Letter to AFL-CIO about the proposed Convention Center
Published on 3/15/2008
March 15, 2008
Capital District Area Labor Federation, AFL-CIO
Albany, New York 12204
Dear Mr. Fox:
Thank you for your letter of March 13, 2008 regarding the proposed New York State Convention Center to be constructed in Albany. In your letter you "urge" me "to move forward with this project." As a Common Council member in Albany, I have no say on the convention center/hotel project. The Common Council does not even have a representative on the Albany Convention Center Authority Board, even though PILOT funds dedicated to the City of Albany are being used as a guarantee for the hotel revenue bonds that will be needed in order to finance the construction of the hotel. The convention center/hotel project is a State not a City project.
I have spoken out against the proposed project mainly for two reasons:
1. The funding scheme in the state legislation (Public Authorities Law and Public Lands Law) for the project places a possible burden on the City that I cannot support. The state legislation uses Sec. 19-A Public Lands Law PILOT funds to guarantee the extremely risky and high interest rate hotel revenue bonds. Presently, Albany receives $22.5 million from this PILOT. Beginning in 2011, that figure drops to $15 million. According to state law, before Albany receives even one cent of that aid, a percentage of that aid must first be used to pay the debt service on the hotel revenue bonds should the hotel's profit be inefficient to meet the debt service. This is a backward way of placing a financial hardship on the taxpayers of Albany. How? - for every dollar of 19-A money that has to go to the debt service of the hotel revenue bonds, that is one more dollar that the City will have to raise through increase taxes. Furthermore, in 2008, Mayor Jennings' budget includes using $8 million from the City's fund surplus in order to balance the budget. Without raiding the fund balance, Albany's 2008 tax increase of 4.5% would have been 20%! The only reason we have a fund surplus in 2008 is because of the $22.5 million in 19-A aid money. Now let's take this down the road a couple of years: starting in 2011, the City loses $7.5 million in state aid (about a 14% tax increase if no other funds are found to offset the loss) and then a portion of the remaining $15 million must first be used to pay hotel revenue bond debt service before being turned over to the City's general fund. This would be devastating to the City - services would have to be cut and employees would have to be laid off (and no union endorses layoffs) or double-digit tax increases would have to be imposed on City taxpayers. In all good conscious, I cannot support this financial scheme that has the potential to place the City's taxpayers in such a financial predicament. I have asked Assemblyman McEneny, if as he says the convention center/hotel project is really the New York State Convention Center and Convention Center Hotel project, to amend the state legislation to remove any wording that requires Albany's state aid to be a guarantee for the state convention center/hotel project.
One more point to emphasize the extreme risk hotel revenue bonds are to a municipality and how hard it is to even find buyers for these bonds is Assemblyman McEneny's own action to add another source of revenue to guarantee the bonds. Assemblyman McEneny recently introduced legislation (A.9999) to include the hotel in the Albany County "bed" legislation and to eliminate the expiration date to this additional taxation. The reason given for the need to now add Albany County as a source of revenue for the state convention center/hotel project is that, according to Convention Center Authority Board Member Mike Perrin, "no underwriter would issue long term bonds backed by a revenue source with a built in, short term end date." So now we have gone from the state convention center/hotel project, to the state convention center/hotel project with help from the City of Albany, to the to the state convention center/hotel project with help from the City of Albany and the County of Albany. For a State project, this proposed project is turning into a locally financed project that our citizens cannot afford. If you do not think that hotel revenue bonds are a bad investment, despite the words of Mike Perrin and the need for the City and County to guarantee the bonds, then please look at other cities where convention center hotels have been financed through the use of hotel revenue bonds. One example is the destination resort city of Myrtle Beach. In 2005, after only one year of operation of that city's newly constructed convention center hotel, the convention center hotel defaulted on its hotel revenue bonds and the city of Myrtle Beach had to float $48 million in bonds which resulted in a real property tax increase of 5% annually for thirty years to pay off the debt service. I do not want to see this happen to the City of Albany. If the project is truly a state project, then the State should pay the full cost of the project.
2. I firmly believe that the $75 million Empire State Development Corporation (ESDC) grant would be more beneficial to the City of Albany, and to unions, if it was put to use to ReBuild Albany's decaying, vacant and abandoned housing stock. I have proposed, and I proposed this before there was an Albany Convention Center Authority, that the state create the ReBuild Albany Authority. This Authority would be charged with investing funds into the rebuilding of Albany's neighborhoods. The Authority would also have a revolving loan fund whereby persons could purchase the rebuilt houses and pay back the loaned money to the Authority. In this way, the Authority would have a constant source of revenue to continue well into the future to revitalize Albany's neighborhoods. The long-term nature of the ReBuild Albany Authority would guarantee union jobs for many, many years. Unlike the convention center/hotel project which is projected to take about 18 months to construct, the ReBuild Albany Authority will provide construction trade jobs for years, and years, and years to come. The ReBuild Albany Authority's homes will not be tax-exempt ad infinitum like the convention center/hotel, but will expand Albany's currently shrinking tax base. The prospect of decades of union jobs, an increase in the City's population, an expanding tax base, and turning Albany into a Capital City once again, is in my opinion, a win - win for all involved parties, not a one-time shot in the arm as the convention center/hotel project is.
It was ironic that your letter came today as I spent the day in Hartford, Ct. and at the convention center. Yes, that same convention center that Assemblyman McEneny points to as an example of the possible economic benefits we could realize here if the convention center/hotel is built in Albany next to I787. I walked around the convention center, as well as one can given the arterials and parking garage entrances, looking for small businesses that have been established in the vicinity of the convention center/hotel. I found NONE! There was a tavern about a block-and-a-half away, but to get to it, one had to cross four lanes of a parking garage entrance/exit, then walk another block to find an intersection with crossing signals, and then cross a four lane roadway in order to reach the tavern (the tavern looked like it had been there long before the convention center was built). The only places to eat in the area were in the convention center hotel's restaurant or the hard-to-reach tavern. There were NO OTHER small businesses in the entire area surrounding the convention center! Furthermore, because of the lack of any other type of business around the convention center, a free shuttle service is offered to bring conventioneers into downtown Hartford where one can find a place to eat (if Albany has to do this, who will pay for the shuttle, Albany taxpayers, perhaps?). Thus, if Hartford is our example of how a convention center will spawn small business development in the immediate areas adjacent to the convention center, then I want no part of it. Zero development of small businesses is not what we are being promised by the "experts" who conducted the studies telling us all the economic benefits we would realize from investing $400 million in one project. I suspect Hartford was told the same thing!
Until the State of New York funds the whole convention center/hotel project (after all, it is the New York State Convention Center/Hotel according to Assemblyman McEneny) or a public/private partnership is formed whereby the State will fund the convention center and a private developer of hotels (Starwood? - they did tell us Albany is a wonderful place for a Sheridan Hotel - so let them put their money where their compliments are) will fund the hotel portion of the project, I will remain opposed to the proposal as it now stands. The City of Albany, and by that I mean the taxpayers and residents of the City, cannot afford to pay for the debt service on the hotel revenue bonds. It is unfair to expect a City with a declining population, a poverty rate approaching 27%, an average annual household income that is $10,000 less than the rest of Albany County's households, and only a 35% or so homeownership rate to be held hostage to guaranteeing risky, expensive and fiscally unsound hotel revenue bonds (see Mike Perrin's comment above).
If you wish to discuss this matter further, please call me at: (518) 859-5219.
Common Council Member - First Ward
Cc: Assemblyman McEneny