PILOTS

The Ulster County Industrial Development Agency does some “housekeeping” before Kingstonian PILOT vote on January 20.

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By Rebecca Martin

On Wednesday, January 20 at 9:00am, the Ulster County Industrial Development Agency (UCIDA) is poised to vote on the Kingstonian project deviated payment-in-lieu-of-taxes (PILOT), an unprecedented 25-year, $20+ million dollar deferment (and in the school district’s case, a loss) of property tax for luxury housing in the City of Kingston’s historic stockade district.

In July of 2020, the developer publicly unveiled their 100% tax exempt PILOT that at that time was valued at over $30.6 million dollars (that includes the PILOT and other public funding sources) in exchange for a parking garage. Although the developers and members of the Kingston Common Council insisted that there wasn’t any wiggle room to improve the project or PILOT conditions, after much effort and advocacy by the public, the developer added 14 affordable units, a couple of public bathrooms and reduced the amount slightly that is deferred over time.

READ: “The road paved by a $30.6 million dollar Kingstonian PILOT (in exchange for a parking garage): A timeline and next steps in October 2020

The request went out to the three impacted agencies for their consent that included the City of Kingston, Ulster County Legislature and Kingston City School District. Although the City of Kingston (8-0) and the Ulster County Legislature (17-6) approved the PILOT agreement, the school board, which represents 60% of the impacted taxpayers throughout Ulster County, rejected the proposal (6-3).

One of the things that we learned throughout this process were the negative impacts that a PILOT has on school districts. In a recent article called “Strife over tax breaks and tradeoffs: It doesn’t have to be like this” by The Benjamin Center (penned by Robin Jacobowitz with KT Tobin and Josh Simons) the author, a graduate of Colgate University with a BA in Education, a Masters in Education Policy from Harvard University and Doctorate of Philosophy, Education policy, Organization Theory and Qualitative Research from NYU, the Director of Education Programs at The Benjamin Center and an elected trustee of the Kingston City School District Board of Education wrote, “Public schools are dependent on property taxes for the majority of their funding. When an entity does not pay its full share of property taxes, that burden does not go away; unless cuts are made, costs get shifted onto other taxpayers. So when a PILOT is granted to a developer everyone else has to pay more. And even in an instance where a PILOT might contribute more than was being paid by the pre-PILOT property, that property is still not paying its full share.”

THE UCIDA’S CLEVER “HOUSEKEEPING”

Meanwhile, the UCIDA released their AGENDA for next week that revealed more concerns.

There appear to be two different items that can trigger a multi-agency review such as what occurred with the Kingstonian PILOT. The first is a deviation from the Uniform Tax Exemption Policy (UTEP) and the second, the inclusion of housing. Notice that on page 27-28 of the agenda, Resolution No. 1020 changes the housing policy so that the UCIDA doesn’t need all taxing entities’ concurrence.

The UCIDA could perhaps override the other agencies on the deviation. But when they added in the opportunity to fund any housing project in the housing policy last summer, they required agreement of all agencies.

During their recent governance meeting (and two hour executive session) they must have changed the housing policy (again) to have the same language as the UTEP for the PILOT deviation, sneaking it in under the heading “housekeeping” by adding an “F” after the “E” in the Schedule A (see header photo).

Furthermore, the authority for an IDA to even fund housing appears to be a complicated question. The state authorizing legislation for IDAs doesn’t clearly allow IDA support for housing. According to sources, the courts have, over time, considered certain housing projects to qualify if the project “promises employment opportunities and prevents economic deterioration”. Is the UCIDA giving itself the authority to support any housing and does it have the power to do that? Perhaps it is why, in the resolution approving the Kingstonian PILOT, that they do a little dance defining the project as “commercial”.

I guess we’ll have to see what the board members do on Wednesday and when this is over, we hope that our elected officials – with much public pressure – use this most unpleasant experience to deeply scrutinize the UCIDA’s practices.

The UCIDA meets on Wednesday at 9:00am. Please visit their WEBSITE to learn how you can view their meeting and participate.

The Kingstonian PILOT and Remaining November Process Steps

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By Rebecca Martin

We’re coming up on nearly three years of following the Kingstonian project process, a proposed $58 million dollar project that promises 129 high-end units, 14 affordable units (with Area Median Income (AMI) based on Ulster County, nearly ⅓ higher than the City of Kingston), a 32-room luxury boutique hotel, 9,000 square feet of retail space, and a 420 parking space complex.  The proposed Kingstonian deviated payment-in-lieu-of-taxes (PILOT) is a 25-year, $30.6 million dollar deferment of taxes for a mixed use, high-end housing project. Since the Ulster County Executive has commissioned a study with the National Development Council (NDC) October 23, 2020 report, in an effort to ‘sweeten the pot’ doesn’t appear to have influenced members of the Board of Education – the agency who has the most to lose.

Here are the next important steps in the process for each of the decision-making agencies as we currently understand them.

Village of New Paltz

On November 4, the Village of New Paltz submitted the following letter to the Board of Education, members of the Ulster County Legislature, County Executive Pat Ryan and City of Kingston Mayor Steve Noble.

Prior to becoming Mayor of the Village of New Paltz, Tim Rogers went to business school and held a successful career in the financial industry. It’s clear in following his advocacy on the matter that our own elected and appointed officials in the City of Kingston do not understand the potential negative impacts that this unprecedented tax incentive may likely have.

Click on the image to review the full letter

“NDC’s suggested PILOT schedule for the Kingstonian is problematic for Kingston’s school district finances now and long into the future

National Development Council’s (“NDC”) October 23, 2020 cost/ benefit analysis for the proposed Kingstonian development is curiously silent about NYS Property Tax Cap law impacts and how PILOTs harm local taxing authorities’ ability to fund new services. 

Property taxpayers, including those across the Kingston City School District that serves several municipalities, will likely face one of two outcomes if the Kingstonian developers receive the PILOT they asked for or if NDC’s proposed PILOT is used. The board of education will have to choose between: 

  1. Cutting school district programming (e.g. teacher and staff layoffs, increased class sizes, etc.), or
  2. Increasing property taxes

This is just how NYS law and the Property Tax Cap formula works. It is unreasonable to list “net public benefits” from the Kingstonian without even mentioning let alone considering Tax Levy Limit (TLL) impacts. An alternative third option to these two could only occur if there was a material contraction in the number of students residing in the district.

School districts are primarily funded by property taxes and state aid. Property taxes are levied against the Full Taxable Value of real estate and its calculation is subject to the NYS Property Tax Cap law. Annually, each school district follows an eight-step formula to calculate its TLL. The TLL does not change when there is a change in the taxable value due to assessment increases; in that instance, the tax rate decreases. However, when there is significant new project construction, the NYS Commissioner of Tax and Finance calculates a Tax Base Growth Factor (TBGF) that increases the TLL to pay for services arising from the new construction.

If it’s fully taxed, the taxable value of $19 million for the Kingstonian would result in a TBGF of approximately 1.0042 and an increase in the district’s TLL of more than $440,000. However, when a new project is subject to a PILOT agreement, its taxable value is never included in the TBGF. This significantly limits a school district’s ability fund educating new K-12 students created by increases in housing supply.  

Using NDC’s newly proposed PILOT, the Kingstonian developers would pay approximately $2.1 million over 25 years in lieu of school taxes. In comparison, if the project was fully taxed with an assessed value of $19 million at year 1 and the district’s ’19-’20 TLL of $105,589,983 escalated 2% annually, the developers would pay $16.6 million in school taxes. 

Moreover, harm is perpetual. During years 26 through 50 the school district could see $23.8 million less in TLL because of the original PILOT. This would happen because the tax cap formula’s Tax Base Growth Factor never adjusts — even at the end of a PILOT’s term when properties become taxable.

Given these scenarios, if the district’s board of education opted not to cut programming because of its lowered TLL from the PILOT, the board could try to make up the difference and raise revenue by raising property taxes. This would require asking voters to support a tax cap override. And, a supermajority of 60% or more would be needed to vote in favor of raising taxes to offset the shortfall.

In 2020, only 13 districts across the state chose this option; there was a 69% success rate, compared with a 99% success rate for districts that did not need a supermajority approval of their budget. The Kingston board of education has never attempted a budget override. 

We are troubled by this proposal to prop up investors of market rate for-profit housing, lodging, and retail. The Kingstonian could set a dangerous precedent for Ulster County that unfairly harms taxpayers and school districts’ ability to serve students. Please take a closer look at what is being considered.”

Kingston City School District Board of Education (BOE)

During a recent Board of Education meeting on November 4, Trustee James Michael, who also is chair of the Audit and Finance Committee, publicly revealed his concerns regarding the Kingstonian PILOT process and the Ulster County Executive’s NDC Study. Michael says that the BOE was not contacted by the consultant or the county while new PILOT terms for the Kingstonian PILOT report were being considered. Weeks after the report was released, the board said that it had still not received the new PILOT terms or any communication from the county. Superintendent Dr. Paul Padalino revealed at that time that he had received the new PILOT terms on that day (11/4) and would release it to the board following their meeting that evening.

The next Kingston City School District Board of Education meeting is on Wednesday, November 18 at 7:00pm. If you wish to submit public comment (live public comment is not permitted during Covid) please consider supporting the members who have correctly taken a stance against a PILOT for this proposal. WRITE: boe@kingstoncityschools.org

Click on the image to hear Trustee James Michael’s comments

“Last Friday, I was reading the news with a headline that stated the county officials celebrated a new PILOT deal for the developers of the proposed Kingstonian project. That caught me by surprise. What I want to tell the county and the developer is that they ignored us (BOE) and they didn’t respect us at all. We are the biggest stakeholders of this development and the biggest losers as far as tax revenue…that’s what the politicians do. They always promise you something and do something else. Last year, Ulster County Executive Pat Ryan stated the Kingstonian project was unacceptable and absurd for the community. Politicians get paid, we don’t. We do this for the love of the kids. Politicians lie, but we don’t because we teach our children to be truthful and honest.”

“…(Joesph) Bonura stated on July 18 that if the PILOT agreement didn’t go through, the city would lose the $3.8m (Downtown Revitalization Initiative grant, DRI) grant….I met with Mayor Steve Noble and I asked him face to face, is it true that we can lose the grant money (DRI) if we don’t approve the Kingstonian PILOT and his answer was yes. That was a blatant lie….I had a conversation with the Director of the DRI grant program in the Hudson Valley. He told me that the city is not going to lose the grant. It can easily be allocated to the rest of the project.””We need more revenue for the district. They (the developers) were very arrogant, demanding and made an ultimatum and said either we have this project otherwise we don’t have a parking garage. Maybe the City of Kingston needs a parking garage, the developers want to build it and expect the city of Kingston taxpayers to pay for it, but to me that’s unacceptable.”

“When you think about the Ulster County Industrial Development Agency PILOT program, I want you to keep in mind the students because they have the most to lose and deprived of a good education…I send a message to developers, the Kingstonian developers and the future developers that the school district will not accept anymore deviated programs. I would suggest that the Kingstonian developers come back to the district with a more traditional PILOT program of 5- 10 years, not a deviated PILOT for two generations.”

City of Kingston Common Council

There has been mixed signals about whether or not the Kingston Common Council has to vote on the Kingstonian PILOTs new terms. It isn’t clear why they wouldn’t, as the terms are different then they were when their unanimous vote was cast over the summer. We’ll have to wait to see what sort of fancy footwork Kingston Corporation Counsel Kevin Bryant and Dan Gartenstein have in store.

If new PILOT terms appear, it would go in front of the Kingston Common Council’s Finance and Audit Committee (posted above). Please consider WRITING TO EACH OF THEM INDIVIDUALLY and request that if new PILOT terms appear for a council vote, that they align their decision with the Board of Education, as it is our children and tax paying families who attend the school district that have the most to lose.

Ulster County Legislature

In October when the Kingstonian PILOT terms were submitted to the Ulster County Legislature, both the Economic Development, Tourism, Housing, Planning & Transit and Ways and Means Committees each had a crack at it. At that time, it was already known that County Executive Pat Ryan had requested an “Independent” study regarding the Kingstonian PILOT terms. The Economic Development committee passed the old terms through anyway while Ways and Means tabled their decision until the study was delivered and the committee had time to review it.

With the results and new PILOT terms delivered in late October, the Economic Development committee did not take it up again during their November. We inquired with the Ulster County Legislative Clerk to understand why, and were told at the time of inquiry, “We still haven’t received any new document in relation to potential changes. As such, the resolution currently stands in the Ways and Means Committee. However, we anticipate having a new proposed agreement very shortly. The Ways and Means Committee members will have the option to amend the resolution in Committee to consider the new agreement.” Although the response didn’t answer our question thoroughly as to why the new terms would not have to be reviewed by both committees as was the case last month, at the Ways and Means Committee meeting this week, the committee adopted the new terms (that have not yet been made public). With much disrespectful banter from Legislators Dave Donaldson and Ken Ronk, Legislators Tracy Bartels and Lynn Archer called them out and held their ground securing the majority of votes to postpone the Kingstonian PILOT vote until committee members had their questions answered by the consultant. Legislator Eve Walters (New Paltz) publicaly stated that she would reject the Kingstonian PILOT agreement.

LISTEN
to Audio of the Ways and Means Committee discussion of the Kingstonian PILOT from 11/10/20

The next Ways and Means Committee meeting will occur on Tuesday, November 17 at 5:30pm. If they decide to pass the new PILOT terms through their committee, it will go to the floor that evening at 7:00pm for a full legislature vote. Since Covid, the Ulster County Legislature amended its rules to allow only public comment on items listed in the agenda. In this case, we won’t know whether or not the Kingstonian PILOT will be on the agenda until 6:30pm that evening, 30 minutes before the legislature meets. NYS Open Meetings Law has no requirements for when Agendas are made public. It’s a flaw in our system, in our opinion. A good practice would be to post agendas at least several days prior to any public meeting in order to allow the public to plan to attend and to prepare their comments.

ADDITIONAL READING

Missed the Kingstonian PILOT press conference event? Here’s a recap and next steps

Criticism of Ulster County’s Independent Review for the Kingstonian PILOT

The road paved by a $30.6 million dollar Kingstonian PILOT (in exchange for a parking garage): A timeline and next steps in October 2020

Highlights from the UCIDA Public Hearing on October 1

The Complication of the Ulster County IDA Recent Policy Change and Public Hearing Date on October 1

The Kingstonian Project PILOT Needs Independent, External Analysis to Review Economic Assumptions Before Approving $30.6m over 25 years

Criticism of Ulster County’s Independent Review for the Kingstonian PILOT

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Click on image to listen to a February 15, 2019 interview of Ulster County Executive candidate Pat Ryan respond to the lack of affordable housing at the Kingstonian as “unacceptable” and “absurd,” adding, “The parking is great, but if you can’t afford a place to live, parking is the least of your worries.”  Image courtesy of the Kingston Tenants Union.

By Rebecca Martin

As we have recently reported, “The Kingstonian is a proposed $58 million dollar project. It promises 129 high-end units (to date, rents will range from $1,500 – $2,850), 14 affordable units (with Area Median Income (AMI) based on Ulster County, nearly ⅓ higher than the City of Kingston), a 32-room luxury boutique hotel, 9,000 square feet of retail space, and a 420 parking space complex.  The developer is asking for a deviated Payment In Lieu Of Taxes (PILOT) agreement where they will pay nominal taxes for 25 years. Community members who have been following the Kingstonian project’s PILOT request have asked for more detailed financial information to understand the potential impacts (including the developer’s “trade secrets,” which are fair game for a public/private partnership). Others are up in arms that a wealthy developer who wants to create high-end housing and a luxury boutique hotel in Uptown Kingston would have the audacity to request a 25-year, 100% tax exempt PILOT agreement worth $30.6 million dollars. Nearly seven months after the SEQR process concluded (where the full value of public subsidies should have been revealed but were not), the developers finally shared their PILOT request with the Ulster County Industrial Development Agency (UCIDA) and threatening the board that without approval of the PILOT, they would not secure the financing that they need and that the City of Kingston was at risk for the project and the Downtown Revitalization Initiative (DRI) grant to “go away.”   

Ulster County Legislative and Executive Branch throw curveball

On October 1st, Ulster County Legislator Lynn Archer appeared before the UCIDA during a Public Hearing on the proposed Kingstonian PILOT to announce that she and her colleagues were in favor of an independent, third party study of the proposed Kingstonian PILOT.  “We are currently relying on the people benefitting from the project to provide the projected costs of the project without validation from an independent third party who has the knowledge of these types of complex endeavors,”  she said.  With the Kingstonian PILOT up for a vote in October it was a surprise and relief for a legislator to make that  request.  Up until that point, it seemed likely that the full legislature was poised  to approve the PILOT terms even with so many outstanding concerns.

Several days later, County Executive Pat Ryan echoed those sentiments with his own press release, pledging that the county would pay for the independent cost benefit analysis.  “Before a decision of this magnitude (the Kingstonian PILOT) is made, the public deserves an impartial assessment of the costs and benefits of the project. Therefore, I am calling on the project developers to disclose their financials to an independent evaluator so that we can have a full picture of the project. This level of transparency is critical given the scale and impact of the proposed PILOT agreement,”  Ryan said.

On the same day of the County Executive’s announcement about his support for an independent review of the Kingstonian PILOT, a second announcement was sent from his office of a change in the Economic Development office.  Tim Weidemann, who had served as Director of Innovation, was tapped as Director of Economic Development, replacing Lisa Berger who would now serve as Director of Tourism.  Weidemann would coordinate the Kingstonian study on the county’s behalf with the National Development Council (NDC), a not-for-profit led by Daniel Marsh, a consultant who has a long history in the Hudson Valley.

When news hit about the selection of the NDC and Marsh in particular, some were concerned as to whether the organization could be impartial.  Having served in a number of positions in Orange County, Marsh had also served as a consultant to the Kingston’s Local Development Council (KLDC) during the recent Gallo administration when Brad Jordan, one of the principal Kingstonian developers, was the council’s secretary. 

The study was originally meant to be ready in time for the October 20th Ulster County Legislature Ways and Means Committee meeting and Kingstonian PILOT vote, and would cost somewhere in the vicinity of $10 – 15k, money that the county said it hoped would be reimbursed (by the developer, we presume).  The promise for a study to examine the PILOT terms encouraged all of the other involved agencies to table their votes that month (that included the full legislature, Board of Education (BOE) and UCIDA) until the study was complete and each body had had the time to review it.

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Highlights from the UCIDA Public Hearing on October 1

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There was good news (members of the Ulster County Legislature called for an independent, third party analysis as we did in our BLOG post last week. It’s the only sensible thing to do) as well as courageous and touching testimonies last evening during the Ulster County Industrial Development Agency’s public hearing for the Kingstonian project PILOT.

Here are the highlights. Click on the images to review each individual testimony.

James Shaughnessy, City of Kingston resident

“In contradiction to what Dan Baker said (City of Kingston Assessor), PILOTs do not have a positive impact on school district finances. The school district is subject to tax cap legislation with limits the growth of our tax levy…when the new construction is under a PILOT, the growth factor is zero at the beginning of the agreement and it is not included in the growth factor at the end of the agreement. So the district’s tax levy limit is permanently reduced…the developers published a flyer yesterday that claims that the Kingstonian will yield its school district more than 41 million dollars in new revenue over 50 years and that is categorically wrong. The developers don’t seem to understand school district finances. They don’t seem to understand the impact of a PILOT on school district finances and frankly, the Mayor and the Common Council and perhaps Dan Baker don’t seem to understand the impact of a PILOT on school district finances.”
Ulster County Legislator Lynn Archer (District 21)

“I have spoken with several of my fellow legislators and we are all in agreement…we strongly encourage the UCIDA to engage an independent third party firm to undertake a cost-benefit analysis of the Kingstonian project and to present the results of these findings to the various taxing authorities. We are currently relying on the people benefitting from the project to provide the projected costs of the project without validation from an independent third party who has the knowledge of these types of complex endeavors….we all have a fiduciary responsibility to the residents of Ulster County and that an independent review should be undertaken immediately by a firm which routinely does these types of reviews for other IDAs.”
Justin Orashan, City of Kingston resident

“…my own concern, and the concern of an enlarged amount of community members here is the nuance of (those details) in the context of the given moment that we are in in Kingston…for anyone on this call who is housing secure or owns a home, if you’re not directly connected to the families who are really hurting right now, it’s really hard to understand how people are in pain and how this will not benefit all of our community, and how it will indeed hurt many of our community members.”
City of Kingston Alderman (Ward 3) Rennie Scott Childress.
Hold him accountable, Kingston.

“…a desperately needed parking garage at no cost to the taxpayers. These structures are expensive so the current project is an ingenious solution. A PILOT to support its construction is essential to its success.”
Sarah Wenk, City of Kingston resident

“Our schools can’t wait 25 years for revenue from this project to start trickling in. The developers own materials set out a 50-year timeline that is speculative at best, fantastical at worst. We are in the midst of a crisis now…our schools are facing huge budget cuts. The taxpayers of Ulster County are being asked to subsidize luxury housing for a possible benefit that won’t begin until after most of us are dead.”
Patrick Logan, Attorney
Rodenhausen Chale & Polidoro LLP 
Logan appeared on behalf of several property owners in Uptown, Kingston.

“I want to request that the IDA keep the public hearing open for…at least an additional 30 days to all for adequate public comment. Several weeks ago my office submitted a FOIL request for all of the IDA’s records relating to the PILOT application. We did not receive a response until approximately 4pm yesterday…my clients are in the process of hiring a third party financial analyst to review the information….to submit this analysis.”
Village of New Paltz Mayor Tim Rogers
(read by City of Kingston resident Jess Mullen)

“On September 15, 2020, the Kingstonian developers published the “Fiction v. Fact” document on their website which stated that “Developers and City officials are comfortable that the increased parking is adequate for peak demand and any excess employee and hotel parking can be accommodated in the adjacent plaza….Please review City of Kingston zoning code §405-34 (J.) “Parking space ratios.” Reading the code and using some simple arithmetic shows how the Kingstonian requires approximately 345 parking spaces (hotel: 34, apartments: 271, commercial space: 40). The developers also stated in their “Fiction v. Fact” document that “without the garage component, there would be no PILOT request as one would not be needed. The PILOT starts and stops with the costs to build, operate, and maintain the parking garage…If the project is only adding 75 (420 minus 345) public parking spaces — not even the 200 that the city asked for in their 2016 RFQ — the UCIDA should take an extra hard look at whether to grant a PILOT to build 75 parking spaces. Additionally, plans include charging users 3x more for parking ($1.50 per hour) than the city charged just a few years ago.”
Ilona Ross, Resident of Olive

“Joseph Bonura is a recipient of two 99-year PILOTS in the City of Poughkeepsie that will deprive that city of billions of dollars. It ought to shock and conscience of any observer that he has dared to come to Kingston and ask for a PILOT.”

The Complication of the Ulster County IDA Recent Policy Change and Public Hearing Date on October 1.

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There has been some confusion about the process for the proposed Kingstonian deviated PILOT, regarding whether or not the agencies (the Common Council, City of Kingston School District Board of Education (KSCD), and Ulster County Legislature (UCL)) must all agree on the PILOT terms in order for it to proceed. The source of that confusion stems from an expedient decision by the Ulster County Industrial Development Agency (UCIDA) to change its rules in ways that benefit the Kingstonian.  

Rose Woodworth, CEO of the UCIDA clarified the question about the process and the Kingstonian deviated PILOT in a recent email: 

  1. In general, the UCIDA has the power to grant PILOT Agreements (and real property tax abatements).
  2. In connection with the granting of tax abatements, the UCIDA has adopted a Uniform Tax Exemption Policy (the “UTEP”).  Under the UTEP, the UCIDA may grant certain levels of real property tax abatements to project applicants.
  3. As has been described both in the IDA Application and in media reports regarding the Kingstonian Project, the real property tax abatement being requested by the project applicant is a deviation from the normal real property tax abatement provided in the UTEP.
  4. As provided in the UTEP, in cases of deviations the UCIDA is subject to the following requirements:

(D) Review by Agency with Affected Tax Jurisdictions. Before the Agency shall enter into a PILOT Agreement that deviates from the policy set forth herein, the Agency shall (1) notify each affected Tax Jurisdiction in accordance with Section 8(A)(2) hereof, and (2) attempt to obtain the written consent of all the affected Tax Jurisdictions to such deviation. In the event that the Agency is not able to obtain the consents of all the affected Tax Jurisdictions to such deviation, the Agency may enter into such a PILOT Agreement that deviates from the policy set forth herein without the consents of such affected Tax Jurisdictions. The provisions of this Section 8(D) shall not apply in situations where the Agency holds title to property for its own account.

“As noted in the above excerpt from the UTEP, the Agency is obligated to get the local approvals regarding the PILOT deviation.  And, as noted in the excerpted language, the UCIDA could, if it is so determined, move forward without the consents of the local jurisdictions.“

In other words, even if the three impacted agencies –Kingston’s Common Council, KCSD and UCL — don’t all agree to support the PILOT and its substantial tax breaks for the developer, the UCIDA may proceed to approve this anomalous PILOT request on their own. In short, the UCIDA – an appointed and democratically unaccountable body – may make a lone decision to approve the PILOT without the consent of all of the impacted tax jurisdictions like the School Board. 

Back in July, the City of Kingston and Ulster County Industrial Development Agency received a letter from Victoria L. Polidoro, Law Offices of Rodenhausen Chale & Polidoro LLP.  Polidoro represents several property owners in Uptown, Kingston. The Polidoro letter informed the IDA that the law did not authorize them to grant the PILOT application.  “As a threshold matter the IDA does not have authority to consider or grant the Application for the Project which includes residential housing units. The IDA’s Housing Projects Policy, which was reaffirmed on January 8, 2020, only allows IDA financing in limited circumstances. It provides that:

A. The Agency will only consider the granting of any “financial assistance” (as defined under the Act) for following projects that provide housing:

  1. (1)  a project that satisfies the definition of a continuing care retirement community project under Section 859-b of the Act; or
  2. (2)  a project by an industrial, manufacturing, warehousing, commercial,research and recreation facility (as defined in the Act) that provides workforce housing for its employees.“

With new information from the Polidoro letter, the IDA appeared to hastily approve a revised policy change a month later on August 12 authorizing their agency to grant tax breaks to “any housing project, or any mixed-use project that includes a housing or residential component, that has received the prior approval from the governing board of Ulster County and each town, village, city and school district in which the housing project is located.”

The UCIDA’s recent process change is troubling for several reasons worth analyzing. Through this policy change, the UCIDA has empowered and entrusted itself to unilaterally give away $30 million to wealthy real estate developers during a pandemic irrespective of the judgements of the very elected officials representing the jurisdictions impacted by the subsidy. The IDA itself is an appointed body and, therefore, democratically unaccountable, making their rule changes and subsidy granting power all the more offensive to the principle of procedural fairness. The damage done to due process by public officials who pledge to uphold the public interests is deeply corrosive, undermining a sense of trust at the core of good local government. We should demand more from those who represent us. At a minimum, citizens should expect that governing rules are clear, consistent and fair to all parties. Any changes to procedure should never benefit one party over another in the middle of a highly contentious process.

To make matters worse, the UCIDA has scheduled their required public hearing on the proposed Kingstonian PILOT, on October 1st, prior to the KCSD vote, which may take place on October 7 (or the 21). The UCIDA’s public hearing is also scheduled ahead of the UCL vote on October 20.  By scheduling the public hearing before the other agencies (KCSD and UCL), the UCIDA prevents concerned taxpayers from addressing their members should either of the two remaining agencies reject the PILOT agreement for the Kingstonian.  The UCIDA members have effectively foreclosed public comment following the votes of those other affected agencies, precluding an opportunity for the public to question them and advocate for fairness. 

Take Action

Thursday, October 1st at 7:00pm
The Ulster County IDA public hearing on the Kingstonian PILOT will occur remotely. Please LIKE our facebook event to learn more about how you can participate. 

The Kingstonian Project PILOT Needs Independent, External Analysis to Review Economic Assumptions Before Approving $30.6m over 25 years

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The Kingstonian is a proposed $58 million dollar project. It promises 129 high-end units (to date, rents will range from $1,500 – $2,850), 14 affordable units (with Area Median Income (AMI) based on Ulster County, nearly ⅓ higher than the City of Kingston), a 32-room luxury boutique hotel (across from the Senate Garage which hosts “…dozens and dozens and dozens of wedding events each year”), 9,000 square feet of retail space and a 420 parking space complex.

The developer is asking for a payment in lieu of taxes (PILOT) agreement where they will pay nominal taxes for 25 years; a subsidy worth approximately $30.6M, in exchange for a temperature controlled parking garage that will primarily serve its high end tenants and luxury boutique hotel guests.

Over and over again, the Mayor of Kingston, members of the Common Council and the developers tell us that Kingston needs this parking garage and that, with a PILOT, it could be built at “no cost to taxpayers.”  If a PILOT allows a developer to defer their real mortgage, property, school and sales tax, how does their project come at no cost? 

The City of Kingston missed both of its opportunities to request an independent, external analysis of the Kingstonian developers’ economic assumptions. The first came during the State Environmental Quality Review (SEQR) that ended last December and the second during the recent common council special finance committee meeting in July.  The developers’ revenues which they call ‘trade secrets’ were not disclosed to the public, when the PILOT terms were approved by the full council in August.  The public needs to know the profit margin or the “trade secrets” in order to determine whether to approve the PILOT.  

With two agencies still left to vote on the council’s PILOT terms, the developer is making another attempt to persuade members of the Board of Education (BOE) and Ulster County Legislature (UCL) to support the PILOT, with a public action form letter crafted without any real substance.  “The PILOT will provide tax relief and public benefit at no cost to taxpayers.” There it is again.  “No cost to taxpayers.” The developer also claims that “…they have worked with Kingston City officials and the IDA Board to ensure that the dollar value of the public benefits of the Kingstonian outweigh the PILOT at zero cost to taxpayers.” But without an independent, external analysis to review their economic assumptions, the tax paying residents of the City of Kingston and Ulster County will never know. 

In their letter, the developer claims “…that the benefits of the project include twice the public parking, 129 market rate apartments, 14 affordable apartments, 30 hotel rooms (when it is actually 32), an outdoor public pedestrian plaza/gathering space, long-desired public restrooms, 300 + new consumers to the marketplace offering immediate relief to the business district and generating much needed sales, occupancy, and property tax revenue, and an estimated 153 new jobs.” But the developer still isn’t able to pin down the number of parking spots they need for this project, even though the City of Kingston’s zoning code says that nearly 313 of their 420 newly created parking spots will be required to serve their high-end apartment tenants and luxury boutique hotel guests leaving us with approximately 107 public parking spots, fewer than the 144 parking spots that we currently have now.  Even with a waiver to allow them to provide less, there will now be an influx of people –  tenants, hotel clients, uptown businesses and residents all vying for parking.  They assert that the overflow can park across Schwenk Drive if their garage is full.  So why is the public being asked to fund a parking garage when they may be losing parking spaces, charged higher fees and possibly not able to find a spot to park in the temperature controlled lot anyway.

As for affordable housing, the 14-units that various politicians claim credit for was due to the hard work of advocates that pressed the matter and won. The developer ended up making the concession but expanded the size of their complex, making their original 129-unit project even larger, with a whopping 143-units in the center of Kingston’s historic uptown.  As reported earlier, it appears that the developers are following the Area Median Income (AMI) not for the City of Kingston ($48,186) but for all of Ulster County ($69,539) that could make those starting rents nearly ⅓ higher.  

As for jobs, they promised 40 full time positions in their application. However, 84% of them were based on a single person’s salary, at $20.73 per hour. This is insufficient income for anyone raising a child, and certainly not enough to rent a one-bedroom apartment in the Kingstonian (or nearly anywhere else in Kingston.) 

The developer claims that “…this project comes at an opportune time when our local economy is in need of job creation, both affordable and market rate housing, and sales tax revenue.  The project also creates an immediate economic boost from the construction phase and revenue from the new taxes that will be generated.”  But we know that the PILOT request is coming at the worst possible time, in the midst of a global pandemic, and when our local, county, and state economic futures are unclear.  In early summer, the City of Kingston, in preparation for a hit to their budget, began furloughing and cutting some of its workers. Tax revenue for Ulster County is unknown and the state may hold back state aid for the City of Kingston School District by 20%, while residents’ school tax bills have increased.  Our Mayor and Common Council endorsed the loss of revenue at one of the worst economic moments in the City’s history without requesting an independent, external analysis to review the developers economic assumptions to understand whether or not the immediate or long term benefits are worth the PILOT investment.

The developer says that “…this project was initiated by the City of Kingston, and is a true partnership between the City, School, County, State and the citizens of our community and that without this partnership the project is not fiscally feasible and the taxpayers will lose the multitude of community benefits and added revenues it brings.”  But in our opinion, a true partnership includes a developer who stands to make a windfall in the City of Kingston paying their fair share of taxes.  Some community members have asked if it’s even wise for a project to proceed when a project like this isn’t ‘fiscally feasible’ without a $30.6 million dollar PILOT.  The proclaimed community benefits are a temperature controlled parking garage (that the developer needs more than we do to serve their high-end apartment tenants and luxury boutique hotel guests), a couple of public bathrooms, a pedestrian plaza with a water feature, an internship to train their future $15.00 per hour wage workers and a walkway over Schwenk Drive. Is that the way we want to invest our hard earned, finite tax dollars?

As a public/private partnership, we think our community deserves more information before it decides on the $30.6 million dollar PILOT. We encourage our elected officials at the BOE and UCL to be responsible and request that an independent, external analysis is performed to review the Kingstonian’s economic assumptions to be reviewed in turn by all tax paying residents living in the City of Kingston and Ulster County. 

RESOURCES

READ: The Kingstonian Project will require 343.5 parking spaces per Kingston’s zoning code

CALL TO ACTION:

We encourage all community members to draft their own letters to decision makers of the Kingstonian PILOT asking for an independent, external analysis of the Kingstonian’s economic assumptions and the feasibility of a $30.6 million dollar PILOT.

City of Kingston Board of Education

jshaughnessy@kingstoncityschools.org
sspicer@kingstoncityschools.org
ccollins@kingstoncityschools.org
hlamb@kingstoncityschools.org
plowe@kingstoncityschools.org
rjacobowitz@kingstoncityschools.org jmichael@kingstoncityschools.org
sjordan@kingstoncityschools.org
nscherer@kingstoncityschools.org ppadalino@kingstoncityschools.org

Ulster County Legislature and County Executive

Chair@co.ulster.ny.us
vfab@co.ulster.ny.us
Mary.Wawro@co.ulster.ny.us
Albert.Bruno@co.ulster.ny.us
Dean.Fabiano@co.ulster.ny.us
Brian.Cahill@co.ulster.ny.us
Abe.Uchitelle@co.ulster.ny.us
Peter.Criswell@co.ulster.ny.us
Laura.Petit@co.ulster.ny.us
HLitts3@aol.com
MaryBeth.Maio@co.ulster.ny.us
Thomas.Corcoran@co.ulster.ny.us
Kevin.Roberts@co.ulster.ny.us
Ken.Ronk@co.ulster.ny.us
Craig.Lopez@co.ulster.ny.us
John.Gavaris@co.ulster.ny.us
Tracey.Bartels@co.ulster.ny.us
James.Delaune@co.ulster.ny.us
Heidi.Haynes@co.ulster.ny.us
MannaJo.Greene@co.ulster.ny.us
Eve.Walter@co.ulster.ny.us
Lynn.Archer@co.ulster.ny.us
John.Parete@co.ulster.ny.us
LegislatorHeppner@gmail.com
exec@co.ulster.ny.us

JOIN US. Please ‘like’ our facebook events to keep up-to-date on Kingstonian PILOT public hearing and potential votes in October. 

Thursday, 10/1/20 @ 7:00pm   FACEBOOK EVENT
The Ulster County Industrial Development Agency  (UCIDA) Kingstonian PILOT Public Hearing 

Wednesday, 10/7/20 @ 7:00pm  FACEBOOK EVENT
The City of Kingston Board of Education may vote on the Kingstonian PILOT. 

Tuesday, 10/20/20 @ 7:00pm  FACEBOOK EVENT
The Ulster County Legislature may vote on the Kingstonian PILOT. 

“PILOT agreements are harmful to local governments and school districts, especially now.” The Village of New Paltz Pass a Position Statement on the Kingstonian PILOT.

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At tonight’s Village of New Paltz Joint Board meeting, the village board passed passed a position statement on Housing and Payment-in-lieu-of-taxes (PILOTS).

The Position Statement was split into two pieces. “First, a comment on the formula as to why PILOTs are problematic because of the NYS tax cap law, and a housing project like this does a great job at illustrating just how problematic the way the law is currently written.” said Village of New Paltz Mayor Tim Rogers. ” It’s such a problem that over the last several years, there have been many bills to try to fix it. Several years ago, it was passed by the Senate and Assembly, but was vetoed by the Governor Cuomo. It’s a formula problem and harms the taxing authorities, and is why a municipality would never agree to a PILOT…when you construct new housing, you are going to end up with additional responsibility and expenses as a taxing authority, especially if you are a school district.”

Mayor Rogers went on to explain, “If you build 100 new units that have “x” number of bedrooms, you’ll have “y” K-12 age children. It’s just math, it’s what happens when you add units to any community. The way sales tax law is currently formulated, you end up with new units and the schools district has no way to increase their budget to accommodate the additional demand on their school district. It’s a fundamental flaw.”

Deputy Mayor KT Tobin agreed. “Unless it’s for affordable housing, I don’t think PILOTs are good public policy. I thought five years ago that they’d be dead by now, because promises for jobs did not materialize. The lack of clawbacks and systematic accountability mechanisms has well demonstrated the failures of PILOTS. And now that we’re in COVID – a pandemic – I can’t even wrap my head around asking for buy-in from property tax payers right now given the cuts we are looking at and the fiscal cliffs that school districts and municipalities are facing. It appears to be a combination of denial and lack of awareness that this is not the right time for this and my municipality will be impacted as well.”  

During the meeting, Ulster County Legislator Eve Walter (District No. 20 – Town of New Paltz, Village of New Paltz) confirmed that “…typically the Ulster County Industrial Development Agency (UCIDA) has the capacity to approve or disapprove PILOTs on their own unless the entity is seeking a deviated pilot. In this case, the Kingstonian developers ARE seeking a deviated PILOT and that means that all three agencies would need to approve the terms (the City of Kingston, Board of Education and Ulster County Legislature). If any one of them do not, it would be a stop.” Legislator Walters later added, “This is about equity and taxes. This is about being one community.”

Read more…

KingstonCitizens.org Letter to Kingston Common Council Finance and Audit Committee and the Kingstonian PILOT

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By Rebecca Martin and the KingstonCitizens.org Advisory Board

Dear Members of the Kingston Common Council Finance and Audit Committee,

On Tuesday of next week, the Kingstonian development team will submit an incomplete deviated Payment In Lieu Of Taxes (PILOT) agreement to you for discussion. Council committee members will be in a position to either pass it out of committee for a full council vote in August or table the matter. We urge the Council to table the proposal thereby allowing time for the Finance and Audit committee to workshop the incomplete agreement. 

By requesting a special Finance and Audit committee meeting outside of the regular monthly scheduled time, it suggests that the Mayor wants the Council to make a swift and ill considered decision. As the direct representatives of Kingston taxpayers, we expect that his request will not pressure you. Council members must thoughtfully and carefully review the proposal so that the sacrifices being requested of the public are clear before approving the deviated pilot. 

If the PILOT is approved unchanged, the loss of potential tax revenues to our city and school budgets for mostly luxury and boutique hotel parking could simply devastate our already fiscally strained community.  We implore you to be keenly aware of your responsibility in assessing the value of the PILOT especially during a time of pandemic induced budget cuts because once approved there will be no going back. 

1. THE INDUSTRIAL DEVELOPMENT AGENCY (IDA) MAY NOT BE AUTHORIZED TO GRANT THE KINGSTONIAN PILOT APPLICATION.  In a letter submitted to the IDA on July 17, 2020,  Victoria L. Polidoro, a lawyer who represents several property owners in Uptown, Kingston, points out that the IDA is not authorized to grant the application.  “As a threshold matter the IDA does not have authority to consider or grant the Application for the Project which includes residential housing units. The IDA’s Housing Projects Policy, which was reaffirmed on January 8, 2020, only allows IDA financing in limited circumstances. It provides that:   A. The Agency will only consider the granting of any “financial assistance” (as defined under the Act) for following projects that provide housing:  (1)  a project that satisfies the definition of a continuing care retirement community project under Section 859-b of the Act; or (2)  a project by an industrial, manufacturing, warehousing, commercial, research and recreation facility (as defined in the Act) that provides workforce housing for its employees.“ By approving the PILOT agreement now, the Council may be taking action prior to being certain that the IDA can legally authorize the PILOT request. 

2. THE IDA SHOULD NOT CONSIDER THE APPLICATION UNTIL THE PENDING ARTICLE 78 IS RESOLVED.  Included in Polidoro’s letter, she states that, “The IDA should refrain from acting on the application until the pending SEQRA litigation is resolved, as any decision it makes may thereafter be invalidated.“  

3. THE CENTERPIECE OF THE DEVELOPER’S LUXURY APARTMENT PROJECT PILOT IS A PARKING GARAGE. According to the Kingston zoning code, the minimum number of spaces needed to serve the Kingstonian project (for luxury housing, a boutique hotel and retail space) is 313 parking spaces. The proposed parking garage with 420 parking spaces is insufficient to replace the existing 144 public parking spaces stated while providing for an additional 313 parking spaces needed by the Project.  The Project will therefore result in a net loss of publicly available parking spaces. In addition, the Kingstonian will set the parking rates. Is the Kingston community, which may not be able to afford the air conditioned parking rates or find an available less costly, metered  spot, expected to otherwise park in the Kingston Plaza parking lot? 

4. AT A TIME OF FINANCIAL CRISIS WHEN THE CORONAVIRUS PANDEMIC HAS LED TO CUTS IN CITY SERVICES AND JOBS, LOSS OF TAX REVENUE COULD BE SIMPLY DEVASTATING.  While the intricacies of the IDA, real estate investment, and PILOTs are complex, what should be clear is that the proposed Kingstonian PILOT deal could potentially harm the least well off in the city as well as hardworking taxpayers who already struggle to pay school and property taxes. For Council members who have advocated for social justice in housing, services for the poor, and children in need, the PILOT should be particularly worrisome. While not all PILOTs are exploitive, they must be balanced against the potential gains an investor or industry may bring to the area. The cost of the PILOT may be offset by community gains that have not yet been realized and won’t come to fruition until after the investment. Those gains may be larger than the PILOT subsidy. For example, if you averaged each Kingstonian luxury apartment to cost $1,800 per month x 129 without including the affordable housing, that’s $2.8 million dollars per year gross revenue just for apartments. Over 25 years, that’s $69.6 million dollars plus the additional grants and tax incentives. The PILOTs that cause concern, which is true in this case, are those structured to eliminate the investor’s financial risk while displacing that risk on to taxpayers. While every investor would like to eliminate risk, ordinary citizens aren’t able to shape the political landscape to achieve their preferred financial ends. Furthermore, new residents and businesses will be adding costs to the City’s budget for things like police, fire and sewer maintenance. These costs are normally covered by property taxes. For all of these reasons, their proposed $30.6 million dollar subsidy deserves increased scrutiny for the actual benefits to the city. 

5. AFFORDABLE HOUSING UNITS IN THE KINGSTONIAN PROJECT ARE NOT BOUND BY NYS RULES.  The 14 affordable housing units that developers inserted into the Kingstonian project after much outcry were not a concession. The developer added another floor to include the additional units, now making more money: the project became even bigger without the developer sacrificing anything in terms of profit. Additionally, the developer, as a private investor, will create these units without state tax credits and will therefore not be bound by state rules. Without a binding agreement (that outlines the units’ starting rent, their size and annual escalator rate), there is nothing to prevent the affordable units from escalating in value. The Kingstonian’s “affordable housing” could become luxury apartments at any time. The PILOT agreement can and must stipulate their affordable housing criteria. 

6. KINGSTON RESIDENTS PAY SCHOOL TAX IRRESPECTIVE OF WHETHER THEY HAVE CHILDREN WHO ATTEND PUBLIC SCHOOL BECAUSE EVERYONE BENEFITS FROM AN EDUCATED POPULACE.  The Kingstonian development team says that it anticipates minimal impact on the Kingston City School District as a similar project of theirs in Poughkeepsie has produced no school-aged residents. Following this logic, anyone without children in the public school system should not be required to pay school taxes. 

7. THE KINGSTON COMMON COUNCIL DECISION IS BEING MADE WITHOUT FULL TRANSPARENCY EVEN THOUGH THE OUTCOME WILL AFFECT THE LONG-TERM FINANCIAL HEALTH OF THE CITY.   As pointed out in Polidoro’s letter to the IDA, even if the IDA has authority to approve the application and the Applicant could demonstrate that additional parking spaces would be created, the Application lacks sufficient information on the Project’s finances. The Applicant alleges that the costs of constructing the parking garage total approximately $16.8 million which, after financing, would purportedly result in annual costs of $1,067,000 over 25 years. However, it is unclear if these cost estimates are accurate. The data supporting the Applicant’s calculation has not been publicly posted. The Council should request that the IDA release all data provided and engage an independent consultant to audit the Applicant’s estimated costs to determine their validity. If the agreement truly benefits the community, the data will prove it. 

8. NYS DOWNTOWN REVITALIZATION INITIATIVE (DRI)  The applicant has said that if the PILOT is not approved, then the project will not go forward and the grant funds awarded to the Kingstonian project (or the entire amount, it isn’t clear) through NYS’s Downtown Revitalization Initiative (DRI) grant will be revoked.  Has the city confirmed with the State that this is true? Could the grant funding for example, if not used for the Kingstonian project, be transferred to one of the unfunded grant projects proposed in the DRI application? 

RESCOURCES

READ: The Kingstonian PILOT – There is more at stake than just parking