Friday, August 22, 2008

Hotel Utica Countdown: H+9

Nine days have now passed since Utica Mayor David Roefaro failed to meet his self-imposed deadline for resolving the Hotel Utica fiasco. I'll refrain from too much self-congratulation (and the inevitable blogger triumphalism) and simply point out that the Observer-Dispatch has finally covered the story:

Hotel Utica remains behind on some tax and loan payments more than three months after Mayor David Roefaro said the city expected to find a solution to the difficulties within 90 days.

City and hotel officials said they still are communicating about their options and are working on plans that would allow hotel officials to consistently pay on time.

This is exactly where we stood three months ago, so Mr. Roefaro and his staff have the dubious distinction of accomplishing absolutely nothing in the last 90 days. This despite repeated pledges to "resolve" the issue or at least "reach a consensus" on the problem. Put simply, Mr. Roefaro has been lying through his teeth.

Hotel officials paid more than $132,500 in Utica City School District taxes on July 21 and more than $40,700 in Oneida County taxes on Aug. 19, according to school and county records.

But the hotel is past due on almost $70,000 in city taxes and has missed its last four U.S. Department of Housing and Urban Development loan payments to the city, according to city records.

“Some tough decisions have to be made by the ownership,” city Urban and Economic Development Commissioner Robert Sullivan said. “Because that cannot and will not continue.”

That's tough talk coming from a man that's delinquent on his own payments to the city, a situation that, amazingly, hasn't resulted in his resignation or firing. At this point the idea that anyone would take Mr. Sullivan's pronouncements seriously is beyond laughable. Could someone please order him a big rubber nose and some size 36 shoes? If the man is going to beclown himself so thoroughly it's only right that he dresses the part.

On May 15, Roefaro said a solution to the hotel’s payment difficulties was expected within 90 days.

Now, about 100 days later, Roefaro says that goal wasn’t set in stone.

“I don’t have a crystal ball,” he said.

Nor, apparently, much of a work ethic. I know the funeral and embalming business doesn't exactly run at a breakneck pace, but you would think Mr. Roefaro would have some appreciation for making an effort in order to meet a deadline. Otherwise we would be hearing from more of his funeral home customers about how bad dear old Aunt Milly smelled at her viewing.

Hotel Utica General Manager Tony Zaleski said the hotel had a strong summer with 90 percent occupancy in August and about 80 percent occupancy in July.

“As with anything else, we said all the taxes would be paid by the end of the summer,” he said, “and that will be the case.”

Zaleski said he wasn’t aware the loan payments haven’t been made because owners Joseph Carucci and Charles Gaetano handle those. He said he expects the payments to be on track soon, but the hotel spent about $200,000 this summer paying off school and county taxes.

“There’s just only so much money,” he said.

If the Hotel Utica has a 90 percent occupancy rate and still can't meet it's financial obligations it's time to accept that it simply isn't a viable concern. It's doomed to failure, and having the city continue to prop it up with millions of taxpayer dollars does nothing more than prolong the inevitable. Actually, it's the worst thing the city could do- with each passing day the hotel's debt, and the city's liability for same, continues to balloon ever higher.

In July 2007, Hotel Utica was behind more than $300,000 in taxes and had missed multiple loan payments on what was originally a $5 million loan from the U.S. Department of Housing and Urban Development that the city guaranteed during the Edward Hanna administration.

The hotel soon made the payments and renegotiated the loan deal, but then fell behind $215,000 in taxes by May.

Roefaro and Sullivan said they will continue to work with hotel officials on how they can meet the loan demands, but they stressed the need to begin making up some lost ground.

“They’ve got to start paying their money,” Roefaro said.

Roefaro said he can’t estimate when the situation will be resolved, but he has been and will continue meeting with the hotel’s owners to determine a plan as expeditiously as they can.

This is exactly where we were 90 days ago.

No, strike that. This is exactly where we were a year ago, back when Mr. Roefaro was just a candidate. He was mouthing the same "They have to pay, it's not right, something must be done" line then and he still hasn't accomplished anything.

I know the Mayor has had a busy schedule of parties, golf tournaments, and personal appearances, but is it too much to ask that he does some work that doesn't involve swinging a golf club or slurping down cannolis?

Since the crack squad at Utica City Hall can't seem to come up with a plan of action, much less carry one out, I'll offer up my own. It's not like I could do a worse job, right?

First, the city needs to determine if the Hotel Utica is actually a viable business. At this point every indication seems to be that it isn't, but a thorough audit and analysis of it's financial situation would put the question to rest once and for all. One would think the city would have already done this, but history demonstrates it's never a good idea to put any confidence in the capabilities of city workers.

Second, the city has to decide what to do based on the results of the audit. If analysis shows that the Hotel has a snowball's chance in hell of actually meeting it's obligations the city and hotel need to come to an agreement that includes a timeline of operations and regular benchmarks for success. If the audit shows the hotel's business plan won't work, or if the hotel fails to meet the terms of the agreement mentioned above, the only option is foreclosure.

Yes, that's a drastic option, but it's the only one the city has. If the hotel isn't a viable business the sooner the city forecloses, the better. Waiting just makes the process more expensive, since the city's loan liability grows with every passing day.

In the meantime the city needs to start shopping the property around and see how much it could get for it, either from another hotel chain or a business looking for some prime downtown real estate. Call me crazy, but selling off the building go at a fire sale price of one or two million dollars seems like an acceptable, if non-optimal, option. With the outstanding balance of the loan topping six million dollars the city would be in the hole for four million dollars, and that's equal to the interest the city would be paying for the next eight years anyway.

Wasted money? You bet. But we've already wasted millions more on the Hotel Utica and it's time for the fiscal hemmoraghing to stop.

Update: Here's a flashback to what Mr. Roefaro was saying back in 2007:

Hotel Utica's owners have consistently failed to meet loan repayment terms since 2001, and have fallen behind on their taxes the past two years. How should Utica address this situation?

The Hotel Utica situation is a bi-product of both the Hanna and Julian administration that lacked both the commitment to tackle real business issues and the integrity to admit when they made some serious mistakes.

We must give the hotel the opportunity to make good on their debt. However, inevitably if the hotel can't meet their business commitments, foreclosure is the only option. We can't hold just a few businesses to policy and we can not allow tax payers money to finance private interests.