That announcement took many by surprise.
The swiftness with which the proposal was dropped on the public and the city council, which must approve the deal, raised eyebrows. Specifically, the proposed one time fee of $300,000 in lieu of any property taxes going forward has generated some pretty stiff resistance.
There has been lots of discussion, most of it online, over the merits of this proposal. Some of it has been enlightening; some has been sarcastic and/or snarky.
Some of us feel that the TESC proposal may not be the highest and best use of the parcel at 301 West State Street. It would be more palatable if there were some sort of structured annual payment in lieu of property taxes built into the package. This just seems to be common sense in a city that is drowning in a sea of tax-exempt properties.
Those who favor the proposal as is, say we should not let the minimal, one-time payment stand in the way of what will be a highly visible project.
"Get something done," is their mantra, "and other development projects will follow."
The implication is that by treating the TESC project as a "loss leader" it will drive other developers to the city looking to do deals. The supporters of the project also tout the secondary benefits of spin off jobs and revenues for existing local businesses.
It is an old argument. It has been tried. It has not been successful.
Getting into the game
We can readily point to the Baseball Park and Arena as examples of big-ticket projects that involved public money and have yet to generate any significant economic development.
Yes, people attend events at both venues. However, the self-contained nature of both facilities makes it unnecessary and unusual for patrons to visit other businesses before or after attending games and concerts. People may come into Trenton to participate in these events, but they do not, as a rule, spend money at other businesses in the city.
This is not just the reality here, studies from around the nation have shown little proof that these public facilities stimulate the local economy. Ken Belson wrote about this in an article published in the New York Times on September 7, 2010.
James Joyner wrote about the faux benefits of publicly financed private sports stadiums in his "Outside the Beltway" blog last May.
The Taxpayers League of Minnesota sums up the fallacy in eight points in this document.
There may be some jobs created that are filled by Trenton residents but most are part-time and or seasonal.
Similarly, those that provide supplies and services to either facility are not necessarily or predominately Trenton-based.
It is a pretty safe bet that no one moved to the city because of the ballpark or arena. Government funded sports venues simply do not spur economic development.
The city owned Marriott Hotel on Lafayette Street is another example. We were "assured" by the Palmer administration that a top-notch hotel located just steps from the seat of state government would be just the thing to spark an explosion of economic opportunity downtown.
The hotel has yet to turn a profit. Not only is the city (read: taxpayers) on the hook for the bond debt used to finance the construction of the building, it is also required to make up any operational deficits.
Last year, we footed the bill for a $500,000 cash infusion to keep the doors open and lights on. This year, we may very likely be asked for another round of funding to cover operating expenses.
Many of us told then Mayor Palmer this would happen when he proposed it, but he did not want to hear it. He forced his way on the city and we are paying the price, litereally, for his arrogance.
One way out of this is to just sell the hotel outright. For whatever price. It would, at the very least, free up the taxpayers from having to fund anymore operating deficits and put the property on the tax rolls. Even with likely abatements, the city might actually see some revenue from the property at last.
If a private owner cannot make the hotel work, that would be sad, but at least the city will only be dealing with the "fixed" cost of the bond debt (principal and interest). The city (and state) put out the money to build this and there have been no real returns on that investment. It certainly has not generated any real development downtown or increased ratables in the city.
Around the corner and up the block
To go along with the construction and opening of the hotel, the city looked for ways to jump start development in the immediate vicinity. As early as 2000, with the planning for the hotel under way, the city looked around and decided they needed to purchase the long vacant "Caola property" at S. Warren and W. Front streets. The city paid $162,863.69 for the property and began to market it. (Bear in mind, at the same time the city had taken possession of the Glen Cairn Arms four years earlier but was by then embroiled in a dispute over the final value of the property).
In 2002, not quite a year after the city settled on the Caola property, they had a well known and respected developer, Enterprise Real Estate Services, interested in doing a project there. Enterprise, an arm of the highly successful Rouse Company, planned to spend $4,000,000 on the project. Despite the fact that Enterprise was not looking for any tax breaks for the project, the deal never went through.
At the time, there were murmurings that Enterprise requested the city kick in some money to help with the asbestos and lead paint situations on the site, as well as partial demolition. The city said "No." Enterprise walked.
Then along came former Senator Robert Torricelli and his Woodrose Properties. They made a proposal to the city and were designated the developer. Woodrose got the property for $1 and a tax abatement. The city did the demo work, removed the asbestos and stabilized the building. Trenton threw some Urban Enterprise Zone money at the project as well.
Was it worth it?
The "restaurant" that was envisioned for the site is a Subway sandwich shop (and not a new business...just one that relocated from around the corner on State Street).
One of the retail spaces just recently became a yoga studio. Another retail space appears to remain vacant.
Has it helped revitalize the downtown? Not really.
We will leave the discussion of how much favoritism might have been shown this particular developer, and why, for another time. (Read here and here for previous posts on this).
Enter the Matrix
Just a block from the Woodrose property is another development project that was hailed as a turning point for the city. That would be the office building at 32 East Front Street that currently houses the regional offices of Wells Fargo (nee, Wachovia) bank.
Originally undertaken by the Economic Development Corporation for Trenton, the project encompassed taking a former two level parking lot and building a parking garage and office building on the site. The garage would be turned over to the Trenton Parking Authority to operate as a replacement for the surface lot. The office building was to house the offices of the Hill Wallack law firm along with other commercial/retail space.
The EDCT was another initiative of the Palmer administration. For sizable contributions, local institutions received seats on the non-profit development corporation's board. In simple terms, the idea was the seed money would fund the development of the buildings. The monies realized from the successful completion of the initial project would be rolled back into the EDCT's fund so it could do other projects.
The short version of a long story is that the EDCT failed to complete the project. It was taken over by an experienced, professional developer and finished. The original anchor tenant, Hill Wallack, opted out of the deal. Finally, Wachovia (now Wells Fargo) moved their offices from Ewing to the building.
The building was never fully rented out. When the current lease is up sometime later this year, Wells Fargo will apparently be vacating the space downtown for quarters in West Windsor.
If the past is an indication
The point of all this is to give the proponents of TESC project some perspective.
Economic development in Trenton is not easy. It is complicated by the politics one has to play. Good deals (like the Enterprise Real Estate proposal for the Caola building) are shunted aside for less desirable ones (Woodrose's version) that end up costing the city more and have marginal effect (like the hotel).
In the end, we, the taxpayers, lose.
Development has been and continues to be more about the political connections and the well-being of the principals and government officials. Your run of the mill, tax paying resident is the ultimate pawn in these deals because, when the promised benefits fail to materialize, we pick up the slack. And the tab.
There has never been a long view of what was best for the city. Our leaders have never looked much past the current or next election cycle when it comes to making development deals.
Former Mayor Doug Palmer said it himself. In an article by Tom Hester, Jr. published in the Times, March 21, 2000, Palmer explains just how long his vision is.
''I don't look at the city today,'' Palmer said. ''I look three, four, five years down the road and what we are doing and what possibly can be.''
Our economic development plans need to look further down the road than the current administration or the next election. We need a policy and process in place that guides our decisions past what is best at the moment and toward that goal of sustainable revenue growth.
It is long past time for this city to move beyond the "loss leader" mentality and favored nations deals and work towards the creation of a comprehensive development strategy that is fair to all proposals. Moreover, fair to the taxpayers as well.
The TESC proposal, as it stands at this writing, simply does not help us towards a financially secure future.