This story was written by staff writers Rick Moriarty and Tim Knauss.

Twelve years ago, Syracuse city leaders were so eager to spur the local economy they gave developer Robert Congel a 30-year property tax exemption on his hugely successful shopping mall so he would expand it.

Ever since — amid infighting and extremes of hope and regret that followed that 2000 agreement — mayors and other city leaders have tried to make the deal better.

Some fought Congel in court. Some excoriated him in the media. Several times, city officials pounced at Congel's failure to meet deadlines to force him to make concessions.

But Congel always won.

As the years went by, the developer promised more and more. Golf courses. Tourist attractions. Sixty thousand hotel rooms.

Three successive mayors and several generations of city councilors and lawyers could never force Congel to build what he talked about.

Mayors won some concessions, but the developer’s lawyers never gave up a fundamental advantage they won in the original deal: the legal right to hold onto a property tax exemption worth nearly $600 million in return for building just an 800,000-square-foot addition to the Carousel Center mall.

Common Councilor Pat Hogan said the city was outgunned from the start.

“They’re an extremely focused adversary, they’re prepared for the long haul and they’re going to get what they want,” said Hogan, a former supporter of the tax deal who is angry about the outcome. “Maybe it’s self-serving, but I think any municipality would be overmatched.”

2000

The battle started in 2000, when Congel and his partners at Pyramid Co. of Onondaga said they would undertake a series of expansions at the mall that would ultimately quadruple its size and make it the largest mall in America. Eventually, they would give it the name Destiny USA.

To finance the deal, they said, they needed a 30-year exemption from property taxes on Carousel Center.

For months, arguments raged among city councilors, county legislators and other politicians over whether the promise of new jobs and enhanced sales tax revenue was worth giving up certain property taxes.

Critics, including state Sen. John DeFrancisco, pointed to what they said was a key flaw in the agreement’s language: Although he promised to build as much as 3.5 million square feet, Congel could keep his tax benefits after building 800,000.

The “final phase” of the expansion, the documents said, was any phase the developer decided was final.

The mayor who negotiated that deal with Congel, Roy Bernardi, said he hoped Congel would finish the full build-out. But Bernardi always had doubts.

“To be very candid with you, I never really believed deep down in my heart that it was ever going to be completed the way it was envisioned by the developers,” said Bernardi, who lives in Virginia. “It was a little overly ambitious to think that he could bring in that final phase and bring in the number of people that would make it the kind of success that Bob Congel envisioned.”

Nevertheless, Bernardi championed the deal, as did County Executive Nick Pirro and U.S. Rep. James Walsh.

Bernardi said no other developer would have built in the pollution-laden area where Congel was prepared to create jobs and new sales taxes.

“You’re always looking for revenue, you know? Times are tough,” Bernardi said.

In the weeks leading to the city council vote, the community buzzed. More than 1,000 people turned out for a city council meeting on the deal in December 2000.

A week later, the deal squeaked through by a 5-4 vote.

One of the councilors who voted in favor was Joanie Mahoney, now Onondaga County executive. She said she knew it allowed Congel to build only one phase and still keep all his tax breaks.

But the focus of the intense public debate leading up to the vote was on whether Congel would expand the mall without the tax breaks.

“From a business perspective, it did not make sense to build there without incentives,” she said.

Mahoney said she still believes the deal was a good one, because of the additional sales taxes.

“I’m disappointed there is not more, but there certainly was no harm done to the community,” she said.

A month after the council vote, the Onondaga County Legislature passed the deal, 14-10.

“It’s a leap of faith. I am putting my faith that you will build out this entire project,” said Legislator Thomas Smith, who voted yes.

“We should consider Murphy’s Law,” said Legislator Terry Pickard, who voted no. “If something is going to go wrong, it will go wrong.”

2006

At the end of 2005, a new mayor had his crack at Congel.

For years, nothing happened on the lakefront. Mayor Matt Driscoll, with growing doubts that Congel would build the bigger project he promised, looked for a way out of the city’s deal.

In December 2005, he refused to implement the tax agreement. He argued Congel violated a requirement that he obtain private financing for part of the project. He had the mall placed back onto the tax rolls.

Congel sued. In March 2006, state Supreme Court Judge John Centra sided with Congel and ordered the city to make the mall tax-free for 30 years. The city appealed, but Driscoll began negotiating with Congel.

Driscoll improved the city’s deal. If the city dropped its appeal, Congel agreed to pay the city a windfall of $60 million, most of which had been promised only if he had built out the whole project.

Driscoll issued a “fact sheet” touting the deal’s “firm commitments” that the developer would build more than just the first expansion, guaranteeing a 1,000-room hotel and more shopping space.

Vito Sciscioli, who was then vice chairman of the city development agency and helped to negotiate the 2000 deal, said he thought Congel would have to make payments in lieu of taxes if he opted not to build more than one expansion.

“We viewed it as an incentive to build as much as possible,” he said.

But the settlement did not change one thing about the deal: the provision that allowed Congel to stop building after finishing the first phase and still enjoy 30 years of tax exemptions on the entire mall.

In June 2006, the Common Council held a packed committee meeting before voting on the settlement. As dozens of laid-off Destiny workers looked on, the councilors quizzed lawyers from the city and Pyramid about the deal.

Councilor Jeff DeFrancisco, the son of the state senator, asked what rights the city had if the developer failed to build more than one phase, according to a transcript.

The lawyers’ answers seemed to indicate that Destiny would face a tax bill on phase one if it didn’t sell bonds to start building phase two.

“If he doesn’t build phase two ... (the city’s) remedy is to put phase one back on the (tax) books,” said Jean Everett, a lawyer from Hiscock & Barclay who represented the city. “If they don’t start, they can put it back on the books.”

Robert Smith, a lawyer for Pyramid, said the new deal gave the city “substantially greater rights, caused in large part by our agreement to build phase two and phase three, which were not in the original agreement.”

Left unsaid was this: Destiny faced no penalty if it declared any completed phase to be final.

Most of the Common Council hated the deal. One of the six lawmakers voting against it was Stephanie Miner.

In a last-minute meeting in an out-of-the-way office, Driscoll had the development agency pull the trigger on the settlement anyway.

The city’s top attorney and a friend of Miner’s, Terri Bright, objected, and Driscoll fired her. A furious Miner led an attempt by the council to revive the court appeal.

It wasn’t an easy position for elected officials to take, given the editorial support the project had received from The Post-Standard and other local media, Miner said.

“There was overwhelming pressure to vote for a project and an agreement that had not been properly vetted,” Miner said.

City Hall exploded into full conflict. The councilors hired their own lawyer to try to keep the appeal alive. District Attorney William Fitzpatrick threatened the councilors with a grand jury investigation over an open-meetings law violation, a probe that went nowhere.

Eventually, a court ruled Driscoll had the power to drop the appeal without the council’s approval.

Bright said the city lost an opportunity to get out of a bad deal when Driscoll settled with Congel.

Driscoll, president and CEO of the state Environmental Facilities Corp., declined to comment about the criticism. In the past, he said he avoided the risk of losing in court and extracted $60 million from Congel.

The tax deal in place now has never been approved by the Syracuse Common Council.

In 2007, the city’s development agency issued bonds to finance the expansion, a move that locked in the 30-year tax exemption for the original sections of Carousel Center. No mayor could touch that.

2011

Miner, rendered powerless in the 2006 standoff, eventually got her chance to negotiate with Congel.

In June 2011, Congel faced a deadline to complete the addition and begin the second phase. Hammered by a rough economy and a foundering project, Congel seemed unlikely to start a second phase anytime soon. And he was at least six months away from finishing the addition.

So he was about to become in violation of the tax deal. The city’s remedy, under the deal, was to throw the expansion onto the tax rolls.

Congel asked his old nemesis, Miner, now mayor, to extend the deadline, saying the project had run into unavoidable delays. Congel was willing to pay the cash-strapped city for the extension.

That gave Miner, who hated the deal, a choice.

She could rescind the expansion’s tax exemption, but that carried a risk.

Congel had threatened to sue if she tried it, city authorities said last week. The deal permitted the suspension of the city’s deadlines if “unavoidable delays” prevented the developer from completing an expansion or building more. Congel could try to claim in a suit that the near collapse of the nation’s financial markets caused such a delay.

Given Congel’s “amazing track record in local courts,” the city’s chances of winning on the point were remote, she said.

Besides, the city’s opposition threatened to delay further a project that stood as an empty, partially finished mall, which would have generated little in property taxes.

So, in the end, Miner said, it really wasn’t much of a choice.

“I had very little, almost no options,” she said. “I took what I was left with and made the best out of it. I was hamstrung by those agreements.”

Miner took the money, a total of $2.5 million for two six-month extensions.

Driscoll, when interviewed Wednesday, agreed his successor had little leverage. He questioned, though, if the city could’ve received more from Congel.

“I’m not certain that something couldn’t have been negotiated for additional construction of something,” he said. “The reality is that these market conditions don’t support the types of phases that were envisioned. But that doesn’t mean that you can’t negotiate something going forward.”

Bernardi, who made the first deal with Congel, approved of Miner’s decision.

“Mayor Miner did the right thing with the extensions,” Bernardi said. “You can’t leave something vacant like that.”

The city’s extensions allowed Congel to keep the tax agreement alive long enough to finish. That became official in December, when the city gave Congel’s expansion a temporary certificate of occupancy — a routine one-page form that affirms that part of the building is safe enough for the public.

With that certificate in hand, Congel was free to invoke that provision written into the deal in 2000 and that survived the 2006 upheaval. Miner said she became aware of Congel’s “final phase” rights shortly after becoming mayor in January 2010.

In a three-page letter signed by Congel’s longtime partner, Bruce Kenan, and delivered to a security guard Tuesday at City Hall, Congel declared the completed addition was the final phase of the project.

That allowed Congel to avoid paying property taxes for the next 25 years on the single most valuable building in the city, without any requirement that he build more.

Miner was in New York City, preparing to do an interview with Bloomberg News about the state of municipal finances, when an aide called with the news of the letter.

“We acknowledge your courtesies and cooperation,” the letter said, “as we have worked to develop this project for the benefit of our community over the past twenty-five years.”

Paul Riede contributed to this report. Contact Rick Moriarty at rmoriarty@syracuse.com and 315-470-3148. Contact Tim Knauss at tknauss@syracuse.com and 315-470-3023.

Related stories:

» The source of the city's problem

» FAQs from Syracuse's Destiny lawyer in 2006: What if the developer doesn't build?

» You play the City Hall lawyer: Wade into a Destiny USA contract

» Former Mayor Bernardi: Even a smaller Destiny USA is a benefit to Syracuse

» Destiny USA's untaxed anti-climax: After 13 years, it is what it is

» A chronology of Robert Congel's Destiny USA project

» Read all our coverage of Destiny USA

Destiny letter delivered June 5 to City Hall