Dey’s Building Project Downtown–Another Win For The 1%

As I read the Sean Kirst article in the Post-Standard today about the development of the old Dey’s department store, I wondered if anyone remembers the history of this building . . . not the department store, but the more sordid recent history. Check the records.

Over the years, the city has taken over $8 million out of the CDBG budget to repay the HUD loan. This is money that would have gone to help low income families repair their homes, fund agencies to fix up vacant houses and provide a limited amount of social services like the local community centers. In addition, the city also took money out of proceeds earned by the Syracuse Industrial Development Agency (SIDA) and sold city assets ($1 million for a city-owned parking lot.)

The city of Syracuse bought this building in the late 1990’s, borrowing the money ($18 million) from the Department of Housing and Urban Development. The program the city borrowed the money from is called the Section 108 economic development loan program. Under Section 108, communities can obtain financing for economic development, housing rehabilitation and large-scale development projects. The collateral for the loan is the city’s present and future Community Development Block Grant (CDBG) funds. CDBG is the only dedicated source of funds available to the city to improve housing for low-income families. The amount of funding given to Syracuse has ranged from a revenue-sharing high of $12 million in the 1970’s to a Tea Party Republican low of $5 million this year.

Section 108 loans are supposed to go to projects that benefit low-income communities–providing jobs/training etc. The Dey’s building project was pursued to provide a high-tech call center for Niagara Mohawk. The building was purchased for a premium and outfitted with state-of-the -art high tech wiring etc. The city then gave the utility a sweetheart deal on rent (because they were threatening to move to the suburbs.) As a result, the city did not have enough rental receipts to cover the repayments on the loan to HUD. When NiMo was bought out and downsized by NatGrid, the call center moved back to Erie Blvd. The city was unable to fully replace that income, luring Bank of NY to use a portion of the space for some back office operations. The city had an even harder time re-paying the Section 108 loans.

In 2004, SUN worked with then-councilor Stephanie Miner to reform how the city approved loans under the Section 108 loan program–taking the authority for the loans out of the hands of the mayor and SIDA, requiring a public hearing on all proposed loans before the Common Council and then requiring a super-majority vote of the Council (6 out of 9 members) to approve a loan. While this has effectively stopped any future Section 108 loans, the city is till haunted by the Dey’s Brothers building loan. The city is on the hook until 2019 for this loan.

One of the most ironic facts of this case is that the man responsible for getting the city into this mess, former Syracuse Mayor Roy Bernardi, left Syracuse to take a top job with HUD, rising eventually to the number two spot in the agency. Part of his responsibility, of course, included the portion of HUD managing the Section 108 economic development loan program. SUN and city officials both had discussions with then Assistant Secretary Bernardi, essentially begging him to help us either restructure or forgive the loans that he had made and were draining our city’s CDBG budget. He refused–pointing out that Syracuse was in possession of an extremely valuable piece of real estate and would more than recoup its present losses when it marketed and sold the building. Then the real estate market collapsed, along with the national economy. The city was underwater on its loan and its final act as the owner of the building was to sell the building to a developer–for $2 million. The city even deferred a portion of the developer’s payment. Pennies on the dollar given the indebtedness of the city.

This year, the city has to repay $2.5 million to HUD and has informed all agencies receiving funding that they face an across-the-board 20% cut in CDBG funding because the city is $1.1 short on other funds for repayments. So forgive me if I don’t celebrate the arrival of market-rate loft apartments and primo coffee shops, paid for by the low-income families that continue to struggle to to find financing for home repairs and our neighborhoods that harbor so many vacant and abandoned houses. In the parlance of our times, the Dey’s Plaza is a project for the 1%–paid for by the 99%.