Renovating the KilmerPosted: June 19, 2011
Priming the Public for Dubious Private Gain By Beniam Awash
The opening in 2008 of the long vacant Kilmer Building, on the corner of Chenango and Lewis Street in the business district of downtown Binghamton promised to restore a local land mark listed on the State and National Registers of Historic Places and beautify an urban blighted area. The renovation of the 72,000 square foot six-story brick and stone building, which took 3 years, was funded with massive amounts of public money with guarantees of generating good paying jobs and property tax revenues for the City. It was even of greater significance for the Binghamton area in light of the National Bureau of Economic Research’s announcement that the United States had been shedding jobs and experiencing a recession of historic proportions since early December 2007. (Source: familyshrub.com)
Built in 1903, the Kilmer Building was Binghamton’s first skyscraper and served as the headquarters for Dr. Kilmer & Company, owned by Jonas Kilmer, manufacturers of the famous “Swamp Root”. After the death of Willis Sharpe Kilmer, son of Jonas Kilmer, the building changed hands several times until the Lander Company bought it for its perfume manufacturing business. The Lander Company ‘donated’ the building to the Binghamton County Industrial Development Agency (BIDA) for $1 in 1996 as part of a sweetheart deal that provided Lander with money and a long-term property tax deal to construct a new plant on Binghamton’s Eldridge Street. The Kilmer remained vacant for close to twenty years, until ideas began to circulate about reviving the deteriorating building.
The first revival attempt was to use $2.4 million of public funds to turn the Kilmer into a ‘business incubator’ and the owner, BIDA, convinced the Broome County Economic Development office to commit to renting the remaining office space. The yearlong project, 1997-1998, did not go anywhere until local headlines in 2001 started to proclaim “Kilmer Building to Come Alive. Renovation could create hundreds of jobs by 2003.”
The first job created seemed to have been for the BIDA, courtesy of a $1.8 million Federal Economic Development Grant secured by Congressman Hinchey in 1997 and set to expire in 2002.
Chairman Akel announced in February 2001 that Lane Construction, a general contractor, would partner with the BIDA, the building’s owner, to convert eighty percent into student housing for married and other graduate students and leave twenty percent as commercial office space. Lane Construction was said to be investing $5 million into the project but it failed when Lane refused to meet the Federal conditions attached to the loan.
On September 2001, perhaps in preparing the building to “come alive,” Joe Moody, Assistant Economic Development Director for the City of Binghamton, announced that Binghamton Economic Development Office was generously paying to tear down several stories of the Kilmer annex on the Lewis Street side of the building. Moody justified the doling out of public money by claiming that the vacant building was “unsafe” but he was silent on why the City had to pay, and not its owners, the BIDA, and why this “unsafe” label was accepted without an architectural study to confirm it.
The renovation idea was finally on solid artistic grounds, when on March 2004, local entrepreneur, Frank Whitney, after approaching the BIDA and Congressman Hinchey’s office agreed to buy the Kilmer Building and convert it into a high-end business office space. This was an odd plan since downtown Binghamton was flooded with empty office spaces that were begging for tenants. According to a local commercial realtor “it made no business sense. If it was up to me I’d have told Frank to keep his money.” Commenting on the downtown commercial real estate scene, he went on to say, “it is basic supply and demand. The downtown area has way too many empty buildings and not enough bodies. Where is he [Frank] going to get tenants for the Kilmer from and at what price? It’s a renters market.”
Several months later the BIDA sold the building. It declared the site “had proved too costly for the agency and outside developers”. This was a strange remark since Frank Whitney was pouring his life savings, encouraged by the BIDA, Congressman Hinchey’s office and Binghamton’s Economic Development Office. The costly renovations of the Kilmer received fresh injections of money when Congressman Hinchey successfully secured, from the Department of Agriculture, several loan guarantees totaling $3.19 million for Mr. Whitney. The good news and money spigot continued to flow when New York State announced on December 21, 2008 that it would relocate nine court employees from its rent-free space in the State Office Building to the fifth floor of the Kilmer at an annual cost of $90,000. The State, in its wisdom, also picked up a hefty renovation tab of $581,670.
(Continued on Page 8)
Renovating the Kilmer (cont’d from p. 1)
The risky nature of opening office space in a lethargic commercial real estate market was evident when one of the first tenants, the trendy French restaurant, the Kilmer Brasserie & Steakhouse, had to be given an $80,000 loan from the Binghamton Local Development Corporation to open its doors. In April 2010 the City’s development office reported that it was working on the terms for settling the, now, defaulted loan.
It seems tenants for this six-story building were harder to come by than the public funds that renovated it into a glittery landmark, feeding the sensibilities of the local architecture aficionados. Native son, Frank Whitney, was hopeful that in addition to Goldsmith (a high end jewelry store) that was located on the first floor other tenants, not requiring public assistance, would fill the vacant upper four floors. How did it come to this?
Building the Kilmer was publicly sold as a necessary project for breathing life into the downtown business district by supporting a local entrepreneur to create jobs and raise tax revenues for the City. It is virtually unanimous that the Kilmer has brought some much needed buzz and flavor to downtown Binghamton and its opening was appealing due to the general likeability of the Whitney’s.
The Kilmer project begins to look like a white elephant, a proverbial hole that is swallowing public money, when we consider it as a business project and not a charity case. Nothing reinforces this better than a glimpse at the amount of property tax revenue that the City (and County) was supposed to recoup from its investments. (Source: http://www.flicker.com/photos/johnwilliamsphd)
A conservative estimate of the taxpayers’ money that has been committed to the Kilmer is close to $3,941,670 divided into $3.19 million for Federal, $671,670 for New York State and $80,000 for the City of Binghamton, that each contributed. The revenue that has been generated, so far, comes from the annual property taxes. For 2010 this was $9,308.76 for the City and $2,089.46 for the County. Does this math make sense to you? The City of Binghamton put in $80,000 to get back $9,308.76 a year. At this rate it would almost take a decade just to get back the initial money, and forget about the Fed and State. If, you’re confused then join the club, but it actually gets more bizarre.
The paltry property tax revenues are based on the assessed value of the Kilmer building. If you’re guessing it is close to the $3.6 million that went into its renovation then you’re wrong. According to the City Assessment Office the total assessed value of the Kilmer is $829,100 while the same office also lists its market value as $1,036,375 for 2010.
Essentially, the total assessed value shaves off at least $2.6 million from the value of the Kilmer that could be taxed and go to support education, the police, fire department – you know things that matter, but it is not taxed.
Most surprising, the value used to calculate the property tax revenues for the City and the County is $250,000! That is like saying that the six-story artistic Kilmer building is worth the same as a high-end four-bedroom house on the West Side of Binghamton. The $250,000 figure is not random, it is the sale price that the BIDA, former owners, set on July of 2004 for transferring the Kilmer to its new owners. The question that naturally follows is, why would the City Assessment Office, six years later in 2010 and after $3.9 million worth of public funds, use this ‘fake’ number as the value of the Kilmer building? After all, it is public money on the line, on both ends.
The original sin is in the deal brokered in 2004, in which the City and County agree to exempt $579,100 (70% of the assessed value of the Kilmer) from taxes for ten years, from 2009-2018. In other words, the City of Binghamton and its School District alone are subsidizing the Kilmer to the tune of $350,000 over this ten-year period. What this means is that the City Assessment Office has not assessed the value of the Kilmer. Rather, it was a political decision that set the value of the Kilmer and tax exemptions in 2004 for a ten-year period stretching from 2009-2018.
The cost of the Kilmer on the public purse is substantial. In fact it is costing the State $90,000 per year for office space that they previously had for free and it is costing the City and School District alone an estimated combined $35,000 per year. This is essentially a subsidy due to a refusal to collect taxes based on the real assessed value of the building.
In light of the $3.9 million public funding package and tax exemptions, with the promise of job creation and increased tax revenues for the City of Binghamton, there are serious concerns about how decisions are made behind closed doors with public funds for private projects that have little business promise and eventually end up gouging taxpayers. At a time when a ‘job-less recovery’ is the new normal every penny counts and a few million is a penny too many to waste.
Currently, the Kilmer remains plagued by missing tenants and vacant floors. The much talked about French restaurant folded in 2010, with a replacement taking its place in 2011 by the name of Remlik, Kilmer spelled backwards and a throwback to the name of Willis Sharpe Kilmer’s estate in Virginia, on the banks of the Rappahannock River. The swanky new website, http://www.kilmerbuilding.com, is advertising for tenants for its empty sixth, third, and second floors. By the grace of the State the fifth floor remains occupied by the NYS Unified Court 6th District and the fourth floor has four tenants, including the owner of the building. As noted by a long time local commercial realtor: “I don’t even know how he [Whitney] is breaking even?” I think I’ll send him a copy of this story.