Carousel Ctr. Co., L.P. v City of Syracuse

[*1] Carousel Ctr. Co., L.P. v City of Syracuse 2006 NY Slip Op 50330(U) [11 Misc 3d 1061(A)] Decided on March 10, 2006 Supreme Court, Onondaga County Centra, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 10, 2006
Supreme Court, Onondaga County

Carousel Center Company, L.P. and PYRAMID COMPANY OF ONONDAGA, Petitioners-, Plaintiffs, For a Judgment Under Article 78 of the Civil Practice Laws and Rules of the State of New York, and for Declaratory Judgment .

against

The City of Syracuse, MATTHEW J. DRISCOLL, as Mayor of THE CITY OF SYRACUSE, SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, IRWIN DAVIS, as Chairman of the SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, TERRI BRIGHT, E. CARLYLE SMITH, GARY PICKARD, and VITO SCISCIOLI, as Members of the Board of the SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, JOHN C. GAMAGE, as Commissioner of Assessment for THE CITY OF SYRACUSE, THE COUNTY OF ONONDAGA, and M. ANN CIARPELLI, as the CLERK OF THE COUNTY OF ONONDAGA, Respondents-, Defendants.



05-7123



ROBERT J. SMITH, ESQ.

COSTELLO, COONEY & FEARON, PLLC

Attorneys for Petitioners/Plaintiffs

205 S. Salina Street

Syracuse, NY 13202

TERRI BRIGHT, ESQ.

CORPORATION COUNSEL

Attorneys for Respondents/Defendants City of Syracuse, Matthew J. Driscoll, as Mayor of the City of Syracuse, and John C. Gamage, as Commissioner of Assessment for the City of Syracuse

300 City Hall

Syracuse, NY 13202

MARK R. McNAMARA, ESQ.

HISCOCK & BARCLAY, LLP

Attorneys for Respondent/Defendant SIDA, Irwin Davis, as Chairman of SIDA, Terri Bright, E. Carlyle Smith, Gary Pickard, and Vito Sciscioli, as Members of the Board of SIDA

One Park Place

P.O. Box 4878

Syracuse, NY 13221-4878

ANTHONY RIVIZZIGNO, ESQ.

COUNTY ATTORNEY

Attorneys for Respondent/Defendant County of Onondaga and M. Ann Ciarpelli, as the Clerk of the County of Onondaga

421 Montgomery Street

Syracuse, NY 13202

John V. Centra, J.

Petitioner-Plaintiff Carousel Center Company, L.P. (hereinafter "Carousel") is the current owner of a Syracuse, New York shopping center (hereinafter "Carousel Center") as a result of an assignment from Petitioner-Plaintiff Pyramid Company of Onondaga (hereinafter "PCO"), the developer of Carousel Center (Petitioners-Plaintiffs hereinafter collectively "Developers"). In 1988, PCO entered into an agreement for Payment in Lieu of Taxes (hereinafter "1988 PILOT Agreement")[FN1] with Respondent-Defendant Syracuse Industrial Development Agency (hereinafter "SIDA") and Respondent-Defendant The City of Syracuse (hereinafter "the City") in connection with the construction and financing of the Carousel Center.

As a result of the 1988 PILOT Agreement, the Carousel Center property became exempt from real property taxation pursuant to section 874 of the General Municipal Law and section 412-a of the Real Property Tax Law (hereinafter "RPTL §412-a"). The 1988 PILOT Agreement provides that as long as SIDA owns Carousel Center, it will be assessed as exempt. Title to the Carousel Center remained in SIDA from 1988 until December 2005 when SIDA transferred ownership of the Carousel Center to Developers.

On October 17, 1995, the 1988 PILOT Agreement was reformed and amended through a Second Amended and Restated PILOT Agreement (hereinafter "1995 PILOT Agreement")[FN2]. On that same day, PCO and SIDA entered into a Second Amended and Restated Sale Agreement (hereinafter "1995 Sale Agreement")[FN3] wherein they agreed that title to the Carousel Center property had been conveyed to SIDA and set forth terms and conditions governing the reconveyance of the title to PCO.

Beginning in the late 1990s, PCO proposed to construct a major expansion of the existing Carousel Center as part of an overall project entitled "DestiNY USA". Over the next few years, a [*2]new PILOT agreement (hereinafter "DestiNY USA PILOT")[FN4] was drafted. The DestiNY USA PILOT was designed to allow the financing and construction of the expansion project. It was negotiated and approved in various forms by both the Common Council of the City and the Legislature of Respondent-Defendant The County of Onondaga (hereinafter "the County").

On January 22, 2002, the City enacted Ordinance No. 32 of 2002 (hereinafter "Ordinance 32")[FN5] to facilitate the development of the expansion. Ordinance 32 requires Respondent-Defendant Matthew J. Driscoll, as Mayor of the City of Syracuse (hereinafter "the Mayor"), to execute certain documents necessary to effectuate the development of the expansion, providing eight contingencies, identified as (a) through (h), set forth in Ordinance 32 were satisfied. The City has conceded that four of those contingencies, (a), (b), (g) and (h), have been met. At issue within this lawsuit is whether contingencies (c), (d), (e), and (f) have been satisfied.

On February 4, 2002, the County adopted Resolution No. 15 of 2002 (hereinafter "Resolution 15")[FN6] which sets forth contingencies almost identical to those contained in Ordinance 32. On October 11, 2005, the County advised the City that all the conditions precedent to the County's approval of the alternative allocation of PILOT payments under the County's legislation had been satisfied or would be satisfied upon the issuance of certain bonds by SIDA.[FN7]

Developers contend that on December 28, 2005, they closed on financing through various lenders and Citigroup Global Markets Realty Corp., as agent for those lenders, (hereinafter collectively "Citigroup") for $785 million in connection with the project, including financing for construction totaling $375 million for the first phase consisting of approximately 848,000 square feet of leasable area. An integral part of that financing is issuance of PILOT-backed SIDA bonds (hereinafter "2000 SIDA bonds") using a revenue stream created by the DestiNY USA PILOT Agreement agreed to in Ordinance 32 and Resolution 15.

By the instant action, Developers contend that each of the contingencies in Ordinance 32 has been fully met but that the Mayor has refused to acknowledge the satisfaction of the contingencies and has refused to perform the duties enjoined by Ordinance 32. Their first cause of action seeks a judgment declaring that the contingencies in Ordinance 32 have been satisfied and that the Mayor is obligated to perform the duties set forth in the ordinance, i.e., to execute and deliver the DestiNY USA PILOT Agreement and to perform such other duties as are set forth in the Ordinance.

The second cause of action seeks mandamus pursuant to CPLR 7806. Developers contend that each of the contingencies set forth in Ordinance 32 has been met, they have demanded that the Mayor execute and deliver the DestiNY USA PILOT Agreement and perform such other duties as are enjoined upon him by Ordinance 32, and the Mayor has failed and refused to perform such legal duty enjoined upon him by law. They seek an order and judgment from this court mandating the Mayor to comply with his obligation pursuant to Ordinance 32 to enter into, execute and deliver the DestiNY USA PILOT Agreement and to perform such other duties as are set forth in the Ordinance.

In their third cause of action, Developers claim that the 1995 Sale Agreement precludes SIDA from reconveying the Carousel Center property to PCO prior to November 15, 2007 unless PCO makes a written request to SIDA for a prior transfer. Further, they argue that pursuant to the 1995 PILOT Agreement, SIDA may only convey the property back to Developers upon thirty days notice to PCO if there is an event of default which remains uncured. Developers maintain that despite the prohibition against SIDA reconveying the property prior to an event of default or a request from PCO, SIDA improperly tendered a deed to the Carousel Center property to PCO on December 27, 2005. Developers seek a judgment declaring the rights of the parties under the 1995 Sale Agreement as follows: that any attempted reconveyance by SIDA of the Carousel Center property and/or any attempted recordation of a deed of reconveyance violates the express terms of the 1995 Sale Agreement, constitutes a breach of contract by SIDA, is an act in excess of jurisdiction, without lawful authority, ultra vires, and null and void; further enjoining and restraining SIDA from attempting to reconvey the Carousel Center property or tendering the deed or other documentation, directly or indirectly, to the County Clerk of the County of Onondaga for the purposes of recordation; and further enjoining and restraining the County Clerk from accepting any such papers for filing or expunging such papers nunc pro tunc if such recording and filing has already occurred.

In their fourth cause of action, Developers maintain that Defendant-Respondent John C. Gamage, As Commissioner of Assessment for the City (hereinafter "Commissioner Gamage") has indicated that he intends to prepare a taxable assessment for the Carousel Center for the City's 2006/2007 assessment roll in anticipation of termination of the property's current exempt status. They seek a judgment declaring that any actions by Commissioner Gamage to place the Carousel Center on the City's taxable assessment roll for the 2006/2007 assessment roll are illegal, unauthorized and in excess of jurisdiction.

The City answered and moved for dismissal of this action pursuant to CPLR 3211(a)(1), (a)(5), and (a)(7). Upon the request of Developers, this court converted that CPLR 3211 motion from a motion to dismiss to a motion for summary judgment pursuant to CPLR 3211(c). The City's only objection concerned the amount of time that it had to respond to any cross-motion brought by Developers. The court notes that, despite this court's denial of the City's request for more time within which to answer, the City was able to submit sizable and comprehensive papers in response to the motion for summary judgment brought by Developers. All parties have proceeded on the premise that all motions seek summary judgment.

As a ground for dismissal, the City contends that the first cause of action involves a nonjusticiable controversy. The City argues that the determination as to whether the contingencies within Ordinance 32 have been satisfied rests with the Mayor. The City claims that there is no specific standard of conduct set out in the Ordinance that must be followed by the Mayor in determining whether the contingencies have been met. Accordingly, the City maintains that this Court does not possess the authority to review and rule on the issue of whether the contingencies set forth in the Ordinance have been met.

In addition, the City posits that the first cause of action should be dismissed on the merits because the construction loan that Developers seek to utilize for the Carousel Center expansion is financed by PILOT payments. As such, the City contends that the loan violates Article VIII, section 1 of the New York State Constitution which bars the City from giving or loaning any money or [*3]property to a private corporation or private undertaking. The City claims that because the construction loan is to be financed in part by the issuance of the 2000 SIDA bonds and the bonds are to be paid off by PILOT payments which the City and County are giving to SIDA, the bonds will finance the construction of various aspects of the Carousel Center expansion. The City argues that the use of PILOT payments to finance construction of the actual Carousel Center expansion is a use of money belonging to the City to aid a private corporation, and, thus, the construction financing must have a structure in place which will protect against an unconstitutional gift of money by the City and County directly to SIDA and indirectly to Developers.

The City's motion to dismiss the second cause of action rests on the ground that mandamus is not an appropriate remedy where the petition fails to state any legally required duty that the Mayor has not performed and where Developers have not met the conditions necessary to the issuance of the 2000 SIDA bonds. The City argues that mandamus is available to compel the performance of a ministerial act only and that acts that involve the exercise of discretion, such as in the case here, are not legally required acts and may not be compelled by a court in an action for mandamus.

The City's motion to dismiss the fourth cause of action[FN8] is based on the fact that all of the exhibits produced in support of this action establish that the Carousel Center is not exempt from taxation. Further, the City maintains that the 1995 Sale Agreement is not binding on the City, including Commissioner Gamage, because the City never signed the agreement and the only way the terms of the 1995 PILOT Agreement could be amended was in a writing signed by the City, SIDA and the Developers, something that never occurred. The City also contends that this cause of action should be dismissed because the 1995 Sale Agreement's purported attempt to extend the PILOT term for the Carousel Center to November 15, 2007 is contrary to the language in the 1995 PILOT agreement signed by Developers, SIDA and the City and is contrary to the specific intent of those parties.

Furthermore, as to the fourth cause of action, the City points out that Real Property Tax Form 412-a lists the tax exemption of the Carousel Center as expiring on December 31, 2005. The City asserts that this shows conclusively that it was proper for the Carousel Center to go back on the City's tax rolls on January 1, 2006.

Additionally, the City argues that the first, second, and fourth causes of action should be dismissed because the City's documentary evidence conclusively establishes a defense as a matter of law. The City contends that although contingency (f) requires a closing on construction financing for 800,000 square feet of leasable area, this has not been accomplished.

SIDA also moved to dismiss this action. It is SIDA's position that Developers are not entitled to the relief they seek against SIDA because SIDA is not authorized to issue bonds without first receiving the DestiNY USA PILOT Agreement signed by the Mayor. Further, SIDA contends it properly conveyed title to Carousel Center because the 1995 PILOT Agreement had expired, Developers could no longer make the PILOT payments required under the 1995 Sale Agreement, and their default triggered SIDA's right to reconvey the premises. Because the purposes of the 1995 Sale Agreement had been fulfilled, it is SIDA's position that the Carousel Center is no longer exempt from real property taxes pursuant to the 1995 PILOT Agreement and RPTL §412-a. In addition, [*4]SIDA argues that the terms and conditions in their resolution approving the issuance of the 2000 SIDA bonds were not satisfied.

Thereafter, Developers cross-moved for summary judgment. Their cross-motion seeks a judgment (1) declaring that the conditions of Ordinance 32 have been met and that the Mayor is required to execute and deliver the DestiNY PILOT Agreement and related documents; (2) directing that the Mayor execute and deliver the DestiNY PILOT Agreement and related documents pursuant to CPLR 7806; (3) declaring that any attempted conveyance of the Carousel Center by SIDA to Developers is barred pursuant to the terms of the 1995 Sale Agreement; (4) declaring that any attempts by Commissioner Gamage to place Carousel Center on the City's tax rolls are barred; and (5) declaring and directing that Respondents-Defendants execute all documents and instruments necessary to implement Ordinance 32.

The City's motion to dismiss raises issues concerning this court's authority to determine the substantive issues addressed in the summary judgment motions. Those issues are whether the causes of action are justiciable and whether mandamus lies under the facts at bar. The court finds that these issues are best addressed by the standard used in a CPLR 3211(a) motion.

"On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction (see, CPLR 3026). [The court must] accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." Leon v. Martinez, 84 NY2d 83, 87-88 (1994). This court will determine the issues of justiciability and mandamus before deciding the substantive issues raised by the summary judgment motions.

JUSTICIABILITY

The court must first determine whether the controversy before it is justiciable. "Justiciability is an untidy' concept but it embraces the constitutional doctrine of separation of powers and refers, in the broad sense, to matters resolvable by the judicial branch of government as opposed to the executive or legislative branches or their extensions". Jiggetts v. Grinker, 75 NY2d 411, 415 (1990).

The City argues that the matter before this court is nonjusticiable because the determination as to whether the contingencies within Ordinance 32 have been satisfied rests with the Mayor and that there is no specific standard of conduct set out in the Ordinance that must be followed by the Mayor in determining whether the contingencies have been met.

The pertinent language in Ordinance 32 is as follows: "BE IT ORDAINED that, upon satisfaction . . . of the contingencies set forth . . ., the Mayor, . . . shall enter into, execute and deliver the PILOT Agreement(s) and such other documentation as may be required, including the execution and delivery from time to time of further PILOT Agreements . . ." (emphasis supplied).

"If the legislation in question established a standard of conduct which executive officers must meet unless or until the legislative body changes it, a dispute over compliance is generally considered justiciable because the courts can compel performance of the statutory command". Natural Resource Defense Council v. New York City Dept. Of Sanitation, 83 NY2d 215, 220 (1994). "The use of the verb shall' . . . in the pertinent provision[] illustrates the mandatory nature of the duties contained therein." Id.

In Natural Resource Defense Council, the Court of Appeals found that the court below properly granted "a judgment ordering respondents to comply with their nondiscretionary legally [*5]mandated duties to substantially comply with the provisions of the New York City Recycling Law, Local Law 19'" because "the record clearly established that respondents had purposely failed to meet the mandatory dictates of Local Law No. 19". Id. at 219.

In the instant case, Developers contend that the Mayor has purposely failed to execute the documents as mandated by the Ordinance. As in Natural Resource Defense Council, should the record clearly demonstrate that the City, through its Mayor, purposely failed to meet the mandates of the Ordinance, Developers are entitled to a forum within which to address this issue.

Accordingly, the court finds that it possesses the authority to review and rule on the issue of whether the contingencies set forth in Ordinance 32 have been met. The court denies the motion brought by the City to dismiss the first cause of action on the ground that the issue is not justiciable.

MANDAMUS

The second cause of action brought by Developers seeks an order and judgment in the nature of mandamus to compel. "Mandamus lies to compel the performance of a purely ministerial act where there is a clear legal right to the relief sought". Legal Aid Society of Sullivan County, Inc. v. Scheinman, 53 NY2d 12, 16 (1981). A "proceeding in the nature of a mandamus to compel is available where, as here, the petitioners have demonstrated a clear legal right to require public officials to perform a duty enjoined upon them by the [Ordinance]". New York Public Interest Research Group v. Dinkins, 83 NY2d 377, 386 (1994).

"While a mandamus is an appropriate remedy to enforce the performance of a ministerial duty, it is well settled that it will not be awarded to compel an act in respect to which the officer may exercise judgment or discretion". Matter of Gimprich v. Board of Educ., 306 NY 401, 406 (1954). However, "[c]ompliance with almost any statutory directive will involve some measure of discretion exercised by those implementing its terms, but this will not render nonjusticiable a claim which asks the courts to compel compliance with a statute that is otherwise mandatory on its face. Mandamus may compel acts that officials are duty-bound to perform, regardless of whether they may exercise their discretion in doing so'". Klostermann v. Cuomo, 61 NY2d 525, 540 (1984).

The execution of the DestiNY USA PILOT Agreement and other documents is a ministerial act to be performed by the Mayor, provided all contingencies of Ordinance 32 are met. Thus, as judged by the standards of CPLR 3211(a), Developers have stated a valid cause of action. See Leon v. Martinez, supra. Because this court possesses the authority to review and rule on the issue of whether the contingencies set forth in Ordinance 32 have been met, it can determine whether mandamus should be granted to compel the Mayor to execute the required documents under Ordinance 32. Accordingly, the City's motion to dismiss the cause of action seeking mandamus on the ground that this court lacks the authority to determine this issue is denied.

FIRST CAUSE OF ACTION SEEKING DECLARATORY JUDGMENT:

As aforestated, the first cause of action seeks a judgment declaring that the contingencies in Ordinance 32 have been satisfied. It also seeks a judgment declaring that the Mayor is obligated to execute and deliver the DestiNY USA PILOT Agreement and to perform such other duties as are set forth in that Ordinance.

As a substantive basis for summary judgment dismissing this cause of action, the City contends that it has shown by documentary evidence that contingencies (c), (d), (e) and (f) in Ordinance 32 have not been met. In response, and as grounds for summary judgment in their favor, Developers state that they have established that all contingencies have been met and that they have [*6]fully complied with Ordinance 32.

The major point of contention between the parties is whether contingency (f) has been met. Compliance with the other contingencies hinges upon the satisfaction of contingency (f). Accordingly, this court will first address contingency (f) prior to addressing whether the other contingencies have been satisfied.

Contingency (f)

Contingency (f) requires a closing to have occurred (or to occur simultaneously with issuance of the 2000 SIDA bonds) on financing for construction of that portion of the proposed Carousel Center expansion to be constructed by PCO which, when added to any portions which are to be constructed by occupants of the proposed Carousel Center expansion, totals at least 800,000 square feet of leasable area, including all security required by such financing, together with the execution and delivery of a guarantee of completion for such square footage in favor of SIDA. Developers contend that the closing on financing has taken place. The City disagrees.

According to the City, one of the reasons that Developers have not satisfied this contingency is that their construction loan through Citigroup is financed by PILOT payments. The City argues that, as such, the construction loan violates Article VIII, §1 of the New York State Constitution which bars a municipality from giving or loaning any money or property to a private corporation or private undertaking. It is the City's position that, because the construction loan is to be financed in part by the issuance of bonds by SIDA and the bonds are to be repaid by PILOT payments which the City and the County are giving to SIDA, the bonds will finance the construction of various aspects of the Carousel Center expansion. The City maintains that the use of money belonging to the City to aid a private corporation, i.e., Developers, is improper. The City contends that the disbursement of City money must be carefully monitored to ensure that it is not being used to build portions of a privately owned retail mall which would not be constitutionally permitted; thus, the construction financing must have a structure in place which will protect against an unconstitutional gift of money by the City and County directly to SIDA and indirectly to Developers. The City posits that as a matter of law, Developers' construction financing cannot satisfy contingency (f) because the structure may well violate Article VIII, §1 of the New York State Constitution.

As to this issue, the court finds, first, that the City had addressed the constitutionality of using the SIDA bond money which was to be paid off by the use of PILOT funds in 2002. The City sent a letter to the Developers in which it expressed its agreement with opinions from outside counsel and SIDA's counsel that the savings clause in Ordinance 32 which provides that "no portion of the PILOT Payments shall be used in a manner contrary to law" is sufficient to withstand any constitutional or statutory challenge to Ordinance 32.[FN9] Next, the original Carousel Center was built with the use of SIDA-issued bonds. The court is unaware of any constitutional issues or challenges that were raised by the City in that earlier phase.

Further, there is no question that the expansion of the Carousel Center is a public project and that SIDA has already declared that DestiNY USA is a project that will serve the public purposes of the New York State Industrial Development Agency Act. [FN10] There is no reason to doubt that SIDA will properly monitor the way in which the money will be used, and, in fact, SIDA's attorney [*7]admitted at oral argument of these motions that there is a protection or a mechanism that would at least assist the concerns that the funds are being properly utilized.[FN11] The City has failed to come forth with any evidence that would demonstrate that SIDA is incapable of monitoring the use of the funds for the expansion of the Carousel Center. The court finds that the City is merely speculating as to what might occur.

The City also seeks dismissal on the ground that although contingency (f) requires a closing on construction financing for 800,000 square feet of leasable area, this has not been accomplished because for a closing of a construction loan to occur, there must be an irrevocable commitment by the lender to finance the construction project. On December 17, 2004, the City approved Developers' construction financing through Deutsche Bank Trust Company Americas and Deutsche Bank Securities, Inc. (hereinafter collectively "Deutsche Bank"). On December 28, 2005, Developers refinanced their construction loan through Citigroup. The City posits that Citigroup has not made an irrevocable commitment to finance the expansion project. In the City's view, the construction loan contains a number of unusual conditions precedent before the lender has to finance the project.

In support of this position, the City's expert, Philip Kozloff, states in his affidavit that a closing has not occurred under the Citigroup construction loan agreement because there are factors which would not be characteristic of a normal construction loan closing as follows: (1) no "at-risk" monies have been advanced under the Citigroup construction loan agreement, which agreement permits Citigroup to unilaterally recover any funds advanced unless certain conditions are met, and (2) the Citigroup construction loan agreement contains significant and unusual conditions precedent to the actual commencement of financing of construction of the project including (a) the future completion of certain condemnation proceedings, (b) the future execution and delivery of a construction contract in a form and with a contractor satisfactory to the lenders, (c) the future approval by the lenders of a final construction budget, and (d) the future issuance of the SIDA bonds and the availability of the bond proceeds to fund the costs of constructing certain portions of the project in contravention of the usual practice of having all funds required for the construction committed by a reputable financial institution.

Although Developers contend that the Citigroup loan is for $375 million, Mr. Kozloff states that the actual Citigroup construction loan amount is $155 million. He calculates this number by subtracting from the Citigroup construction loan of $375 million, mandatory reductions in the aggregate amount of $220 million (consisting of an Escrow Deposit of $11,536,290, an Equity Escrow Deposit of $28,463,710, PILOT Funds Recap Account Deposit of $90 million and PILOT Funds Construction Account of $90 million).

Mr. Kozloff has compared the prior financing through Deutsche Bank with the Citigroup construction loan agreement and concluded that, in contrast to the Citigroup construction loan agreement, the Deutsche Bank agreement did not include unsatisfied closing conditions for a final construction budget or the availability of bond proceeds to fund specific portions of the construction project. It is Mr. Kozloff's opinion that (1) the available principal loan amount of the Deutsche Bank loan was $340 million whereas the principal amount of the Citigroup loan is no more than $155 million with an integral part of that financing being issuance of the PILOT-backed SIDA bonds, [*8]which bonds are a condition precedent to the advancement of loan proceeds under the Citigroup construction loan agreement and result in a mandatory reduction in the stated loan amount, and (2) at the closing of the Deutsche Bank loan, $13 million was advanced by Deutsche Bank as opposed to no funds having been advanced by the Citigroup loan (other than the $11.5 million placed in an escrow account to be released solely upon the satisfaction of the above-enumerated closing conditions). Thus, according to the City, the documents conclusively establish that Developers have not closed on construction financing as required by contingency (f).

Developers maintain that they are entitled to summary judgment on this issue because the date set in Ordinance 32 for closing on financing was on or before December 20, 2004. They argue that the City admits that the Deutsche Bank financing in the amount of $340 million satisfied the requirements of contingency (f). They contend that the City does not dispute that the ordinance permits Developers to refinance the Deutsche Bank financing, that the Citigroup financing constitutes a refinancing, or that the amount of the refinancing is $375 million. Developers claim, therefore, that they have been in continuous compliance with contingency (f) since December 17, 2004 when the Deutsche Bank financing closed and that contingency (f) is, therefore, satisfied.

As further proof of compliance with contingency (f), Developers have submitted the affidavit of the lead transaction counsel for the issuance of the SIDA bonds, Kevin Sheridan, Jr., Esq., who states that the requirements of contingency (f) are: (1) a closing must occur for financing of construction of at least 800,000 square feet of leasable area and (2) a guarantee of completion must be delivered in favor of SIDA for such 800,000 square feet of leasable area. Developers submit that because (1) the City has already approved the Deutsche Bank financing, (2) there is no requirement that any replacement financing must be equal to or better than the Deutsche Bank financing (as contended by the City), and (3) a guarantee of completion has been delivered in favor of SIDA, contingency (f) has been satisfied.

Developers contend that, in exchange for a commitment to build at least 800,000 square feet of leasable area, the City and the County agreed to forego receipt of PILOT payments pursuant to General Municipal Law §858(15) and SIDA would act as the conduit issuer to finance the PILOT payment stream to be paid to it through one or more PILOT bond offerings. It is Developers' position that while the financing agreements under the Deutsche Bank loan and the Citigroup loan are not identical, the structure and operation of the two agreements are compatible and each dictates the same result under Ordinance 32, including the integration of PILOT bond proceeds.

Mr. Sheridan notes that the same substantive requirements that Mr. Kozloff finds fault with in the Citigroup financing are also in the Deutsche Bank financing. For example, (1) there are "at risk" monies of Citigroup because Citigroup has paid $11.5 million using the same structure as used in the approved Deutsche Bank financing; (2) the Deutsche Bank financing contained an even more restrictive condition regarding the future completion of the aforementioned condemnation proceedings; (3) the Deutsche Bank financing contained the same condition regarding future execution and delivery of a construction contract; (4) the Deutsche Bank financing contained the same condition regarding future approval of a final construction budget; and (5) the Deutsche Bank financing addressed the impact of bond issuances in a similar manner.

Mr. Sheridan points out that the Citigroup loan contemplates a construction budget for the first phase of the project of $375 million and provides four primary sources of funding: (1) $40 million of equity funded by PCO, (2) $155 million of construction loans to be advanced by Citigroup, subject to increase if the bond proceeds are less than $180 million, (3) $90 million of [*9]SIDA bond proceeds which could be applied to construct certain portions of the first phase of the project, and (4) $90 million of SIDA bond proceeds which could be applied to reimburse PCO for a portion of the costs incurred by PCO in furtherance of the project. Under the terms of the loan agreement, if the SIDA bond proceeds are less than $180 million, Citigroup is obligated to advance any shortfall in the total funds available up to $375 million, subject only to the proffer of additional collateral by PCO to Citigroup.

Additionally, Mr. Sheridan observes that the Deutsche Bank loan includes a provision of default if the SIDA bonds proceeds were not applied to pay project costs directly or to repay the outstanding loan. He states that the total principal amount of loans permitted to be outstanding under the Deutsche Bank loan could not exceed $160 million which would result in a $35 million shortfall to the project budget.

Furthermore, the architect for the expansion of the Carousel Center has opined that the projected reasonable cost of the construction of the 800,000 square feet of leasable area is $193 million. Based on this figure, he has determined that the amount of financing provided in the Citigroup construction loan is sufficient for this project.

Although not binding on this court, the County has taken the position that Developers have met the construction financing condition in both Resolution 15 and Ordinance 32 when Developers closed on financing on December 17, 2004 with Deutsche Bank. It is also the County's opinion that the Citigroup financing satisfies both Resolution 15 and Ordinance 32 as demonstrated by their October 11, 2005 letter advising that all conditions precedent to the County's approval of the alternative allocation of PILOT payments under the County's legislation had been satisfied or would be satisfied upon the issuance of the 2000 SIDA bonds[FN12]. The County has indicated that it remains ready, willing, and able to move forward with Developers, the City and SIDA and to bring the Carousel Center expansion project to conclusion. In addition, Citigroup has confirmed by letter dated January 5, 2006, that Citigroup has closed and funded as of December 28, 2005, a $375 million construction loan relating to the expansion of the Carousel Center.[FN13]

Quite often, when faced with two expert opinions, a court will determine that there is a question of fact that requires a hearing. However, in this case, the court finds that reliance on the experts' opinions is unnecessary and that there is no question of fact raised by the papers. The documents are clear and speak for themselves.

There is no doubt that the City previously approved the Deutsche Bank loan as meeting contingency (f).[FN14] Accordingly, the court has used the terms of the Deutsche Bank loan as the benchmark that must be met by the Developers in determining whether the new financing through Citigroup was also satisfactory. If the court finds that the financing through Citigroup significantly deviates adversely from the approved financing through Deutsche Bank, then this court must find that the Mayor correctly determined that contingency (f) was not met and properly declined to execute the DestiNY USA PILOT and related documents. If it does not, then this court must find that the Mayor wrongfully determined that contingency (f) was not met and improperly declined to [*10]execute the DestiNY USA PILOT and related documents.

Upon a review and comparison of the Deutsche Bank construction loan documents and the Citigroup construction loan documents, this court finds the following regarding the issues raised by the City:

(1) "At risk" monies: The Deutsche Bank loan agreement provides in section 2.1.2(a) that on the closing date, it would make an advance in the amount of $11,536,290. The Citigroup loan agreement provides in sections 2.13(a), 3.1(t) and 2.1(d) that it would establish an escrow account in the amount of $11,536,290 to be funded by Developers which would be used as a first advance.[FN15]

(2) Future completion of condemnation proceedings: The Deutsche Bank loan agreement provides in section 4.1.1(d) that as a condition precedent to the second advance of money, Developers were required to complete all proceedings, without limitation, relating to the transfer of the Carousel Center tenants' interests in their leaseholds. The Citigroup loan agreement provides in section 3.4(l) that prior to the first escrow account advance, the Carousel Center tenants' interests in their leaseholds must have been taken.[FN16]

(3) Future execution and delivery of construction contract: The Deutsche Bank loan agreement provides in section 4.1.1(j) that Deutsche Bank shall have received, reviewed and approved, in its sole discretion, the general contractor agreement and the general contractor consent. The Citigroup loan agreement provides in section 3.4(m) that, by not later than the ninetieth day following the Closing Date, Citigroup shall have received, reviewed and approved, in its sole discretion, the construction management agreement and the construction manager consent.[FN17]

(4) Future approval of final construction budget: The Deutsche Bank loan agreement provides in sections 4.1.2(n) that Deutsche Bank was to receive an updated budget and anticipated cost report for the project approved by Deutsche Bank, in its sole discretion. The Citigroup loan agreement provides in sections 3.4(o)(i) and 3.5 (n) and (o) that Citigroup was to receive the budget, in form and substance satisfactory to it in its sole discretion, which budget was to be certified by an officer's certificate, and further, Citigroup was to receive an updated budget, with respect to the first advance only, approved by Citigroup in its sole discretion, and, thereafter, reasonably approved by Citigroup for anticipated costs to complete the construction of the required improvements.[FN18]

(5) Future issuance of SIDA bonds and availability of bonds: The Deutsche Bank loan agreement provides in sections 15.2, 15.3 and 18.1(a)(xxiv) that in the event that SIDA bonds are available, Developers will cause the bonds to be paid to Deutsche Bank in prepayment of the loan, an amount equal to the advances previously made for public improvement costs, and the maximum aggregate loan amount will be reduced as a result of the prepayments by a minimum amount of $75 million. The Citigroup loan agreement provides in sections 3.4(f), 2.13(d) and (e), and 2.19 that the SIDA bonds proceeds are to be deposited into the construction account, and, if the proceeds are less than $180 million, Developers must deposit into the equity account the difference between $180 [*11]million and the amount of funds deposited as a result of the SIDA bonds into the construction account and grant to Citigroup liens on additional collateral for the loan in form and amount satisfactory to Citigroup in its sole discretion.[FN19]

This court hereby determines that the restrictions and conditions associated with the Citigroup construction loan are not significantly different from those associated with the Deutsche Bank construction loan. For example, each financing document contemplates the use of $11.5 million dollars of "at risk" money. With Deutsche Bank, the money was advanced as part of the loan proceeds; with Citigroup, the money was advanced as part of an escrow account funded by Developers. In either case, Developers have $11.5 million of at risk money as a first advance.

As to the future completion of condemnation proceedings, the court finds that there is little practical distinction between the two provisions. Although the Deutsche Bank loan requires a more restrictive, and perhaps protective, result from the condemnation proceedings, from a practical standpoint, it is inconceivable that Citigroup would jeopardize its collateral without assuring itself that the condemnation proceedings will successfully result in a benefit to the expansion of Carousel Center.

Further, as to the future execution and delivery of the construction contract, the language in the two financing documents is practically identical. Each requires that the lender receive, review and approve, in its sole discretion, the general contractor or construction management agreement and the general contractor or construction manager consent.

In addition, regarding the future approval of the final construction budget, once again, the language in the two financing documents is practically identical. Each was to receive an updated budget and anticipated cost report. These were to be approved by Deutsche Bank, in its sole discretion. The Citigroup loan agreement only required approval, in its sole discretion, for the first advance. Thereafter, Citigroup had to reasonably approve the anticipated costs to complete the construction.

Finally, as to the SIDA bonds issuance, under the Deutsche Bank financing arrangement, it was anticipated that the issuance of the SIDA bonds would result in $180 million and that the receipt of the SIDA bonds monies had to first go to repay the Deutsche Bank loan. Under the Citigroup financing arrangement, it is also anticipated that the issuance of the SIDA bonds will result in $180 million; however, Citigroup has agreed to lend additional monies to Developers, with security of liens on additional collateral, up to any shortfall of the amount that was anticipated by the bonds. The court finds no significant detriment to any of the parties in this arrangement.

This court finds that Developers delivered a guarantee of completion dated December 28, 2005 in favor of SIDA to Citigroup. Thus, based on the above, the court determines that approval of the Citigroup loan should have occurred, the Mayor wrongfully determined that contingency (f) was not met as a result of the refinancing, and the Mayor improperly declined to execute the DestiNY USA PILOT.

Although this court disagrees with the City's assessment that only $155 million of available financing is available under the Citigroup construction loan, this court finds that the $155 million, when added to the $40 million of monies in the escrow account, will provide sufficient funds available for the expansion project costs as projected by their architect. [*12]

Based on the above, this court determines that Developers have satisfied contingency (f).

Contingency (c)

Contingency (c) requires the adoption of a resolution by SIDA authorizing issuance and sale of the 2000 SIDA bonds. SIDA has already adopted its resolution on October 8, 2002. SIDA can only issue the 2000 SIDA bonds upon execution and delivery by the City of the DestiNY USA PILOT Agreement. This court agrees with SIDA that the conditions to issuance of the 2000 SIDA bonds were not satisfied as of December 31, 2005 because the Mayor had not signed the DestiNY USA PILOT Agreement. Because this court finds that the financing with Citigroup met the requirements of contingency (f), the Mayor should have signed the DestiNY USA PILOT Agreement. Had the Mayor signed the DestiNY USA PILOT Agreement, there would have been no impediment to SIDA issuing and selling the 2000 SIDA bonds.

SIDA has argued that the conditions of its resolution were not satisfied. However, SIDA's Vice Chairman, Vito Sciscioli, has stated that SIDA's approval of the expansion of the Carousel Center and the grant of "financial assistance" to that expansion "remains in full force and effect and [SIDA] remains committed to assisting PCO with financing and construction of [the expansion]. . . . Other than issuance of SIDA Bonds secured by PILOT payments, [SIDA] is willing and able to grant the financial assistance requested by PCO and approved in the . . . [r]esolution."[FN20] Accordingly, this court finds that if the Mayor had properly signed the DestiNY USA PILOT Agreement in a timely fashion, SIDA would have had no reason not to issue the 2000 SIDA bonds. Thus, this Court finds no impediment to contingency (c) being met.

Contingency (d)

Contingency (d) requires the County and the City to enter into a revenue sharing agreement. The County has agreed to enter into this agreement. Because the financing with Citigroup met the requirements of contingency (f), the Mayor should have signed the revenue sharing agreement. In addition, the court finds that the execution of this document is beyond the control of Developers. The City cannot unilaterally decline to sign this document and use that as an excuse for Developers' non-compliance with Ordinance 32. See A.H.A. General Constr. Inc. v. New York City Housing Auth., 92 NY2d 20, 31 (1998). Thus, this Court finds no impediment to contingency (d) being met.

Contingency (e)

Contingency (e) requires the City, SIDA, and PCO to enter into an agreement relative to the reporting of annual sales tax revenues. PCO has agreed to sign this document. Because the financing with Citigroup met the requirements of contingency (f), the City and SIDA should have signed the agreement relative to the reporting of annual sales tax revenues. Neither the City nor SIDA can unilaterally decline to sign this document and use that as an excuse for Developers' non-compliance with Ordinance 32. Id. Thus, this Court finds no impediment to contingency (e) being met.

Based on the foregoing, this court hereby denies summary judgment to the City and SIDA and grants summary judgment to Developers on their first cause of action. The court declares the rights of the parties as follows: that all eight contingencies of Ordinance 32 have been satisfied, that the Mayor is required as a matter of law to enter into, execute and deliver the DestiNY USA PILOT Agreements and to perform such other duties as are required by said Ordinance, and that SIDA is [*13]to issue the 2000 SIDA bonds as well as sign any other pertinent documentation which it had previously agreed to sign to facilitate this project.

SECOND CAUSE OF ACTION FOR MANDAMUS:

The second cause of action seeks a writ of mandamus against the Mayor. Because the court has determined that it has the power to mandate that the Mayor execute the DestiNY USA PILOT Agreement and other documents and has further determined that all of the conditions set forth in Ordinance 32 have been met, this court hereby denies summary judgment to the City and grants summary judgment to Developers on their second cause of action. The court hereby directs and mandates the Mayor to comply with his obligation pursuant to Ordinance 32 to enter into, execute and deliver the DestiNY USA PILOT Agreement and perform other such duties as set forth in the Ordinance, all of which documents are to be signed now nunc pro tunc, effective as if originally executed December 31, 2005.

THIRD CAUSE OF ACTION FOR DECLARATORY JUDGMENT:

As earlier stated, Developers contend that the reconveyance by SIDA of the Carousel Center property and the recordation of the deed violates the express terms of the 1995 Sale Agreement, constitutes a breach of contract by SIDA, is an act in excess of jurisdiction, without lawful authority, ultra vires, and null and void. They seek an order enjoining and restraining SIDA from attempting to reconvey the Carousel Center property or tendering the deed to the County Clerk for the purposes of recordation and further enjoining and restraining the County Clerk from accepting any such papers for filing. By prior order of this court, Justice James C. Tormey expunged the deed that had been filed by SIDA pending this court's further determination.

SIDA argues that it properly reconveyed title to Developers because the 1995 PILOT Agreement had expired, Developers could no longer make the PILOT payments required under the 1995 Sale Agreement, and Developers' default triggered SIDA's right to reconvey. SIDA maintains that the purposes of the 1995 Sale Agreement had been fulfilled and, therefore, Carousel Center was no longer exempt from real property taxes pursuant to the 1995 PILOT Agreement and RPTL §412-a.

SIDA states that RPTL §412-a was amended in 1992 to require an Industrial Development Agency (hereinafter "IDA") to file a formal application with the local assessor's office for new tax exemptions on IDA-controlled property as well as for modifications of existing tax exemptions. SIDA contends that the language of RPTL §412-a is unambiguous, that it clearly requires SIDA to apply for tax-exempt status for any modifications or changes with respect to real property granted an initial exemption as well as property granted exempt status on a prior assessment roll. SIDA further argues that, pursuant to RPTL § 412-a, it must complete and file a form with the assessor and include an extract of the terms of any agreement relating to the exemption and that without such a filing, there is no tax exemption.

This court finds that the 1995 PILOT Agreement has no expiration date. The 1995 PILOT Agreement provides that upon a default, SIDA was entitled to reconvey the property upon thirty days notice. Although it is conceded that no such notice was given, SIDA argues that no notice was necessary because Developers could no longer make the PILOT payments required under the 1995 PILOT Agreement.

However, all parties had contemplated that the DestiNY USA PILOT Agreement would have been signed prior to December 31, 2005, and, had that happened, there would have been no lapse in PILOT payments. The reason that PILOT payments did not continue as contemplated was that [*14]the City did not sign the DestiNY USA PILOT Agreement because it determined that Developers had not satisfied the contingencies in Ordinance 32. Had the City determined, as found by this court, that the contingencies had been satisfied, the PILOT payments would have been made pursuant to the DestiNY USA PILOT Agreement and there would have been no lapse in Developers' tax exempt status.

The court finds that there is no issue as to compliance with RPTL §412-a. Had the 1995 PILOT Agreement been extended, SIDA would have had to file an application pursuant to that section. See RPTL §412-a(2). However, in this case, there was no extension of the 1995 PILOT Agreement, and, thus, no application based on a modification was necessary.

There is an argument to be made that the new PILOT agreement requires a new application. If that is the case, it appears as though SIDA will process that application based on the affidavit of Vito Sciscioli that SIDA "is ready, willing and able to grant the financial assistance requested by PCO and approved in the Approving Resolution."[FN21]

The 1995 Sale Agreement provides a closing date of November 15, 2007. The parties have differing views regarding the reason for the date of November 15, 2007 in the 1995 Sale Agreement. Developers argue that title to the Carousel Center must remain with SIDA pursuant to the 1995 Sale Agreement until November 15, 2007 unless prior to that date, Developers request that SIDA reconvey Carousel Center to them. SIDA argues that when it entered into the 1995 Sale Agreement, it did not intend that the real property tax exemption would be granted by SIDA for any period after December 31, 2005 absent an agreement by the City, PCO, and SIDA on an extension or amendment of the 1995 PILOT Agreement.

The 1995 Sale Agreement defines "closing date" as the date of sale of the Carousel Center by SIDA to Developers, "being no later than November 15, 2007." SIDA has stated that it did not intend that any real property tax exemption would be granted by it for any period after December 31, 2005 without a written agreement to that effect by the City, SIDA and Developers. However, as this court has previously found, the entry into such an agreement was contemplated and, in fact, would have been entered into, but for a determination by the City that Developers were not in compliance with Ordinance 32.

Accordingly, and consistent with what appears to be the intent of the parties, this court finds that the date of November 15, 2007 was placed in the 1995 Sale Agreement to provide for a situation exactly like the one at bar. By permitting SIDA to continue to hold title, the parties are able to complete whatever closing documents are necessary to effectuate the intent of the parties, i.e., to accomplish the goals of Ordinance 32 and the DestiNY PILOT Agreement which are to promote economic growth for the City. Furthermore, the City and SIDA acknowledged in the 1995 PILOT Agreement that the transfer of title to Carousel Center from SIDA to PCO was pursuant to the terms and conditions of the 1995 Sale Agreement. The 1995 Sale Agreement specifically referred to November 15, 2007 as an outside closing date.

Based on the above, the court denies summary judgment to SIDA and grants summary judgment to Developers on the third cause of action. The court declares the rights of the parties as follows: any attempted reconveyance by SIDA and/or any attempted recordation of the deed of reconveyance violates the 1995 Sale Agreement. SIDA is enjoined and restrained from attempting [*15]to reconvey the property or tender the deed or other documentation to the County Clerk for purposes of recordation and the County Clerk is enjoined and restrained from accepting any such papers for filing based on Developers' purported noncompliance with Ordinance 32.

FOURTH CAUSE OF ACTION FOR DECLARATORY JUDGMENT:

Developers' fourth cause of action seeks a declaration that the acts of Commissioner Gamage in placing Carousel Center on the taxable assessment roll for the 2006/2007 assessment roll are illegal, unauthorized, and in excess of jurisdiction.

Based on the determinations previously made herein that all contingencies in Ordinance 32 were satisfied and that the Mayor should have executed the DestiNY USA PILOT and related documents, this court finds that the property would have remained tax exempt. As such, the property would not and should not have been placed on the 2006/2007 assessment roll. Thus, the court denies summary judgment to the City and SIDA, grants summary judgment to Developers on the fourth cause of action and declares the rights of the parties as follows: the acts of Commissioner Gamage in placing Carousel Center on the taxable assessment roll for the 2006/2007 assessment roll are illegal, unauthorized, and in excess of jurisdiction.

This court further finds that the deed SIDA filed on December 28, 2005 was properly expunged by Justice Tormey and that SIDA is required to hold title to the property until such time as the parties execute all documents referenced herein to bring about the purposes of Ordinance 32 and the DestiNY USA PILOT, or by the latest, until November 15, 2007, unless, prior to that date, Developers request a transfer of title. Developers are to continue making payments of $800,000 per month into the escrow account previously established by this court until such time as the parties can meet with the court to discuss the distribution of the escrowed funds.

Developers are to submit an Order on notice.

___________________________________

JOHN V. CENTRA

Supreme Court Justice

Dated:March 10, 2006

Syracuse, New York Footnotes

Footnote 1:See Exhibit A to the City of Syracuse's Motion to Dismiss.

Footnote 2:See Exhibit A to Developers' Order to Show Cause.

Footnote 3:See Exhibit B to Developers' Order to Show Cause.

Footnote 4:See Exhibit CC to the City's Motion to Dismiss.

Footnote 5:See Exhibit EE to the City's Motion to Dismiss.

Footnote 6:See Exhibit GG to the City's Motion to Dismiss.

Footnote 7:See Exhibit G to Affidavit of Anthony R. Rivizzigno, Esq.

Footnote 8:The City's motion to dismiss speaks to the third cause of action as well as the fourth cause of action. This court has not addressed those grounds that relate to the third cause of action because the third cause of action is only directed toward SIDA.

Footnote 9:See Exhibit 13 to Developers' Motion.

Footnote 10:See Exhibit 1 to Developers' Motion.

Footnote 11:See Transcript of January 24, 2006 oral argument p. 76, lines 14-18.

Footnote 12:See Exhibit G to Affidavit of Anthony R. Rivizzigno, Esq.

Footnote 13:See Exhibit 1 to Reply Affirmation of Robert J. Smith, Esq., affirmed January 22, 2006.

Footnote 14:See Paragraph 20, Affidavit of Thomas M. Carnrike, Esq., affirmed January 11, 2006.

Footnote 15:See Exhibits 22 and 25 to Developers' Motion.

Footnote 16:See Exhibits 22 and 25 to Developers' Motion.

Footnote 17:See Exhibits 22 and 25 to Developers' Motion to Dismiss.

Footnote 18:See Exhibits 22 and 25 to Developers' Motion to Dismiss.

Footnote 19:See Exhibits 22 and 25 to Developers' Motion to Dismiss.

Footnote 20:See Affidavit of Vito Sciscioli sworn to January 13, 2006 at ¶44.

Footnote 21:See Paragraph 44, Affidavit of Vito Sciscioli, sworn to January 13, 2006.