Wednesday, June 28, 2017

Economic Nonsense and Keeping Up Appearances

On Monday "No Hospital Downtown" and "Better Utica Downtown" sponsored a symposium called "Battle for Our City" which featured the presentations of two planners from Strong Towns and Urban3 [video links will be posted if they become available].  Too bad only one elected official (Mike Galime) out of dozens of our area officials saw fit to attend. 

From the County Executive, Mayor, Assemblyman and Senator on down, they passed on a golden opportunity to learn something about economic development and economic reality from nationally renowned experts.  

Per WKTV, Mr. Picente wasn't interested, stating:
"Mohawk Valley Health System made a decision on the location of a new hospital in conjunction with the state, county and city, and I have always supported that decision. While I respect the opinion of others and their right to oppose that decision, the point of debating its location has passed. All of this energy would be better spent working together so that we can see a new hospital and new development in downtown Utica."
The fact there was never a point when the public was allowed to debate the hospital's location (even though the public will have to live with that decision for the next 60 years) is concerning enough. However,  after seeing the presentations, it became abundantly clear that to proceed on this and other "silver bullet" projects (like the "U-District" and Harbor Point) in ignorance of strategic pieces of information would recklessly expose the City of  Utica and its taxpayers to a risk of financial harm. Simultaneously, the lack of this information denies Utica, its taxpayers, and entrepreneurs opportunities of significant returns for modest investments.

Through a series of examples using actual data from cities across the continent, including Syracuse and Rome, the planners demonstrated that large-scale economic development projects often leave their communities in worse shape financially because the revenues from the new projects may not cover the costs of the projects or their maintenance. They also demonstrated through calculating taxable value and jobs on a per-acre basis that "poor" or even "blighted" areas of communities often have more value than areas of booming new development because they produce more revenue than they consume. This hidden value can be multiplied many fold by encouraging more private investment with things as cheap as new sidewalks, lighting, and street trees. For example, on a per acre basis, Armory Square is much more valuable than Destiny USA, which has extensive non-productive parking lots.  

Regarding the Downtown Hospital (but applicable to other projects, too) the planners urged decision-makers to ask "Where is the model?" and to "do the math."

So far Downtown Hospital proponents from MVHS, to political officials, to EDGE and various consultants have shown the public NO model with real numbers to demonstrate that placing a hospital downtown will generate a positive economic return for the City of Utica.  Like the now decaying "urban renewal" projects that traded hundreds of  old revenue-generating going businesses for new revenue-consuming public buildings and subsidized housing, the public is given only the appearance of a positive outcome while actually suffering negative economic consequences.

What we do know about the Downtown Hospital is that about 40 going businesses will be taken. These are not just any businesses but Proven Winners because they beat the 1-in-5 odds of surviving 5 years to actually last decades -- businesses who pay their taxes and provide jobs -- businesses which should be cherished, not pushed aside, in spite of their modest appearance,  because they produce a positive economic return for the city. Based upon the numbers of what happened in Rome when land was taken for the "Fort" and "Living Bridge" projects, Utica would be lucky if even 4 of these businesses remain in town following the project. Their property taxes, sales taxes, jobs and income will be forever lost to the local economy and replaced with a decrease in hospital jobs (because hospitals are consolidating) and virtually ZERO taxable value and revenue (because the hospital is tax exempt). Utica will give up in perpetuity the chance of ever generating revenue over the entire 34 acres to be taken. Utica taxpayers will be particularly hard hit because Utica will be responsible for police and fire protection of an additional hospital campus (because the others aren't going to disappear overnight). With no plans for the two campuses to be left behind, the potential for long-term blight (like that experienced at the CNY Psychiatric site on York St. after most of its facilities were closed) will be visited on two good neighborhoods. There is already talk about saddling taxpayers with a $41 Million parking garage. You can be sure that when ancient water lines, sanitary and storm sewers prove to be inadequate, the costs of improvements will be passed on to the local rate-payers in the form of higher water bills.

Meanwhile, MVHS' 64-acre St. Luke's Campus has plenty of room for the New Hospital and is served by major 4-lane traffic arteries, a new co-generation facility, and relatively new water and sewer lines. Parking is already on site and would only have to be incrementally augmented. No businesses would be taken, no revenue would be lost to local government, no private jobs would be lost, and one less site would be abandoned to potential blight. Since the site is already owned by MVHS and nearly shovel-ready for expansion, more money from the state's $300M gift can go toward a better hospital and equipment. The need for taxpayers or rate-payers to kick in extra money to improve public infrastructure will be virtually eliminated.  Furthermore, the St. Luke's site has already been approved by the MVHS board as its "backup," eliminating the argument that the site does not meet MVHS' needs.

Simply put, placing the New Hospital Downtown as opposed to St. Luke's campus makes no economic sense.  It buys less healthcare, while putting Utica at risk.  

Where are the economic models for the "U-District" and Harbor Point? Uticans are presented with pictures of dazzling buildings and promises of attracting tourists, but what will Uticans pay? Pay to build, pay to maintain, pay to protect? And what will they receive in return? Will revenues cover costs?   Where is the math?  The fact that these projects do not happen without the public risking substantial funds suggests that maybe the math does not work. If private ventures have only a one in five chance of  financial success, why should we expect that government officials can do better? Maybe it would be better to leave the "U-District" and Harbor Point as is, undeveloped, and wait for development to come the old-fashioned way -- the way Utica was originally built -- the way Utica became wealthy at one time: through trial-and-error efforts by entrepreneurs risking their own money. They are already doing it in Baggs Square, and are prepared to do it within the Downtown Hospital footprint.

The Downtown Hospital, U-District, and Harbor Point -- like the old Urban Renewal Project #1 -- are more about keeping up appearances than real economic development.    


The Preservationist said...

absolutely 100% on point, Strikeslip

Don Backman said...

I agree with pretty much everything in this post. County Government needs a diaper change badly, and I'm running in District 16 to drain the 10th floor of the County Office building of raw insane ideas (like a Casino downtown and reshuffling the sales tax distribution agreement with the towns and villages, to begin with).

I'm also for term limits for all elected legislative county officials. New ideas and fresh approaches to problems will not be solved by the same-old same-old way of thinking.

I've started a blog ( What this county had 4 decades ago and what we have now are worlds apart. Please read my blog and if you find it worthy, please add me to your list of blogs on your side post. Thank you. I enjoy your blog.

Don Backman

Anonymous said...

Although the presentation was disappointing, the fact of the matter is that renewal projects of this type are never on time and never meet budget. Moreover, many if not most of the businesses taken, take the money and run never to re-open. Lawyers get rich while the taxpayer gets poorer from start to finish. Let us face one fact; the state money drove and keeps driving the location decision not medical concerns. In that sense it is a dishonest project.