Aug 7, 2012
Saratoga real estate developer Sonny Bonacio has a plan. In this case, it's a plan for what to do with the former Railroad Avenue Price Chopper --- better known to natives as the Ghetto Chopper. The long-standing supermarket was sacrificed to make way for the newest annex to the city's burgeoning Canyon of Condos in the shadow of the Franklin Square historic district. His surprising idea for the property: build a giant multi-screen movie theater complex on it.
But there lies the catch: a mere week after announcing his grand vision, Mr B stated that he would require $1.2million in assorted tax breaks in order to proceed. The numbers just don't jive otherwise, he claims. Such bait & switch theatrics aside, the question becomes whether or not the Saratoga Industrial Development Agency (IDA) should agree to such concessions, given their role as the approving entity.
That they did, granting the majority of the request. We find ourselves distressed when hearing of that decision.
Bear in mind that this reaction is not coming from the “keep governments out of the markets / don't pick economic winners” perspective of the political right nor is it coming from the “end all corporate welfare” thinking of the left. Economic development entities have a rightful and valued role in community planning, but if (and only if) it assists initiatives that demonstrate the potential to generate clear and significant benefits for the greater good and if (and only if) the private sector is not providing such a solution on its own. The report card in determining the latter is obvious; the report card for determining the former is via an analysis of both its direct and indirect economic benefits. The contention here is that the Price Chopper to movie theater conversion does not qualify under either count.
We already know the “direct” selling points being offered by supporters of the tax breaks. First and foremost, it is argued, a downtown movie theater of this scope will generate impressive new foot traffic, which in turn will generate revenues and sales taxes from the resulting commerce in nearby retail and hospitality businesses. But this is a stretch. Movie-goers tend to be just that: movie-goers, period. The stickiness factor is weak when compared to other attractions, especially live-performance venues. The Schenectady example that is offered as a supporting case study actually proves otherwise in that Proctor's is the dominant traffic-generator there and not the movie complex next door.
Our bigger objection is with the lack of substantial “indirect” benefits, or the so-called multiplier effect. Is this helping to establish an industry cluster that is all the rage of the econ-dev world and seen as the magic bullet for localized growth? In other words, will a wellspring of nearby support services sprout up to serve the theater's needs and will additional theaters relocate there soon after? How about a local movie industry; will that arise as a result? This one's even easier to forecast: such goals will never be realized.
Next we consider the concept of local dollars retention. This new enterprise will be operated (if not outright owned) by a national chain, which will drain a good deal of start-up investments, operating cash and net revenues to its out-of-state mother ship. Then there is this stone cold fact: depending on the title, 70-90% of all ticket admissions go to any given film's distributor and producer. Now just how many of those enterprises are located in the city or county's bounds? Such a giant sucking vacuum effect will likely offset all the supposed direct and indirect benefits, if not actually surpass them. Why are local taxpayers subsidizing not only the city's most successful developer but also the Hollywood blockbuster industry?
Good paying full-time jobs. Career professions. Industry clusters. Local enterprise support and acceleration. Local dollar retention. These should be the key qualifiers for any proposed economic development investments made by the public sector on behalf of its funding citizenry. On all five counts, the Railroad Avenue movie theater proposal falls short.
Tax breaks are a true zero-sum game: if one party is given such a benefit, the burden is picked up by all the others --- unless the project has the prospect of delivering an exceptional level of economic activity and/or quality of life benefits back to the community. If they do not – as is the case here – then any request for the concessions should be rejected, It is then up to the private sector entrepreneur to determine whether the project stands on its own merits without that public assistance. That volley would put the ball back in Mr Bonacio's court.
That should have been be the perspective from the Saratoga IDA's office, at least. But it wasn't. That, in turn, calls into question the guiding philosophy and economic development strategy of the organization and its leadership.