The last straw

Maybe, finally, the last straw has been loaded onto the backs of the Sullivan County legislators and Industrial Development Agency (IDA).

Here’s the drill: a big business delights everyone by saying it will set up shop here—but it turns out it will only do so if it is granted special deals and privileges and tax cuts while—surprise!—the burden on the average middle-class working taxpayer grows and grows. We saw it with the Millenium Pipeline; we saw it with Ideal Snacks. On a state level, we saw it with New York Regional Interconnect’s request for a guaranteed return for its investors, and we saw it back in August when Cappelli Enterprises requested and received an estimated $107 million worth of tax breaks for its “Entertainment City” development at the site of the old Concord.

And now Cappelli is back again, hat in hand. Having assured us in October that it had full financing, the national fiscal crisis notwithstanding, we now find there’s a little matter of a $30 million gap that the banks have “discovered.” Discovered? Had it been perhaps marooned on another continent or buried underground? Or is this gap something Cappelli and the banks would have been aware of to begin with if they’d gone through the financial papers properly? And if the business brains responsible for the project could come up with this kind of miss to begin with, can we really trust any of their other assurances?

The developers might argue that $30 million is not, after all, such a bad mistake in proportion to the $1.2 billion cost of the entire project—only 2.5 percent. Fine. If it’s all that small, they can handle it themselves, either by getting more investors or by scaling down the project.

Here’s the way capitalism is supposed to work: people assess prospective risks and rewards of putting their money somewhere, and if the risk/reward ratio seems reasonable, they go ahead and invest. The developers and the banks and the original investors obviously made a bad assessment. To solve it, they want to shift the risk/reward ratio radically against the people of Sullivan County.

Not only can we no longer look forward to any reward above $1.2 million per year from Sullivan County room tax income (including current taxes and Entertainment City room taxes combined), but apparently the developers think any room taxes from other developments also ought be siphoned off to pay back their investors. The total tab, over 40 years, would be an estimated $92 million including interest. What this means is that they are demanding the people of Sullivan County cede to them the full upside potential of any increase in room tax revenue beyond $1.2 million from our general lodging economy—even that portion of it that has nothing whatsoever to do with Entertainment City.

The whole reason to grant Cappelli special deals in the first place was because we expected the tax concessions to be more than offset by other types of income—including room tax income. The newest request substantially reduces that incentive. And what happens if Entertainment City goes bust? Would Sullivan County owe room taxes from all its other lodgings to Entertainment City investors for 40 years, long after the complex’s doors were shut? That risk would be nothing short of insane.

The only good news out of this outrageous situation is that at least some Sullivan County officials finally seem to be getting their fill of this kind of tactic. Maybe it has something to do with the national scene. We’ve just seen the American taxpayer taken to the laundry for $700 billion to bail out the banks, solemnly assured that it would be in our own economic interest. Weeks later, all that has happened is the banks still refuse to lend but are setting aside billions in bonuses for themselves and, according to The Wall Street Journal, have raised their fees to their customers to record levels. Meanwhile, the economy spirals downward as before.

A good businessperson can project expenses, measure costs and risks, estimate rewards, and come up with a plan that will make money without siphoning money from the public treasury. Otherwise, he or she is not a capitalist, but a public welfare case.

Both on a national level and a local level, this needs to change, and we hope that the results of the recent general election indicate a public will to do so. Let’s begin at the local level by telling Cappelli Enterprises to rewrite its plan so it works without draining the coffers of Sullivan County.

Also in this issue:

• Who will clean up Bush’s mess?

Dr. Punnybone

Altar Ego