Editors' note: Staff writers Rick Moriarty and Tim Knauss wrote this story.

Syracuse, NY -- The shopping mall project that was supposed to make Syracuse a world-class tourist destination will fall far short of its grand promises — and leave the city’s single most valuable property off the tax rolls for the next quarter of a century.

Developer Robert Congel’s Pyramid Co. of Onondaga and its offshoot, Destiny USA Holdings, made it official this week by delivering a three-page letter to the city declaring he has no plans to expand the Carousel Center mall beyond the 1.3-million-square-foot addition slated to open Aug. 2.

The action, announced Wednesday, cemented what many doubters of the project have been saying for years — that Congel will build just enough to qualify for a 30-year property tax exemption, but no more.

Long gone are the developer’s promises to build a 1,342-room hotel for the tourists that would pour into Syracuse from all corners of the world for a chance to shop, dine and play at Destiny USA, the name Congel is giving to the expanded mall on the shores of Onondaga Lake. Gone also are talk of re-creations of the Erie Canal and Tuscan villages and huge indoor public parks.

What remains will be a sizable shopping center, but one much smaller than what Congel promoted in 2007 when he secured an unprecedented deal from the city that will save his mall nearly $600 million in property taxes over 30 years. That reality — about a project which has dominated the public agenda in Syracuse for the past 15 years — generated anger Wednesday.

“I find this to be outrageous,” said Margrit Diehl, a member of Parents for Public Schools, which advocates for schools at a time when insufficient tax money has forced the district to cut teachers. “Even if it’s legal, it certainly is unethical and greedy.”

Though not surprising, she added. “That whole project was so pie in the sky, so outlandish, that he knew very well he wasn’t going to do it,” she said.

Common Councilor Pat Hogan, a longtime supporter of the project and an advocate for business developers, said he was appalled to learn that the mall would escape property taxes. “Obviously, Mr. Congel feels he doesn’t have to pay taxes because he’s part of the 1 percent,” Hogan said. “Many people in the community are going to be pretty angry and upset about this. And I am, too.”

Terri Bright, who was fired in 2006 as the city’s top lawyer by then-Mayor Matt Driscoll for refusing to sign off on the tax deal, said the arrangement turned out even worse than she feared. “This is the most valuable piece of property in the city,” she said. “It’s just a horrendous deal.”

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The news was vindication for state Sen. John DeFrancisco, R-Syracuse, a vocal critic. “It’s a mall expansion and only a mall expansion,” he wrote in 2006.

With an assessed value of $498 million, the expanded mall would represent about 12 percent of all taxable property in Syracuse. Its assessment is equivalent to more than 7,000 average city homes. If it were taxable, the mall would pay $19.4 million a year in city, school and county property taxes this year — and more when the expansion is finished.

Congel, who will turn 77 next month, has said little publicly in the past several years about a project his marketing team gave this slogan: “Nothing like it in the world.”

“Right time to pause”

On Wednesday, his chief spokesman, David Aitken, said “national economic challenges” convinced Congel to abandon more construction. “Our focus, given all the challenges we’ve been through, is bringing this phase of the project to light,” he said. “We determined it was the right time to pause and make sure what we were doing was successful.”

Aitken said the developer had always planned to build more and did not, as critics claim, use promises of a grander project just to wring a lucrative tax deal out of the city. He said the deal has been a good one for the city because the mall is a significant economic generator.

At 2.4 million square feet, it is the sixth largest in the nation and, with 30 million visitors a year, the second-most-visited mall, behind only Mall of America in Bloomington, Minn., he said. The mall employs 3,400 people, he said. When the addition is done, that will rise to 5,000, he said.

He said 15 percent of the shopping center’s visitors are from Canada — a number the company expects to rise. Destiny has teams of people marketing the center to Canadian shoppers, he said.

Aitken did not rule out the possibility that the mall could expand again some day.

Congel isn’t escaping all payments to local government. He agreed to pay a $60 million project fee, spread over 11 years, to the city and the county when the city development agency issued the mall’s construction bonds in 2007. He is required to continue his payments on that debt.

He also makes annual payments of about $800,000 to compensate the city for taxes formerly paid by a junkyard where the mall now stands and by the owners of oil storage tanks removed to make way for the mall’s auxiliary parking lots.

The “final phase” surprise

But the fact that he will not be required to make tax payments on the expansion that is nearing completion surprised many observers, including some involved in the tax deal.

It was widely thought that Congel had to launch another addition in order to keep the tax exemption on the previous phase. Turns out, a provision in the deal allowed the developer to quit building after the first expansion and still retain the tax exemption on it. He simply had to declare that it was the “final phase” of the project.

Driscoll, the mayor from 2001 to 2009, said he and others were fully aware of the “final phase” clause. That was added to the Destiny deal before he took office, he said. The first tax deal for the project was struck in 2000, when Roy Bernardi was mayor.

Still, many key players in the handling of the city’s Destiny negotiations claimed they didn’t know about that provision.

For example, in 2006 city councilors put questions about the proposed agreement to lawyers for the Syracuse Industrial Development Agency, which cut the deal with Congel. One of them dealt with what would happen if the developer did not build out all three of the promised phases of the project.

In his response, John Opar, of the New York City law firm Shearman & Sterling, wrote that if the developer did not begin the second or third phase, he could still keep the tax exemption on the original portion of the mall but that the first phase “will be put on the tax rolls.”

Irwin Davis, chairman of the development agency when the deal was activated in February 2007, said that’s exactly what the agency’s directors were always told. “Our major concern was that what was promised was going to be built,” he said. “Obviously, if that provision was there, people had to know about it, but I don’t recall it.”

For Mayor Stephanie Miner, who as a city councilor was a critic of the tax deal, the moment of truth came last year.

In June, Destiny was in violation of the deal because it missed its deadline to complete the first expansion and start a second one. She had the power then to revoke the tax deal.

Though she did not like the tax deal, Miner as mayor twice agreed to extend deadlines for Congel to complete the expansion and begin a second addition. The first time, in June last year, Congel paid the city $1 million for a six-month extension. The second time, in December, he paid $1.5 million for another six-month extension.

She lost that leverage after the second extension in December, when the city gave the developer a certificate of occupancy for the addition. That meant he was done with phase one and free to invoke that “final phase” provision.

Miner said she knew, when she agreed to the extensions, that Congel could exercise his “final phase” option. But she said she agreed to the extensions to enable Congel to obtain new bank financing to finish the expansion. She also expected a lawsuit by Congel challenging the city’s authority to enforce the deadlines. She said an empty, unfinished mall expansion would have generated no sales taxes and little property taxes.

“Was putting an empty expansion on the tax rolls going to be a benefit for this community?” Miner asked.

Jobs and sales taxes

Terry Mannion, Miner’s stepson and an attorney who negotiated the two deadline extensions for the city, said some players may have been confused about Congel’s “final phase” option because the deal is so complicated. The 2007 tax agreement negotiated by Driscoll incorporated terms approved in 2002 by the Common Council. That amended a 2000 city ordinance.

Minch Lewis, a former city auditor and longtime supporter of the Destiny project, said he was not aware of the “final phase” option for the developer. “I was always under the assumption that each phase had to earn its tax exemption by providing the resources necessary to build the next phase,” he said.

But Lewis said that does not alter his view that Destiny has been an economic boon to the city, with its construction and retail jobs, sales taxes and project fees to the city. The expansion consists of a mix of luxury outlet stores, traditional retailers, restaurants, a nightclub, a bowling center and a go-cart track. “Let’s celebrate the fact that it has been such a big economic engine and it can be an economic engine in the future,” he said.

Vito Sciscioli, who was vice chairman the city’s development agency when the deal was cut, said he also does not recall anything about the “final phase” option. But he said the city made the proper call when it decided that the sales taxes and jobs from the mall would worthwhile enough.

“The best thing right now is to get the lights turned on and make it as stable as possible,” he said. “It will generate sales tax, and at the same time employ people.”

Staff writer Paul Riede contributed to this report. Contact Rick Moriarty at rmoriarty@syracuse.com or 470-3148.

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