Collegetown Loan is really a grant

At the April City Council, meeting I spoke against the $20 million loan to the developers of the "College Town" project.  It turns out I had one fact wrong, though it does not change my opinion about the loan.  Originally, it was my understanding that the City would be getting $500,000 in taxes from this project. I assumed that was before the loan repayment was taken out, but it is after the loan payment is deducted.

Even though I like the concept of College Town, I am still against the loan as it is blatant corporate welfare. For those not following this at home, College Town is a project near Strong Hospital and the University of Rochester.  It is a $100 million investment which will create 150 apartments, a hotel, lots of commercial space and some restaurants.

With the loan almost 60% of the financing for this project comes from government sources.  The city is also doing $8.5 million in street improvements to facilitate this development.  A deal was made to tax this $100 million project as if it is only worth $30 million.  This set their tax payment at $1.7 million but almost $1.3 million or over 75% goes towards repaying this loan.  The rest is split between the City and County leaving the city with only $333,000.  The loan is a Section 108 loan, which is supposed to be paid back using taxes but if the taxes are lowered to a special rate for the project then this loan is taken out this seems like the development is not paying its fair share of taxes.  As $1.7 would have to be paid in taxes by this project anyways they are not really paying back the loan unless their taxes are raised by the amount needed to repay the loan.

Thus we are really giving them a grant not a loan.  We are getting a loan and then the City is paying it off out of our tax revenues.  Of course while the project wants to get this free money the City has not made the argument that this project would not go forward without it. So it seems like once more we are helping a developer make large profits which they will take out of the area at the expense of Rochester taxpayers.

Now the city believes that this project will create hundreds of jobs, but in their analysis no compensation is made for the jobs which will be transferred here or the businesses which will close because of this project.  Meanwhile, the total revenue for taxes in the next 20 years from College Town will only barely cover the street improvements we are doing.   I was the only person who spoke against this loan and the city approved it. Now we will all have to tighten our belts and give up city services so we can enjoy the new College Town after all we are paying for it.

Fair Tax Assessment Speech To City Council

[Given at the Speak To City Council portion of the April 24, 2012 Rochester City Council Meeting]

Last year when there was an election going on I heard Tom Richards say over and over again that everything needs to be on the table in order to close the budget deficit.  Well once more we have a budget deficit and now I am sure you are attending budget meetings, and going over number for departments and projects so much that it seems everything is being considered.  Unfortunately it is not.  While you consider whether it is better to risk the lives of Rochestarians by reduced fire protection or to inconvenience people by cutting a library, no one seems to be considering whether we could avoid both by taxing all properties fairly.  Yes, all properties are not taxed fairly.

Let us consider the Merkel Donahue building assessed at $800,000 but was sold for $2.8 million, or Westfalls Heights which is assessed for $4.1 million and built for $11 million.  The Xerox tower is only assessed at $13 million yet its yearly rental revenue would be more than $15 million and Xerox would like to sell this building and then rent the space back.  Frederick Douglas Apartments was built for $7 million and assessed for $44,000 while Buckingham Properties is spending $83 million at Alexander Park but the city only finds all this investment to be worth $7.4 million.  There are many more examples.

According to the city web page the purpose of assessment is to create an accurate reflection of the true value of residential and commercial properties.  Well either this department does a very bad job or this is part of a plan to increase the profits of city investments at the expense of the citizens.

If everything was going great perhaps we could afford to give tax rebates for building construction, but for the past 7 years Rochester has had budget deficits.  During this time taxes have increased, and services have been cut, but Corn Hill Landing continues to be assessed at less than a third of its construction cost. Now I have been told we need to do this to encourage jobs and growth. It is important to grow the economy, but if we taxed fairly then the residents of the city would have more money to spend in our city and that would grow our economy.  Giving tax breaks to these large properties which are usually owned by people who do not live in our city means that big profits will leave our city.  Most of these projects are not job creators anyway, as of the 127 PILOT agreements in the city, 80% are for residential or rental properties and these by nature do not create jobs.

It is time to finally put everything on the table.  It is time to start fairly taxing all properties in our city.  It is time to end the practice of under assessing large properties so that we can pay for our government and grow our city.

Fair Taxes and Jobs

Some people would argue that there is a need to under assess new projects in order to get jobs or new construction into a city.  This might explain the actions of the city on new construction though there is no record of any deal involving assessment.  But what about older properties?  These have been built and paid for years ago and any deals the city or county had with them should have expired.  Well fortunately there are usually many properties for sale in any city at any time and in Rochester there are a number of them.

On page six of this Downtown Market Summary, there is a list of properties for sale and a number of them list the asking price.  Looking up the assessment and comparing I found a few interesting items.  The Merkel Donahue building is assessed at 818,000 but they are asking 2.8 million for it.  454 East Broad is for sale for 1.25 but only assessed at 460,000.  While 49 Stone St is assessed at 550,000 and they are asking just under a million.  This shows a pattern, which seems to indicate that the city is not getting its full market value correct on these properties.  If these three were assessed for their asking price the city would be getting an additional 140,000 a year.

This becomes a bigger problem for the huge towers.  Xerox announced it wanted to sell its tower in 2009  and this building complex has 850,000 square ft of office space in it which would rent for $15-24 a sq. ft a year so it would generate 12.75 million to 20.4 million a year in rental income.  Xerox even wants to rent this building back and this is the perfect investment opportunity if the building would sell for its assessed value of 13 million. As this building has so much space and would generate so much revenue for the owner it seems that an assessment at substantially more than one years rental revenue would be fair.  Now I do not know what the value of this tower should be but I do know that it is heavily under assessed and that the city is not receiving at least a million dollars in yearly revenues, which it could be receiving from this building alone.  Now consider the other large properties downtown and you see the root of our financial problems.

Now to under assess like this is a statement of priorities.  To give these generous deals is just one of the many services the city provides to the businesses and residents of this fair city.  It seems odd that for years the residents have had to give up recreation centers, firefighters, library services, after school programs, police officers, and many other things so these deals can remain in place for the large property owners and businesses.  It seems to me that when faced with another huge budget deficit that we should examine what the priorities of this city are and see if these sweetheart deals are in the best interests of all the residents of Rochester.