Destiny disputes go to State Supreme Court judge

Sunday, January 01, 2006

Staff and news service reports

It's Jan. 1, so the Destiny USA project has entered uncharted territory.

A deadline for the 30-year property tax deal passed. Or there was never any deadline.

The financing package proposed by the developer didn't satisfy the city's requirements for the property tax break. Or the developer offered several financing packages, each of which satisfied the city's requirements, and the city rejected them without good reason.

The choice depends on whether you agree with the city's interpretations of the agreements, or with Destiny's.

What happens next is uncertain. What's certain is that the issue has been dumped into state Supreme Court.

Friday, in the courtroom State Supreme Court Judge James Tormey Friday temporarily blocked the city of Syracuse from putting Carousel Center on the tax rolls.

He issued an order barring the city from taxing the mall until a judge rules on larger issues: whether The Pyramid Cos. has met the terms of a 30-year property exemption for the mall and whether the original 15-year tax deal expires Sunday, as the city contends.

Acting on a request from Pyramid, the judge also reversed an action Wednesday by the Syracuse Industrial Development Agency to hand title to the mall back to Pyramid in anticipation that the property would go on the tax rolls Sunday.

The agency had held the deed to the mall as part of the original property tax exemption for the mall. Pyramid contends agency Chairman Irwin Davis has no authority to transfer the mall's deed to Pyramid until Nov. 15, 2007. The city says the original property tax deal expires today and that Davis has the authority to hand back the deed.

Friday's court action followed months of wrangling between the city and Pyramid over whether the company has met the requirements of a tax agreement approved by the city in 2000 as an incentive to expand the mall into a retail, hotel and entertainment resort called Destiny USA. The city contends the deal, amended in 2002, expired at the end of 2005 and the mall should start paying $12.3 million a year in property taxes.

The city says Pyramid has not met the requirements of the deal, which include obtaining financing to add at least 800,000 square feet of leaseable space to the mall and obtaining city development agency bonds to finance infrastructure improvements related to the expansion.

Friday morning, Pyramid filed a petition asking Tormey to block the city from taxing the mall, to declare that the company has complied with the amended 2002 tax deal and to order Mayor Matt Driscoll to execute the tax deal.

Tormey only temporarily blocked the city from taxing the mall until the bigger issues can be decided by Judge John Centra, possibly later this month.

Eminent domain action

The city development agency Thursday filed petitions in state Supreme Court seeking condemnation, under the agency's eminent domain powers, of certain lease rights held by 14 Carousel Center tenants.

The lease rights give the stores power to block changes at the mall. The agency has agreed to use its eminent domain power to force the stores to sell those rights to the agency so the Destiny project can go forward.

The 14 stores are: Arden B, Bath & Body, Bath & Body at Home, Bon Ton, Borders, Circuit City, Comp USA, DSW, H&M, JC Penney, Kaufmann's, Lord & Taylor, Old Navy and Weathervane.

Under a preferred developer agreement with the agency, Pyramid will pay whatever a court decides the lease rights are worth.

The lease rights are an important issue because Pyramid cannot obtain construction financing or get development agency bonds for the mall's expansion while the stores can block the project. The city has cited that issue as one of the reasons Pyramid has not met the requirements of the 30-year tax deal.

What the ordinance says

The differences of interpretation ticked off above lead pretty directly to the question: Well, what does the ordinance say?

The critical sections of it have been excerpted here before . . . in part to show how you need to be a lawyer to understand what it's trying to accomplish.

Several people who post on the Destiny USA forum at Syracuse.com cooperated to have the document posted on a Web site for all to see.

The Post-Standard recently started a Destiny Web log, known as a blog to the Web savvy, and it includes a link to the text of the ordinance authorizing the PILOT agreement and some information about where to find the critical sections and what the disputes over the interpretation are all about.

You can find the blog at:

 www.syracuse.com/destinyusa/ updates

What comes next?

The possibilities include, but are not limited to:

Property taxes on the mall will be collected. The bill could be $12.3 million a year, based on the original assessed value of $326.7 million. Or it could be much higher, based on a recent appraisal of the mall that pegged its value at $530 million. Or it could be much less, if the mall grieves the assessment and wins.

What? You expected definitive answers when there's so much left unsettled?

The city and Destiny cut a new deal. A lot of people who have been watching the dance by Destiny and the city the past five years think the old PILOT deal was fatally flawed, and the contortions both sides were going through to make it work were a reflection of that leading to a modest expansion of Carousel that neither side really wants.

(The city wants at least the original 3.2 million-square-foot project; the developer has spent a lot of time and money planning an 800,000-square-foot expansion that is essentially a distraction from the Destiny project.)

Perhaps being back at the starting point will prove to be best for all concerned.

© 2005 The Post-Standard.