The Statement: Criticism of the city’s tax breaks for Destiny USA project

From: Stephanie Miner, Democratic mayoral candidate

Type: Interview

Date: August 2009 interview with the Syracuse New Times

URL: http://www.syracusenewtimes.com/index.php?option=com_content&task=view&id=3498&Itemid=147

What She Says:

During her eight years on the Syracuse Common Council, Stephanie Miner has consistently voted against tax breaks for the Destiny USA mall-expansion project. She is making her opposition to the project a theme of her mayoral campaign. In an interview with the Syracuse New Times in August 2009, Miner answered questions about her views on Destiny USA.

"Q(Syracuse New Times): What do you say to people who argue that the Destiny deal does not cost the taxpayer anything?

Miner: It’s not accurate. Carousel Center and Destiny sit on the largest single piece of taxable property in the city of Syracuse and Onondaga County and it’s not paying taxes because of the actions taken by SIDA (Syracuse Industrial Development Agency) and the mayor.

When police get called, when the fire department is dispatched, the taxpayers pay for it. They said that the amount of revenue in sales tax would dwarf property taxes. That clearly has not happened, has it?

The Facts:

• “Carousel Center and Destiny sit on the largest single piece of taxable property in the city of Syracuse and Onondaga County and it’s not paying taxes…”

 When completed, the entire Destiny USA property will take up approximately 800 acres. The Destiny USA property is comprised of former private property, land that used to belong to Onondaga County and vacant lots. In 2005, Pyramid Cos. began the process of buying private property to add to the project. If not for its tax agreement, this property would be the largest taxable property in Syracuse and Onondaga County. But it is unclear if Pyramid Cos. would have continued to buy property without the tax deal in place.

The Pyramid Cos. own both Carousel Center mall and the Destiny USA property next door.

If the existing Carousel Center mall did not have tax breaks, Pyramid would pay about $11 million a year in property taxes , said David Clifford, first deputy commissioner for the Syracuse Department of Assessment. Clifford’s office measures property values in Syracuse, which is needed to assess property taxes.

He could not calculate, he said, hypothetical taxes on the completed Destiny expansion.

“It hasn’t been built yet,” Clifford said, “so we haven’t been able to assess it for its property value.”  But it’s reasonable, Clifford said, to expect Destiny USA’s property to be worth more than the current Carousel Center because of its size and new construction. So if it were taxed, a completed Destiny would bring in more city revenue than the estimated $11 million in tax breaks from the existing Carousel Center, said Clifford.

In negotiations with the city, the Pyramid Cos., developers of the Destiny USA project, signed a payment-in-lieu-of-taxes agreement for the Destiny Project. The 30-year deal took effect in 2006. Destiny’s developers agreed to pay the city $64 million over 12 years in exchange for not paying property taxes for 30 years, according to a June 2008 report by Philip LaTessa, Syracuse city auditor.

The Pyramid Cos. did not return phone calls or e-mails to comment for this story.

The length of Destiny’s tax agreement is unusual, said Clifford of the city tax assessment. .

Typical payment-in-lieu-of-taxes deals are for 10 years, Clifford said. The Carousel Center’s original tax agreement was for 15 years. It expired in 2006. When the current agreement expires, the Destiny property will have gone 45 years without paying property taxes.  

Consider this math: If Destiny paid only $11 million a year in taxes — the estimated amount from the smaller, older Carousel Center — the city will lose a minimum of $495 million in tax revenue over the 45 years of the tax deal.

Said Clifford, “Nobody’s ever had a deal like these guys have.”

• “They said that the amount of revenue in sales tax would dwarf property taxes. That clearly has not happened, has it?”

This part of the statement is at the heart of the controversy over Destiny. Supporters and opponents, like Miner, make conflicting predictions of the revenue — in sales taxes and other income — that Destiny will generate. For now, it’s impossible to prove which side is right.

Destiny supporters have compared the Destiny plan to Minnesota’s Mall of America when it was first proposed. When completed, Destiny will be larger than the Mall of America, just outside Minneapolis. In 2008, the Mall of America was the nation’s most-visited mega-mall.

In a best-case scenario, Destiny would have the same success as the Mall of America. That mall increased sales by one percent last year, said Dan Jasper, public relations director at the Mall of America. That compares to a decline of 12 percent in 2008 for malls nationwide.

The Mall of America, said Jasper, has:

• Produced about $50 million in sales tax revenue annually
• Generated $1.9 billion in sales to its visitors in the region each year
• Employed more than 13,000 people

The Mall of America is now seeking a 20-year tax-free deal to help finance its proposed expansion.

Michael LaFaive, director of fiscal policy for the Mackinac Center for Public Policy in Midland, Mich., is not sold by those numbers.The Mackinac Center for Public Policy is an economic policy think-tank that’s frequently cited in news accounts and has helped expand the influence of state-based think-tanks. It is critical of tax breaks to encourage economic development projects.

“I know there is no benefit to tax-abatement programs,” Mackinac Center’s LaFaive said in a telephone interview. “The costs greatly exceed the benefits associated with such projects.”

Decades of reviewing evidence on tax-incentive programs prove such programs are not successful, LaFaive said. A 2006 study by urban planner Gary Sands of Wayne State University found that most tax-incentive programs do not provide as much benefit as promised. According to Sands’ research, most of these programs:

• Do not increase economic development
• Fail to produce promised economic gains
• Increase costs to residential taxpayers for more roads, water and sewers

 Aparna Mathur is a research fellow at the American Enterprise Institute, a conservative think-tank in Washington, D.C.. Cities have an incentive to pursue tax-incentive agreements, Mathur said.

“These deals are a form of luring businesses to your city,” Mathur said in a telephone interview. “If they can get a tax break in a given city, smart business says to go there.”

But Mathur stopped short of endorsing such deals. “From every study that has been done the conclusion is the same,” Mathur said. “The costs are significantly higher than the benefits.”

Conclusion:

Miner would be correct in saying that Destiny is the largest non-taxed private property in Onondaga County-- if the Pyramid Co. had continued to amass its 800 acres without the tax breaks from the city. It's not clear if the company would have done that, since it would have faced a hefty tax bill. She was correct in saying that Destiny is not paying property taxes. Destiny won’t be paying those taxes for 27 years, because of the tax breaks granted by the city.

Miner said Destiny’s sales tax revenue will never “dwarf” its property tax assessment. Many studies say such deals don’t off-set the tax breaks given by governments. But Minnesota’s Mall of America is an example of  an economically successful mall development. With Destiny, supportive Syracuse officials and developers are betting this will be another example. Miner is not.

(Dan Scorpio is a junior with dual majors in newspaper journalism and political science.)

(An earlier version of this story said Miner was incorrect about Destiny being the largest taxable property.)

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