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Carousel Center Benefit - $32.4 or $0.3 million per year?

by Howard Hart, Cazenovia, N.Y.

Some supporters of the Carousel Center expansion say most of the fiscal benefit to the city and county will come from sales tax receipts and these will approximate $32.4 million per year1. While superficially true, a careful examination of the ERA report on the Carousel Center2 shows that for the next three decades, the benefit of expanding the mall vs. not expanding it is materially less, in the order of $0.3 million per year.

The $32.4 million figure incorporates three oversights. First, the estimate applies a 3% sales tax to the total sales generated by both the current mall and on the additions to the mall, whereas the benefit from expanding is only the tax on the additional sales that will come from expanding. Second, while the tax rate of 3% may be historically correct, ERA reports that a lower average rate for the expanded Carousel Center will occur in future years because of the $110 apparel and shoe exemption that is proposed to go into effect this year. Third, the sales tax benefit associated with the expansion should be compared to the real estate tax benefit that would be gained if the mall did not expand. (At present, the city can begin collecting real estate taxes on the current mall in 2006, whereas PILOT contracts associated with expanding the mall will postpone such collections another 30 years or possibly more.) Since the ERA data below shows the sales tax and real estate tax benefits are nearly equal at least until the mid 2030s, the difference in revenue associated with expanding or not expanding the mall approximates $0.3 million per year for the next three decades, or longer. Thereafter, real estate taxes will increase the difference.

The increase in revenues that result from (1) expanding the mall and extending the PILOT on the current mall or from (2) not expanding and allowing the PILOT on the current mall to expire are shown in diagram form in Figure 1 and Figure 2. They are described below.

Revenues from Expanding the Carousel Center

If the mall expands, a new PILOT (a special kind of contract) will give exemptions from real estate taxes to both the current mall and to the mall additions until the mid 2030s or even beyond3. Thus when the expanded mall is completed in 2006, the city and county will receive sales tax revenue and small special taxes, but no real estate taxes until the mid 2030s or later.

When the mall expands, ERA forecasts it will bring in about $552 million in business4 from counties outside of Onondaga and it is the sales tax on these sales that will boost the city and county treasuries. The expanding mall will also capture sales from other retailers in Onondaga County, but moving sales about within the county does not increase the county's sales tax receipts.

The county's share of sales tax has historically been about 3%5 of retail sales. But ERA's analysis of Carousel sales shows that Onondaga County's proposal to allow a $110 exemption for apparel and shoes this year will reduce sales tax revenues at the mall by about 38%6 (at the time of the mall's completion in 2006). This reduces the current tax rate to an average of 1.86 percentage points or to 1.86% of the Carousel Center's sales7.

When the 1.86% average rate is applied to the $552 million in business brought in from outside the county by expanding the mall, the sales tax benefit becomes $10.3 million per year. Add to this an increase in the Tankyard/Junkyard tax of $0.5 million per year for the expanded mall, and, perhaps, a $0.3 million Lakefront Improvement Fee8, and the total benefit for the general good of the city and county comes to $11.1 million. After the mid 2030s or later, when the PILOT expires and the real estate tax collection begins, total revenues to the city and county will increase. ERA did not give an estimate of the increase, nor did it assess the possibility of changes in the sales tax rate over the intervening three decades.

Revenues from Not Expanding the Carousel Center

If the mall does not expand, the PILOT agreement on the existing mall will expire in 2006, and at that time, the city can begin collecting real estate taxes on the mall. The current assessment is $325 million, and the statutory tax rate is 3.337%, so the collection will be about $10.8 million per year, which is about $0.3 million less than the $11.1 million above9. ERA did not give estimates as to how the assessed value of the Carousel Center would change over time and offered rationales for taxing at rates below statutory levels. It did not, however, recommend doing so or estimate what such a rate would be or should be.

1. Frederic Pierce, "Gateways, " The Post Standard, page C-6, November 10, 2000 1

2. Economics Research Associates (ERA), Carousel Center Expansion, dated June 8, 2000. Prepared for the Syracuse Industrial Development Agency (SIDA). 2

3. PILOT (SYLIBOI-84070-6), the second revision of the pilot agreement, page 6. In PILOT term, "...in no event shall the pilot agreement expire later than the 60th anniversary date of the issuance of the 2000 SIDA Bonds, " page 4. 3

4. In Tables 18 and 19, Out of County Sales = total sales less Onondaga sales. Out of County Sales in 2005 less Current Out of County Sales = $518 million in Table 18 and $585 million in Table 19. The average is $552 million.

5. Formulas, first line, page 33

6. Apparel Exemption, loss is $12.4 on $32.4 million for expanded mall = 38%, page 34.

7. A 38% reduction of 3% gives 1.86%

8. Table 23, line 3. And PILOT agreement (SYLIBOI-84979-6), page 11.

9. Original PILOT Agreement, pg. 29 and 31


Figure 1 - For the alternative of expanding the Mall, the increase in revenues that will accrue on completion of expansion in 2006.

Notes: All data come from ERA Report of June 8, except where noted.

  1. Average of sales in Tables 18 and 19, figure agrees with data in Table 28
  2. Movement of sales between stores within the county does not increase sales tax receipts
  3. Sales tax on $552 million brought into the County by expansion. Tax at 1.86% is 38% lower than historic rate of 3%. This reflects pending shoe and apparel sales tax exemption of $110 - see page 34.
  4. Increase in Tankyard/Junkyard tax, see table 23 and additional Lake Front Improvement fee (0.3 million per year in PILOT agreement (SYLIBOI-84979-6).
  5. The expansion incorporates the current mall into the new PILOT, thus no real estate for 30 years or more.
  6. Average of sales in Tables 18 and 19, figure agrees with data in Table 28


Figure 2 - For the alternative of not expanding the Mall, the increase in revenues that will accrue when the current pilot expires in 2006.

Notes: All data come from ERA Report of June 8, except where noted.

6. Current Assessment of $325 million at statutory rate (3.337%), see middle of page 31.

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