Redevelopment Wrecks: Schnectady, New York

Schenectady, New York

On March 12, 2004, the $12.5 million, 14-screen Diamond Cinema project at State and Clinton streets died when the owner and developer of the proposed project, Joe Tesiero of Riverfront Cinema, backed out.  Without having a signed contract with Riverfront Cinema, the Schenectady Metroplex Development Authority (SMDA) spent approximately $3.7 million acquiring nine parcels of property for the theater and preparing the site.  Tesiero claims he abandoned the project due to ongoing conflicts over parking and security.  Meanwhile, the developer received a loan from M&T Bank for approximately $1 million less than he expected.  Tesiero asked SMDA to make up the difference, but the development authority balked at making up the shortfall in financing.  It immediately became a textbook redevelopment disaster that left the City with a $3.7 million hole in the ground.[1]

Besides the vacant property that sat lifeless for months, the constant road construction on State Street hurt even more local businesses.  In March 2005, John Camaj, the owner of Pizza King at 469 State Street, said that the construction aimed at giving State Street a makeover kept customers away from his small business, which was already struggling to survive on the City’s main strip.[2]

The City is reportedly struggling financially; in January 2004, Schenectady faced an immediate budget gap of more than $550,000 and a structural deficit close to $9 million.  Moody’s Investors Service downgraded the City’s bond rating in November 2003, making it more expensive for the government to borrow money for capital projects, let alone throw around millions of dollars for unsecured development.[3]  City officials breathed a sigh of relief when Schahet Hotels Inc. agreed to buy the theater site from Metroplex for $100,000 and build a five-story Hampton Inn.[4]  The hotel is still being built, and construction is expected to finish in 2007.  It remains unclear whether the City will completely recover from the damage done by the project.  What is clear is that tax-hungry bureaucrats have already destroyed functioning small businesses for a development that cost millions in taxpayer funds—and maybe even more in foregone tax revenue, while land sat vacant awaiting another developer to come along.[5]

[1] “Diamond Cinema Project Dead; Happy Ending Eludes Developer,” The Business Review  (Albany, NY), March 19, 2004, at Vol. 30 No. 51 Pg. 4.

[2] Mike Goodwin, “Opportunity Ends, But Not Hopes; Schenectady Officials Weigh New Plans After Downtown Movie Theater Deal Falls Apart,” The Times Union (Albany, NY), March 16, 2004, at MAIN A1.

[3] “The New Face Of Economic Development at Metroplex,” The Business Review (Albany, NY), Jan. 30, 2004, at Vol. 30 No. 44 Pg. 1.

[4] Robin Wood, “Schenectady Lands Hampton Inn for Proctor’s Block,” TheBusiness Review  (Albany, NY), Oct. 1, 2004, at Vol. 31 No. 26 Pg. 3.

[5] “Groundbreaking Planned for Schenectady Hotel,” The Business Review (Albany, NY), December 13, 2005.