Remaking Schenectady

After years of costlly failures, downtown shows signs of life as Metroplex pumps $7 million a year into revitalization

MIKE GOODWIN Staff writer
Section: Main,  Page: A1

Date: Sunday, February 26, 2006

SCHENECTADY -- By any measure, ``Phantom of the Opera'' was a smash at Proctor's Theatre.

Its monthlong run sold out the final 22 performances and a nightly flood of nearly 2,500 ticket-holders gave restaurateurs reason to rejoice. The musical was just the technological dazzler Proctor's leaders had in mind when they conceived their $22.4 million expansion of the old vaudeville playhouse.

The event also put a spotlight on the $50 million in taxpayer money spent by the Metroplex Development Authority in the last seven years to revitalize downtown Schenectady with a mix of entertainment venues, restaurants and office buildings.

``It shows you can move people downtown and they'll have a good experience,'' said Metroplex Board Chairman Ray Gillen. ``You can sustain things, if there is a mix.''

Metroplex is Schenectady County's remedy for 30 years of decay in the city's central commerce district that once bustled with General Electric employees looking to spend their paychecks.

The county was compelled to take action after GE transferred hundreds of good-paying white-collar jobs from Schenectady to Atlanta in 1997.

The loss, compounded by the elimination of thousands of GE manufacturing jobs in the 1980s, forced government officials to face a grim reality: GE would never reverse decades of downsizing.

Funded with a steady stream of revenue provided by $7 million in annual county sales tax receipts, Metroplex is attempting to achieve what prior revitalization efforts could not: bring people downtown.

The work is showing some signs of success. Metroplex projects, including a new headquarters for MVP Health Plan and a regional office for the state Department of Transportation, have added 1,500 jobs downtown, the authority says. It expects at least 300 more jobs in the coming months at new businesses about to open and the expansion of existing ones.

Mayor Brian U. Stratton's administration works closely with Gillen and the Metroplex board, relying on the authority to finance development projects the cash-strapped city cannot afford.

"Obviously, Metroplex is an incredible tool for us, and we're finally doing things so that Metroplex can achieve its true potential and Schenectady can achieve its true potential," said Stratton, a Democrat.

But the authority has its critics who say it discourages free enterprise. They also charge its control of local public development agencies exceeds the authority of its charter.

Under Gillen and his predecessor, John Manning, the authority has funded 26 different downtown projects, including the Proctor's expansion, which received $10 million in Metroplex grants. Other efforts include a movie theater, two hotels, two parking garages and office buildings.

The authority also has promised money for a variety of small and midsize restaurants. Several have opened; others are under construction or remain on the drawing board.

Downtown merchants say the monthlong run of "Phantom" gave their businesses a much-needed injection of customers, selling out seats at restaurants nightly. But even before that, they say, owners have seen modest increases in the number of visitors to their businesses.

"People who live outside the city, who have always had a negative outlook on the city, have a more positive outlook. And that's bringing more people to the city than it did a few years ago," said Jeff McDonald, who manages The Stockade Inn on North Church Street, one of two downtown restaurants his family owns.

McDonald's restaurant sold out on weekend nights during the "Phantom" run and was nearly full on weeknights.

"Unbelievable" is how Lisa Parisi, owner of Parisi's Steak House on Broadway, described the "Phantom" boom.

Theatergoers put an exclamation point on the uptick in business Parisi says she's already experienced from customers employed at MVP, DOT and a number of other businesses.

"There are more businesses, so you have more base customers who are down here all the time," she said. Neither she nor McDonald received Metroplex funds for their businesses.

Birth of Electric City

When GE founder Thomas Edison moved his nascent company to Schenectady in 1887, it triggered a stunning industrial boom that eventually swelled the city's population to 90,000.

By the mid-20th century, GE's work force numbered 30,000, and briefly topped 40,000 during World War II as workers poured through the gates to produce armaments, turbines, searchlights, generators, radio transmitters and the first jet engines for aircraft.

But since the 1970s, the city has been pummeled by massive job cuts at GE's downtown complex, a scenario that has played out at dozens of other company towns in America's Rust Belt. The number of GE workers in Schenectady now hovers around 3,000.

City officials spent millions of dollars in federal aid during the 1970s and 1980s to prop up downtown's faltering retail businesses, only to see the funding dry up and most of the stores close.

One early 1980s project, the $11 million Canal Square shopping plaza, drew praise from President Ronald Reagan, who declared it an example of urban renewal done right. But the plaza, located next to Proctor's, flopped amid economic downturns and the explosion of suburban retail.

Other projects, including one now-unthinkable plan to level Proctor's and develop a shopping mall, never got off the drawing board.

Though originally conceived as a way to fund a convention center downtown, Metroplex has evolved to support dozens of projects through outright grants, loans, street and sidewalk improvements and new parking.

In return, businesses have promised to invest another $175 million in their projects. One company, Logical Net, is building a wireless Internet system for downtown.

"It's easier every day," Gillen said of selling Schenectady to outside investors.

The pace of projects has picked up since county leaders used a $130,000 salary to lure Gillen away from the Pataki administration in February 2004 to become the county's planning commissioner. He also serves as the unpaid chairman of Metroplex.

Gillen immediately ruffled feathers by questioning the fiscal soundness of a $12 million, 14-screen movie theater project.

Instead, he backed a scaled-down six-screen Bow Tie Cinema for the corner of State Street and Broadway that also will feature floors of office space. Metroplex gave a $3 million loan and a $750,000 grant for facade work to help the Galesi Group finance the construction.

Some of Metroplex's largest projects - MVP, Proctor's and the DOT building - were undertaken when Manning led the authority. Though Metroplex continues to support major projects, Gillen has changed the authority's focus to include a mix of small and midsize businesses that employ fewer than 50 people.

"There was a time when (Metroplex) did one or two good projects a year. We're trying to do dozens a year and speed up the momentum," he said.

County Legislator Robert Farley, a driving force behind the creation of Metroplex in 1998, gives Gillen high marks.

But the Republican insists state and local legislation needed for its creation does not give the authority the power to manage the city and county industrial development agencies, quasi-governmental organizations that grant tax breaks and other incentives to businesses.

Farley also questions Metroplex funding for restaurants and retail establishments, saying such businesses will evolve on their own once large projects are completed.

Joseph Suhrada, a fellow Republican legislator from Rotterdam, complains that politics plays into how Metroplex awards funding.

Big role for Proctor's Tonight is the final Schenectady performance of "Phantom," but the run of Broadway hits won't end here, says Philip Morris, Proctor's CEO.

Morris is negotiating to bring in Disney's "Lion King," and, in what would be a rare drama for Proctor's, a potential touring production of "Who's Afraid of Virginia Woolf," starring Broadway heavyweight Kathleen Turner.

"It helps us get a `Wicked,' or a `Spamalot' or whatever else over the next few years," he said of the theater's expansion.

Few believe Schenectady will ever return to its heyday of the 1950s, when the population of the city soared past 90,000, nearly 30,000 more than today's. While some restaurants are benefiting, the return of retail businesses has been slow. The Jay Street pedestrian mall, an earlier revitalization effort, has several empty storefronts as does much of the rest of downtown.

But Metroplex hopes the completed projects and others in the pipeline eventually will get enough people downtown to sustain a small roster of stores.

The Mildred Elley School has promised to move its 600 students and 100 employees to a State Street location next to Jay Street. The vocational college is buying the Center City sports and office complex on State Street for $7 million, using a $1 million loan and a $1.5 million grant from Metroplex.

Another $4 million form Metroplex went toward the $15 million street redesign of six prime blocks of State Street downtown.

But some projects have hit snags. The start of construction of the Hampton Inn and the Bow Tie Cinema were delayed by the ongoing construction at Proctor's. Met roplex officials hope both projects will be completed this year.

Cornell's Restaurant, which relied on $475,000 in Metroplex grants and loans to build a new restaurant on North Jay Street, continues to experience financial problems and recently had to restructure debt.

Metroplex also approved a $375,000 refinancing package for the Van Dyck restaurant and jazz club in 2004. Authority officials are holding their breath as they wait to see whether owner Peter Olsen will make good on a $200,000 balloon payment due this fall.

Luring projects Over the past two years, Metroplex has helped finance the renovation of office space for modest high-tech firms, and planned office park on Broadway. The demolition of an abandoned shopping plaza off of Nott Street will provide the site for a new YMCA, medical offices and a building for the Graduate School of Union University.

Other small firms have moved downtown in the last year, enticed with a package of grants and loans from Metroplex.

Last year, Metroplex helped Utech Products buy and renovate a former Canal Square building.

Logical Net expects to have 44 employees at the Schenectady office by month's end, when 17 customer service employees transfer from Johnstown to Schenectady.

"I'm definitely sold on it," said Logical Net CEO Tush Nikollaj, who moved his Internet Service Provider firm to 530 Franklin St. from Colonie in November. "I do have friends who ask `Why did I move to Schenectady?' My comment to them is, `When did you last visit Schenectady?' "

Mike Goodwin can be reached at 454-5465 or by e-mail at