Suggestion to educate residents on PILOT

A letter to Syracuse Common Council

June 21, 2006

Dear Councilors,

I was at the public hearing last night. I was saddened to witness a litany of pro Destiny USA advertisements recited by good citizens who have drunk too much Pyramid Kool-Aid. The Post-Standard continues to cheer for a 'yes' vote on the PILOT without---despite reporting on the subject for 6 years---publishing an accurate representation of the PILOT benefits to Pyramid or a substantive explanation of why they should be granted.

I am, of course, for development of the oil city tract. But the development should be based on a sound government fiscal framework that will improve the social/cultural/economic vitality of the area.

I trust you will vote 'no' to the PILOT. But I would like you to consider doing more than that: Publish a statement describing---in very concrete terms---the problems you see with the existing agreement. If you make a formal statement as the council, the Post-Standard will have to publish it. Once the people see the absurd give-away the PILOT is, we can begin to have reasoned discussion on the subject. Here are some salient points you may wish to touch on:

  1. Most people imagine "payment in lieu of taxes' to mean that a developer will pay some taxes, but less than the normal amount. However, this PILOT provides that Pyramid pays no property taxes---for 30 years.
  2. The PILOT also provides that sales taxes collected at the mall will be used to pay off the municipal bonds. Pyramid gets a new expansion for free (or what percent of the project cost will this revenue cover?).
  3. The legal standing of the PILOT is based on the judgment by SIDA(?) that the mall expansion qualifies as public infrastructure. This is highly dubious since Pyramid will be the beneficial owner and is entitled to all profits from operations. Moreover, the municipal bonds are tax exempt from state tax but not federal tax; the federal government determined the mall expansion did not qualify as public infrastructure.
  4. If Carousel were put back on the tax roll today, with no expansion or reassessment, it would owe property related taxes of at least $12.4M/year ($327M at $37.90/$1,000 of assessment), or $372M over 30 years. More accurately, $590M, assuming a long-run 3% per year inflation rate. 30 years is a long time. Local government expenses will also have risen 60%.
  5. A huge piece of prime downtown real estate, all consolidated, zoned, and cleared for development, is a very attractive target for any developer, not just Pyramid.
  6. Economic spin-off from an expanded mall should occur, and sales and property tax revenue should increase from this. But so will government expenditure. Since the vast majority of new jobs at the mall will be below the average pay in Syracuse, the additional tax revenue is unlikely to be greater than the additional government expenses. So, it's crucial that Carousel Mall pay it's fair share of taxes.
  7. Moreover, it is important to consider how much of the business at an expanded Carousel will be new versus existing business shifted to Carousel. Only the net gain can provide a stimulus to the local economy. We already know that the building of Carousel Mall devastated the downtown retail business and contributed to the decline of malls and strips north and west of Syracuse.
  8. By providing a huge subsidy to Pyramid, the city and county are unduly influencing the market in favor of Pyramid at the expense of all the businesses that will be competing with mall tenants. The government should not be engaged in picking economic winners and losers.
  9. A subsidy to a mall developer does not translate to lower prices to consumers. A mall charges the highest lease rates the market will bear regardless of whether it paid dearly for the building or it was 100% subsidized by taxpayers. Since Carousel Mall lease rates are well above average, and Carousel Mall is very profitable, the mall expansion does not require a subsidy to make it economically viable.
  10. The mall expansion is designed for and can only be built at Carousel. The city of Syracuse is not in competition with other cities to offer Pyramid the largest incentive packages to build the expansion here. The usual knee-jerk arguments for subsidies do not apply in this case.

I will stop at 10 points. I suggest you create a document of a handful of pages for general distribution, but also provide a Web page of the document and include additional links to more detailed analyses, such as contractual details, wording, legal opinions, etc., which will be of interest to a smaller audience, but necessary for focused discussion.

Thank you for your continuing diligence in this important issue.

Carlo Moneti
Syracuse, NY