Plans to begin the first phase of the $2 billion-plus Destiny USA project in Syracuse, N.Y., remain stalled as the city and its industrial development agency defend a lawsuit filed by the developer, Pyramid Co.
The U.S. Treasury Department last week awarded the Destiny project up to $1 billion of tax-exempt “green bond” capacity under the 2004 American Jobs Creation Act. Destiny was one of four developments granted the special bond allocation. The others are the Atlantic Station project in Atlanta; the Belmar redevelopment plan in Lakewood, Colo.; and the Georgetown Special Taxing District in Connecticut.
Pyramid on Dec. 30, 2005, filed suit against the city and the Syracuse Industrial Development Agency over plans to separately sell an undetermined amount of taxable bonds backed by payments in lieu of taxes, which were to finance expansion of the Carousel Center mall. The case is before Justice John Centra in the New York Supreme Court, Onondaga County — a trial court.
Pyramid contends that the city is reneging on a five-year-old agreement to grant the company a 30-year property tax exemption in exchange for adding an additional 800,000 square feet of space at the mall. The city contends that the mall should go onto the city’s tax roll after 15 years of exempt status ended with the start of the new year. The property is valued at $327 million and would generate about $12 million annually in city tax receipts, according to an article in the Syracuse Post-Standard newspaper.
City officials declined to comment, citing the ongoing litigation.
Calls to Pyramid Co.’s David Aitken, and officials at Onondaga County — who side with Pyramid on the dispute — were not returned.
Pyramid and the city had agreed to financing terms under a $345 million loan from Deutsche Bank, but the company changed its plans last July, opting for a $375 million package from Citigroup Inc. Though the new financing plan calls for the city’s IDA to sell about $180 million of debt for the mall expansion, city officials say the project is eligible only for $70 million of bond funding with proceeds directed solely to public infrastructure.
If and when those bonds are sold, Citigroup Global Markets Inc. and Lehman Brothers will market the debt. Citigroup declined to comment; calls to Lehman were not returned by press time.
The mall is planned to be the core and starting point for the much larger Destiny project, which is intended to be a futuristic retail destination complex exhibiting and demonstrating technology and innovation. When completed, it is expected to be “the world’s largest enclosed and integrated structure,” offering shopping, hotels, restaurants, workspace, and recreational amenities, according to the Destiny Web site. It will use only non-fossil-fuel energy sources and is hoped to be the “most visited” leisure spot on earth, employing thousands of workers in the region along the way.
Destiny started to make good on its employment promises late last year, hiring about 200 workers at salaries ranging from $60,000 to $75,000. The project delay, though, prompted the company to lay off those hired indefinitely.
Fitch Ratings analyst Jessalynn Moro said a completed Destiny project would benefit the BBB-rated city as well as Onondaga, which Fitch rates AA-plus.
“We believe it’s going to happen,” Moro said. “It appears that it is going to be pretty good for the city and the region, but it’s hard to tell at this point how successful the project will ultimately be.”
