When he first got involved in developing downtown Auburn, Michael J. Falcone said, there wasn’t any plan for a hotel.
In fact, Falcone said neither he nor the company he founded, Pioneer Cos., were planning to do business in Auburn at all. But they were approached by a group of public officials and business leaders dubbed the Blueprint group to help with a revitalization initiative on State Street. Initially, it was to work as a consultant, Falcone said.
“I didn’t start assuming I was going to build a hotel,” Falcone said last week. “After we got involved in that and saw the potential ... that’s when we ended up buying the properties on State Street.”
That potential included a plan to start an annual musical theater festival in Auburn, which proponents say will bring thousands of people to downtown Auburn every summer. At the time, those plans lacked a “first-class hotel,” Falcone said.
“They appealed to my sense of community,” he said.
In his first sit-down interview with the media since the hotel project became the subject of public debate, Falcone talked about the 88-room Hilton Garden he and more than 30 investors are trying to bring to downtown Auburn.
The project cleared a major hurdle earlier this month when the Auburn Industrial Development Authority approved a number of financial benefits for the hotel. But the 7-2 vote came after months of negotiations, a hearing, rallies and other uproar over whether the project is a good idea and what the city and developers should give to make it happen.
Falcone said he believes a number of truths have been lost in the debate, and said he wants to make his case to the community. He stressed points of which he said the public is either unaware or misinformed.
The financial incentives, including a 25-year agreement that would freeze the assessment of the hotel at its
current level for 15 years, are necessary for the hotel to happen in central New York’s economic climate, Falcone said.
And he maintains Pioneer compromised on every one of its original requests, despite receiving what he says were promises of support from the city dating back to 2008.
Those critical of the current hotel proposal say Falcone and Pioneer are asking too much and haven’t compromised at all. Two members of the city council have been among that group through the process and could keep the project from happening if they maintain their stance against it.
Falcone and supporters say these are the things that need to happen to help “recreate downtown” and improve Auburn’s economy.
“The impact of this hotel goes way beyond money,” he said. “It goes toward revitalizing the heart of the community.”
Pioneer did come up with estimates of the $11 million hotel project’s monetary impact. After stabilization, they expect the hotel to generate $145,000 per year in sales tax and $125,000 annually in room occupancy taxes.
They anticipate creating 100 construction jobs and 45 to 50 permanent jobs. They also anticipate the hotel could help generate about $5 million in annual local spending.
During the interview, Falcone also described possibilities of using this venture as a way to further connect Auburn to the regional wine industry and to strengthen local tourism.
None of that happens, Falcone said, without the public subsidies. The 25-year PILOT, which stands for payment-in-lieu-of-taxes agreement, state grants and an adjacent public parking are the only way the hotel can maintain the return percentages that would make this venture profitable, he said.
What critics have called corporate welfare, Falcone describes as a necessity to do business in a state with two economies – that of Albany and the downstate area, and that of the rest of New York. Up here, he says, the tax burden, regulations and general dysfunction make the cost of doing large-scale development projects just too expensive without public help.
“It’s impossible to make the deal work without it,” Falcone said. “Without the subsidies this project would have no opportunity to move forward.”
Falcone says he and his investors have been willing to give and to compromise on their requests.
They abandoned eminent domain and a PILOT that would freeze the assessment for 25 years, he said.
They moved forward after the city scaled back a proposal to build a municipal parking lot across the street, a parking lot Falcone said the hotel and guests would pay to use just like the rest of the community.
They plan to pay back the approximately $200,000 needed for work on a sewer line, Falcone said. This would be in taxes they’d pay over time through a special district.
“We’ve compromised dramatically,” Falcone said.
Local investors involved, developer says.
Fair or unfair, an us-versus-them sentiment has permeated public debate over the State Street hotel.
At public hearings and meetings, many of the local residents against this project have called Falcone and Pioneer outsiders – a big-city real estate developer without any connection or investment in the community.
Falcone, who lives in Skaneateles, says that’s not true. He points out that he has roots in Auburn and still has family here.
The project itself is a limited partnership of 35 investors, a funding model he said Pioneer rarely uses. The developer usually finances the project itself, Falcone said, but the deteriorating economy changed the plan.
Falcone says he’s legally obligated to maintain the privacy of his individual shareholders. But he did say none of them are government officials. He also said 18 of those investors live in the Auburn area, nine more are in central New York, and the rest are from outside the region.
One of the local investors is Lew Springer, a long-time Auburn businessman who announced his support during a public hearing earlier this year. Springer, 71, was born and raised in Auburn and ran what is now Creative Electric until selling it in 1999.
As a supporter of the hotel, Springer has followed the debate over eminent domain and financial incentives. He said on Friday that he thinks most of that debate has been healthy discussion.
But he also said he believes a first-class hotel on State Street could put “a little vitality” into a downtown corridor that needs it.
This is something the community has to do, Springer said, to better the economy.
“As the smokestack industries have moved away from the Northeast, we’ve suffered,” Springer said. “I think our route back is going to require a little jump start.”
City council is last step
In Springer’s jump-start analogy, the city economy would be the engine and the hotel development would be the battery. If the city government and its financial incentives are the jumper cables, there’s still one more connection to make before turning the key.
The Auburn City Council will likely vote in the coming weeks on final proposals needed to move this project forward. The city has to condemn a short stretch or Water Street and sell it to Pioneer, and the city needs approval to spend about $1 million on a 79-space municipal parking lot across the street from the hotel.
The five-member council needs four votes to pass at least one of those proposals, the street condemnation. The two people on the AIDA board who voted against the incentives both sit on the council – Matthew Smith and William Graney.
Both have said a 25-year PILOT is too much to give and said it sets a “bad precedent” for Auburn.
Falcone takes exception to recent comments by public officials about the project. He said precedent is nonexistent in the business world.
“There’s no such thing as precedent. Each deal stands on its own,” Falcone said.
As for other criticism, Falcone said there were no concerns when he shared the idea with members of the city council back in 2008. Pioneer received a letter from Auburn Mayor Michael Quill and City Manager Mark Palesh officials saying the council will support his project, and Falcone said neither Smith nor Graney brought up any issues at the time.
“Everybody knew what we needed,” Falcone said. “If they said no, I would have walked away and saved us all a lot of trouble.”
Smith has stated he didn’t recall receiving the first letter, and said when reached on Monday that the mayor and city manager have “no authority” to speak for the entire council.
Smith also reiterated his stance that he considered the early discussions between the city and Pioneer to be preliminary. There was not a “hard proposal” in his hands until very recently, he said.
“If the developer construed silence with commitment, and sold investments on that basis, then certainly they may be in a pickle, but it’s a pickle of their own making,” Smith said.
As for Falcone’s take on a precedent in the business world, Smith said again that what the city is being asked to give for a hotel is unprecedented in Auburn.
“What he’s been given is a 25-year welfare program on top of asking the city to give him close to a million-dollar parking lot,” Smith said.
Graney also stood by his stance that the PILOT sets a “bad precedent.” He said last week that if you give these incentives to one company, you have to give them to anyone.
Graney said he’s still considering whether to support the hotel on the city council, and he wants to hold more discussions with Falcone and Pioneer about this project.
Those talks, Graney continued, have been lacking from the start as far as he is concerned.
“There has been no real discussion on this ... between me and anybody. There’s been no discussion period,” Graney said.
Staff writer Christopher Caskey can be reached at 253-5311 ext. 282 or firstname.lastname@example.org.