Why Is Rochester Subsidizing A Restaurant?? With Massive Budgets And No Money, This Is Not WHere We Need To Spend Our Resources!

Pier 45 gets a special deal from Rochester

Pier 45, the stylish city-sponsored restaurant in the Charlotte ferry terminal, has been a culinary and artistic success. On warm summer evenings, guests line up to dine outdoors on the restaurant’s expansive second-story veranda overlooking the bustling mouth of the Genesee River.
“We feel our food is very, very good. Our service is good. But its location — that’s the strong point,” said Joseph Floreano, who acts as impresario of the restaurant that opened in May 2009.
But for all that, Pier 45 has been a financial bust. Despite significant financial support from the city of Rochester, the restaurant suffered losses of roughly $400,000 in its first 20 months of operation.
Those losses have been absorbed by the restaurant’s operator — the nonprofit corporation that runs the city-owned Riverside Convention Center.

But that nonprofit, the Rochester Convention Center Management Corp., is itself subsidized by $1.5 million a year from the city and Monroe County.
The red ink, which is not apparent in publicly available budgets and financial audits, only came to light after inquiries by the Democrat and Chronicle. The losses belie bold predictions that the restaurant would make money from the outset, and flies in the face of former Mayor Robert Duffy’s assertion that Pier 45 would be self-sustaining.
Some of its financial shortfalls were incurred during its first two winters, when the crowds deserted Charlotte but the nonprofit’s leaders kept the restaurant open anyway.
Now some of those leaders are at odds with City Hall over the arrangement.

Acting Mayor Carlos Carballada said recently that Pier 45 should operate only in the summer. Carballada, a member of the nonprofit’s board of directors, said he believes most directors agree that winter operation has been a bust.
He also said it remains to be decided whether the current operators, hired by the city in 2008 to create and run Pier 45 under terms of a no-bid, six-year contract, should be replaced.
Floreano, the nonprofit’s executive director, isn’t on the same page yet. “Me and Carlos have a difference on that,” he said earlier this month. “We need to take a hard look at it.”

A ferry vestige

Pier 45 was conceived in the spring of 2008 to help “stabilize” the terminal building, as Duffy put it then, after the city wrestled control of the facility from the operators of the failed Toronto ferry. Rochester had spent $19 million turning the old North River Street warehouse into a gleaming hub for the ferry, and gave it to the ferry operators under a 40-year lease.
But those operators docked the ferry after only three months in the summer of 2004, and Mayor William A. Johnson Jr. then was unable to make the ferry work as a city-run enterprise.
When Duffy became mayor in January 2006, he pulled the plug on the service and sold the vessel. It wasn’t until April 2008 that the city was able to buy out the terminal lease for $400,000.
The city wanted to enliven the building and showcase the area’s development potential, and officials decided a 6,300-square-foot area on the second floor would be perfect for a restaurant.
“They wanted to create the sense of a destination. It was a beautiful building, but it was empty,” said Sergio Esteban, chief executive of LaBella Associates engineers and chairman of the nonprofit’s board.
The nonprofit was selected for the task. It has successfully operated the convention-center food service and a catering business but had never run a restaurant. The nonprofit also took over booking for events in a first-floor hall at the terminal. Modest rental fees from the 20 or 30 annual luncheons, meetings, weddings and the like, go to the city.
The Duffy administration told City Council there was no time to solicit proposals from restaurateurs. Officials also say now that the city preferred Floreano and his associates because they were flexible allies, and willing to turn over the space to another operator if the city so desired.
Floreano now says the idea was to use the restaurant as an incentive to draw a hotel developer.

The corporation borrowed $950,000 from M&T Bank to create a brightly decorated restaurant with indoor seating for 68 and room outside for 160 more. Heaters and plastic wind-blocks extend the outdoor season. The space is striking, though the restaurant is invisible from Lake Avenue and walk-up traffic is unlikely.

Entrees cost from $14 to $33. There’s a big appetizer menu as well.

Floreano considers restaurants like 2 Vine or Black & Blue as competition, not the dozen or so places in Charlotte.
“There’s not a lot of restaurants that serve high-end fare in that area. We wanted to do something different,” said Floreano, who sometimes acts as host at the restaurant in the evening. A portrait of him in a Panama hat hangs next to the bar.

Special advantages

Pier 45 has considerable financial advantages over other restaurants. It pays the city $1 a year in rent, and taxpayers cover heat, electricity, water, sewage and trash removal. Free parking is provided.
As a nonprofit, the corporation pays no income taxes and no sales tax on supplies.

These breaks do not sit well with some.

“When things are tight and it’s hard to run a business today, here we have a high-end restaurant where I don’t think a high-end restaurant is necessary. They’re getting the rent paid for, the RG&E paid for, the disposal paid for — all the hard costs are being paid for by the city,” said Lee Selover, former president of the Charlotte Business Association and owner of Windjammers Bar & Grill. “If they’re not making any money, why are the taxpayers of the city of Rochester paying for it?”
Convention center officials acknowledge that Pier 45 lost money in each of the two fiscal years in which it operated, and is on track to finish the current fiscal year on June 30 with an operating loss of about $100,000.
Through its first 20 months, Pier 45 had revenue of $3 million and expenses of about $3.4 million, officials said.

The restaurant is considered a department of the convention center, and its losses have been covered by the nonprofit’s cash reserves, Floreano said. He said the corporation had received no extra city funding to offset Pier 45 losses.
“We paid for everything,” said Floreano, whose salary is $211,041.

Former city corporation counsel Thomas Richards, now vying to replace Duffy as mayor, was quoted two years ago as saying if Pier 45 lost money, it would either close or be subsidized.

Floreano flatly rejects the idea that the restaurant is subsidized.

But the nonprofit corporation of which Pier 45 is a part does receive sizable annual subsidies from the city and Monroe County. The nonprofit, created by the city to operate the downtown convention center when it opened in 1985, is underwritten by local government for economic-development reasons.
The city and county governments each have two seats on the nonprofit’s 21-member board, which also includes representatives of educational, cultural and development-related institutions.
The nonprofit receives $795,000 annually in Monroe County hotel-motel tax money, and the city’s contribution has been $731,100 in each of the last two years.
The city subsidy increased substantially in the year that Pier 45 was built and opened for business, but both convention center and city officials say the increase had nothing to do with the restaurant.
The nonprofit needs that money to break even. Without it, the entire operation, including Pier 45, would be in precarious shape.

Lack of records
Pier 45’s financial travails have not been made public before now. The financial statement filed by the nonprofit for the 2008-09 fiscal year, which covered the first six weeks the restaurant was open, did include revenue and expense summaries for Pier 45. The picture was positive — the figures showed the restaurant almost breaking even.
The following year’s financial statement and other public filings covered a period in which officials now concede Pier 45 lost about $300,000. But those documents contain no breakout of Pier 45 finances.
Convention center officials say they saw no need to include one.

City budgets, which annually feature a summary of the convention center’s finances, also have not reflected losses at Pier 45.
This year’s document contains a revenue projection for Pier 45, but no offsetting expense projection. City budget director William Ansbrow said the expense number was left out inadvertently. (The expense projection, which Ansbrow provided to the Democrat and Chronicle, proved wrong at any rate. It indicated a $72,000 profit, whereas Pier 45 will end this year in the red.)

City Council member Matt Haag questioned the lack of detail in the city budget last spring, and said last week that it was important for Council members and the public to understand the restaurant’s finances.
“If this is something that we’re going to subsidize for a couple of years, that’s a judgment call we have to make. But you can’t make that judgment call if you can’t see what you’re subsidizing,” Haag said.
When the restaurant was preparing to open, its operators publicly predicted a first-year profit of $420,000, and a few months later they told the Democrat and Chronicle that they were on track to achieve that target.
Officials now say they badly overestimated their winter business.

“We really thought the numbers would be much stronger in the winter,” said Ronald Beck, the convention center director of food and beverage.

Marketing effort

Pier 45 was open four nights a week in its first winter, but financial results were poor.

Floreano and his colleagues concluded that patrons associated Pier 45 with its al fresco seating and assumed it closed when it grew cold.
Instead of bowing to that perception, they tried to change it. The restaurant stayed open this winter, this time for three evenings each week, and the nonprofit mounted an extensive billboard-and-print ad campaign.
The effort helped, Floreano said, and some nights drew good crowds. But revenue isn’t covering expenses.

Floreano said officials at the nonprofit hope to decide in the coming weeks whether they should throw in the towel on cold-weather operations. A consideration is the cost of closing for the winter, including having to hire and train staff in the spring.
Carballada said he believes the choice is clear.

“What we’re finding out is it’s a summer destination restaurant. It is not one that, at the present time, can work in the winter months. That could change when our development plans for the area are culminated, when you have more people living out there,” he said, referring to plans for a marina near the terminal ringed with residential and commercial buildings.
He also said the nonprofit board may want to opt out entirely.

“It’s been somewhat of a burden for the convention center to have another operation that they have to staff,” he said.
Haag said he appreciated the “excitement and energy” the restaurant brought to the waterfront, but noted the city was facing extremely tight budgets and said it might make sense for a private restaurateur to step in.
“I think that’s something we have to explore,” Haag said.

Said Floreano: “We expect to run it as long as the city wants us to run it.”


Thomas Richards

While the city could cancel the lease, Pier 45’s direction is up to the convention center board, made up of city, county and community representatives, said Democratic candidate Richards.
Pier 45 opened after the city broke a $1-a-year, 40-year lease on the terminal and regained control of the space. With no clear plan for the port, Richards said, it was the wrong time to sign a private operator to another long-term agreement.
The current arrangement got something going in the interim, he said, yet allows the city to change its mind.
“Ultimately, the goal here is to transfer it over to a private entity,” he said.
In the meantime, the board should take “a hard look” at Pier 45.

Alex White

The problems with Pier 45 are many, said the Green Party candidate.
He said he has never dined at Pier 45, but said he doubts the present business plan will turn a profit. Pier 45 should be rebranded, he said, which then would bring it into more direct competition with existing businesses and, therefore, would necessitate — for White — that the city cease its involvement.
Attracting a private operator could be difficult, given the demonstrated business performance, he said. But with a new marina planned, the city could backload a lease, increasing payments once the marina opens, he said. Becoming seasonal could help, but he said it is unlikely that Pier 45 could simply cut out the bad months and expect the good months to turn the same profit.


Despite significant financial support from local government, the Pier 45 restaurant in Charlotte suffered losses of roughly $400,000 in its first 20 months. Pier 45 has lots of other government-provided advantages over neighboring restaurants. City and convention center documents did not reveal Pier 45’s losses.

William A. Johnson Jr.

The former mayor, the Working Families and Independence parties’ candidate, likens the city’s efforts with Pier 45 to his administration’s attempts at High Falls. But he is critical of the city not seeking bids from private restaurateurs to run the operation and, thus, minimize or eliminate risk to the city and taxpayers.
“To say they have taken reserves out of the convention center is to say they have taken reserves out of the city,” he said, as the convention center operates like a city/county subsidiary.
He would look at all options, from seasonal hours to a private operator. Lacking budget specifics, he said he cannot say which is best. But Johnson, who has been to Pier 45 and calls it “a great experience,” said it is important to continue activity at the venue.

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