage recording tax, sales tax and some other benefits from the Syracuse Industrial Development Agency.
GR: Okay, thank you. County Executive, do I have that story about right, do you agree with what the mayor is making as a friendly amendment to it?
Joanie Mahoney(JM): For purposes of this conversation I think it’s close enough.
GR: Okay, let me move to some questions. County Executive I’ll start with you. Does the apparent fact that the developer has gone back on its word to the city in seeking the tax abatement suggest that it is dealing in bad faith and is that important here?
JM: Absolutely, dealing in bad faith would be important but all of the published information is that there was no such agreement made. I think that, and the mayor would know better than me, because this part happened before the developer came to the county, the published reports that I’ve seen about it were that the developer said that they weren’t going to ask for a PILOT on the hotel that’s currently being built, the Aloft Hotel, but I know from archives that have been circulating about this now that one of the city counselors at the time voted no on the land transfer because COR specifically wasn’t agreeing to not seek a PILOT so I don’t subscribe to that being a foregone conclusion that they had made that agreement. I think that’s the crux of the litigation and it certainly wasn’t the impression that the public had but the mayor had conversation that were outside of the public.
GR: Do you want to comment on that Mayor?
SM: You know, I have to be careful because the Judge has asked us not to comment on this but I think it’s fair to say that there were representations made specifically that a pilot would not be sought on the hotel and yet the PILOT that the OCIDA, the county agency gave to COR includes the hotel in exhibit B and so I think that’s a specific instance in the larger instance in which there are people in the city, myself included, that have said that there were commitments made that they were not seeking a PILOT.
GR: So Mayor, let me go forward in the story with you on this, could you explain this to me, if the mayor’s office was previously supportive of a developer going ahead without an explicit agreement to hire locally, which is what I understand the situation was when the city agreed to sell the land to the developer, why would your office now be opposed to the project going forward simply because the developer has subsequently sought a tax abatement?
SM: Because the tax abatement is worth $44 million dollars and the state money that is in the project is $30 million dollars so you’re at $70 plus million dollars for $320 million dollar project. That’s a 20% public investment. When you have that kind of public investment, public resources, we in the city have been very consistent in saying we think there has to be a direct public benefit, a community benefit, and while we have not structured a formal community benefit agreement, every single PILOT that we have starts with the proposition that there has to be a direct benefit for the public. You know, this is always, when these types of negotiations happen, you always have to think about how much leverage do I have? How much are they asking for? This was the largest project in my tenure as Mayor, the only other one that pre-dates this, that was larger, was the Destiny project and the Destiny project, I think, illustrated exactly what this community doesn’t want to have which is to give away very lucrative benefits, not get commitments in response and see that what happens when you give away those benefits and you don’t get commitments in return that it doesn’t anore to the publics benefit.
GR: Let me ask a follow up question and then I want to turn to the County Executive. Mayor, you are a lawyer, why didn’t you get that promise about seeking the tax abatement in writing?
SM: Because we worked for 4 years with this developer and there were lots of back and forths that we had to go through with the developer and I felt that there was a commitment in good faith to work with this developer and there were lots of things that we had to do. I had to go in front of the Thruway Authority and the Canal Corporation. We had to work through lots of different issues and when they said to me that they weren’t going to have PILOT, I believed them, but also knowing full well that if they were going to ask for a PILOT, that they would come in front of SIDA and that would be the point where there would be discussions and negotiations.
GR: County Executive, what I’m hearing from the Mayor basically, to try to put it into one nut shell is basically this was too much of a give-away. Can you respond to that?
JM: In a couple ways, one, in the details of the PILOT and as you and I talked about before I came online here, I am not the person on the county side that operates the Industrial Agency. That’s the way it’s set up in the city but in the county its run by the county legislature, but I’m fully versed and happy to have the conversation. If you look at the PILOTs, for instance, for the Marriott in the Armory Square neighborhood that SIDA gave to the developer, they’re far more valuable and there’s a longer period of time that taxes are paid on the improvements, so this deal as being characterized as too big a give-away, I don’t think is accurate. But then I would also say that the state money that the Mayor talked about being in the deal, that was in the deal regardless of the county, so adding that to what made it so valuable that would require a CBA it was also part of the city’s deal. But I think that if you’re truly committed to this notion of a community benefit agreement, when the land was transferred, that is a tremendously valuable asset in the city and in the county as a whole and when that land was transferred from the city to COR, the Urban Jobs Task Force was at the meeting and they were asking for a community benefit agreement and there was no discussion and no community benefit agreement and I do take exception to the notion that it was not valuable enough to have required that, but now shame on the county for not doing it at this point. I suppose a balance, maybe a matter, there is a lot of state and local money and value in this and Onondaga County has a really good track record of making sure that local people are hired. I think as a matter of fact, the local hiring component that the Onondaga County IDA uses, the city modeled their own after it. I can give you a very long list of ways that Onondaga County ensures that local people benefit so it’s just really the community benefit agreement language that I think we’re debating.
SM: I have to disagree and let me say a couple things. First, the Marriott PILOT was a Driscoll PILOT and that was one that we wanted to get taken care of right away so that was in the first 3 months of my administration. The second is the land was transferred and 13 days later, the developer went to OCIDA surreptitiously with no notification to us and the county IDA did not notify the city IDA and had the PILOT benefit. You know, I would say this, the County Executive has a good track record of really saying and talking about how important it is to give people jobs and how important it is that we hire people from the city. But where I think we disagree is that I don’t think it is good enough to just talk about it, I want it in writing, I want it enforceable, because I’ve seen first-hand and experienced first-hand what happened in Destiny when they just said ‘we’re going to do all of these things’ and none of those things happened. And also I would say there is a key difference between the county IDA and the city IDA in that we have goals for minority and women in business owned hiring. We look at those goals when we talked to people about the benefits when they come back and they want more benefits, that’s part of how we measure whether to give them benefits and additional benefits so we have actual language in the agreement that says this is what we expect you to do, but when you’re talking about a PILOT that’s $2 million dollars versus a PILOT that is $44 million dollars, your leverage is different and the quantity of the public benefits that you’re talking about, it becomes a different scope.
JM: Can I just add really quickly, the PILOT that the Mayor gave to the Marriott in Armory might well have been negotiated by Driscoll but the developers sold that and the land transferred had to be voted on by SIDA and that was voted on without any of this community benefit agreement. But the other thing is, with all due respect to the Mayor, she’s critical of the county because she said we talk about the importance of hiring city people but she wants it in writing and she wants it to be enforceable but we just said why wasn’t this initially that they weren’t going to get a PILOT in writing, why does the city have different standards for itself and not need requirements in writing but when the county does business, again, shame on us if we don’t.
SM: I think because the size of the projects are different and when the only other similar size project that we’ve had come through the city has been the Joint Schools Construction Board, which we had in writing, 10%-15% for people of color, city residents, job training, so the actual language enforceable by an outside entity, we met and exceeded those goals, but again, the difference between a PILOT that’s taking away $9 million dollars from the school district, $21 million dollars from the city, a 15 year PILOT versus a PILOT for housing downtown, they’re vastly different and your amount of leverage and the ability to negotiate and talk about this is different.
GR: I’m Grant Reeher and I’m talking with Syracuse Mayor Stephanie Miner and Onondaga County Executive Joanie Mahoney. We’re discussing the development project for the Inner Harbor area of Syracuse. One specific question County Executive, I think we’re getting a good sense of where you two see these things differently and just how different this particular project was and when things should have been done and by whom. Was there any evidence, this is for the county’s part in this, was there any evidence that the developer would not continue with the project if it did not receive a tax break from the county because by that point, as you’ve already pointed out, it was already underway, I mean the land had been sold, they’re building, so why couldn’t you use the fact that it’s already going to get some sort of commitment about local hiring?
JM: Well, we have lots of commitments that have to be made about local hiring, the question was is there a specific community benefit agreement in the PILOT and those questions I would have to defer to the IDA, as again I say, I don’t run the IDA but I think what they’ll tell you is that the Aloft Hotel was one parcel. This is a whole bunch of different parcels that aren’t all one project and the land gets pulled down over time and then the PILOTs on those additional pieces, I know that they have to justify the need in the application for the IDA and I can put all of that - is online - but I think it also brings certainty in what the ongoing costs will be that are passed on to the retail, commercial and private tenants and I think that’s some of the value but I did not specifically negotiate this with COR.
GR: I understand that but let me push this just a little bit further. I’m not a developer but it seems to me that if I were running the numbers and I’ve got this thing already under way, I probably would be thinking, I’m going to make money even if I don’t get this agreement otherwise I wouldn’t be in this deep and so they’ve already kind of got their chips in the middle of the table.
JM: What I think what the public is missing and will probably forever miss because people are too busy to get into the weeds and you only have 23 minutes, but there was an assessment and it got changed when the first property got pulled and I know the Mayor has plenty of justifications, but the end of the story is that the assessed value that COR had to pay in property tax on the Aloft Hotel was tripled or quadrupled and I think that gave them the uncertainty of going forward and needing those values set because they can’t negotiate leases with the uncertainty of the tax bills. So I’m not questioning any of the reasoning for that but I’m saying there’s more to it than I think people are aware.
GR: So what you’re saying is the city then raised what they were saying the value of that land was and therefore the taxes were going to go up.
JM: On all of these PILOTs, the developer pays the property tax on the vacant land that they acquire but what the PILOT gives them is a payment in lieu of what the tax would be on the improvement and before the Aloft was built and open, it’s still not open, its assessment, I don’t know, Mayor, tripled or quadrupled, and they ended up in litigation with the city and settled on something a little less than that but I think this has something to do with their desire to get this into a PILOT and some certainty.
GR: We will move on to broader questions but this seems like an important detail so Mayor, would you comment on that briefly.
SM: Yes, it is, when you take public land and you transfer it to another municipality or another government entity, the law states that you have to reassess it. The law on assessment in New York is very definitive about what you have to do in your legal responsibilities. COR understood that, they knew that, they were unhappy with the assessment, they sued us, we went to court, we settled it. The assessment is what it is. It gives them the certainty that they need. I would say this, they had what they needed and if they thought they didn’t have that after working with us for 4 years, they could have talked to us about that. I really think this is a case where you have a developer who saw one entity, SIDA, the City of Syracuse, who was going to drive a hard bargain, say if you want public benefits, we have very specific expectations in return for that both in terms of my history with the Destiny project but also in terms of my history with the PILOTs that we have seen and the fact that I had met with the Urban Jobs Task Force, the county executive had met with them, it was open and notorious that this was an issue with a city that has the kind of poverty levels and needs for jobs that we have. But instead, they went to the county and the county’s IDA did not have any requirements set for jobs that there had to be hiring, minority hiring, people from the city. The only local requirement hiring that they have is that people on the site have to be hired from a 10 county region. Well, that’s not, in my belief, a hard estimate or a hard goal to meet at all.
JM: But the cities requirement is a 6 county region.
SM: Right, in addition to minority and women of business owned hiring and contracting and the fact that they knew, based on what I had said, what Counselor Bey had said, Counselor Hudson had said, what others had said, that this was going to be a discussion that we had to have and we felt in terms of our economic development policy that we needed to have as a community.
GR: If you just joined us, you are listening to the Campbell Conversations on WRVO Public Media and my guests are Onondaga County Executive Joanie Mahoney and Syracuse Mayor Stephanie Miner. I do want to broaden the conversation with the limited time we have left. If you could be brief on this although these are big questions, I recognize. County Executive, this is more directed to you, this order of events suggests a bigger question about jurisdictions, political authority and economics. We all know that the city has a tax base problem and in fact we’re sitting in one of those problems right now as we speak. Do you think it’s politically appropriate that the county is able to remove part of the city’s tax base without the city’s involvement in the decision, just as a political matter?
JM: You are touching on something that I’ve been trying to talk about and I’ll be very brief. The old talking point about the city’s needs being based on the fact that half the property is tax exempt, was addressed when the county changed the sales tax sharing formula. I’ll just give you 3 numbers, in the city right now, the property tax collected is $33.5 million dollars. The county sales tax in the city budget is $85 million dollars and the state aid is $75 million. So property tax in the city makes up a minuscule part of how they function with their city government, and in 2009, the last year of the old sales tax sharing formula, the county gave the city $61 million dollars, this year it’s almost $83 million dollars. In one year that’s a $22 million dollar increase. So yes, I do think the county is in a perfect position to be handling economic development decisions, county-wide, and the city is part of the county. When SIDA does tax deals, they compromise a way county taxes and sales tax, mortgage recording fees and in property tax and there’s no requirement nor do they in practice come to the county to ask for permission to do that. But the county legislature recognized this property tax base problem and made up for it in millions of additional sales tax dollars every year. So I think we are pretty strong partners.
GR: Let me ask a different question if I can and I’ll direct it to Mayor and it’s even broader about the whole tax break approach to economic development. Do you know, is there evidence from systematic research that you’re aware of, that this tax break approach produces more economic activity overall? I’m not an economist but it appears to me it might be seen as an analogous to rearranging the deck chairs on a ship and that ship being the state of New York or if we want to broaden this, the United States of America. So what do we know about the effectiveness of this and actually growing the economy?
SM: Well I can tell what we know about it, that we were told by the Destiny people that if we gave up 30 years of property taxes which comes to more than half-a-billion dollars in lost property taxes, that we would see a windfall in sales tax that would more than replace that and get us additional money. The expansion of the Carousel Mall, Destiny, was completed in 2012. So from 2012 forward, we should have seen plus $19.6 million dollars in additional, in our sales tax. We haven’t seen that and when you say, what about the jobs that are produced, well when you look at the jobs they have produced, they are retail jobs and they are based on the New York State Department of Labor, they are minimum wage jobs. They are not $15 an hour jobs. So, as evidence also of this, New York State, in the industrial development law that oversees it, does not allow, one, to give a PILOT to retail projects, so what the county IDA has done, instead, is that they have started mischaracterizing this so that the Town Five Mall which is a retail, if ever there was a retail facility, got a PILOT recently from OCIDA but they characterized it as something completely different. So we know as a state and as economists, giving tax incentives to retails doesn’t work. We also know that we were promised this incredible windfall of sales tax and all you have to do is look at the New York State Comptroller’s, what Onondaga County’s trend for sales tax is and we have never seen a plus $20 million jump, except for in 2004 when the county got an additional 1% and the county executive and I, she’s absolutely right, we renegotiated the sales tax formula. It wasn’t that the base was growing, we just got the city more with the leadership of the county executive and with the help of a number of key state delegation members.
GR: Just a few seconds left but County Executive, this bigger question to you, what is your impression of the effectiveness of this approach and actually growing the economy?
JM: If I was in a class at Maxwell, in an economics class, debating these policies, my answers would be very different. I am the County Executive that is trying to do right by the community with the hand I’ve been dealt. These are the tools in our tool box and we’re using them as effectively as we can on behalf of the people that live here.
