All PILOTs Are Not the Same

Earlier this week, while walking Joey in the neighborhood, I noticed this handbill tacked to a utility pole. When I returned to the spot the next day, with the intention of taking a picture of the handbill in situ, I found it had been blown off the pole in the night. So I picked what was left of it and brought it home.

  
The author of this handbill, be it an individual or organization, is not identified, but the intent is clear: to muster opposition to the Galvan Foundation's proposal for 75 North Seventh Street. Under the head "Don't be fooled. Know the facts," here is the information that is presented. (The underscoring, boldface, italics, capital letters, and color have all been faithfully replicated.)

1. Galvan is the largest private owner of properties in Hudson with nearly 100 properties, many of them vacant. If Galvan cares so much about affordable housing, why not put some of that existing stock on the rental market right now?
2. Handing a TAX BREAK to the wealthy & powerful at a time when we are facing a massive budget shortfall means that regular people in Hudson would have to make up the difference. Taxes go up, making Hudson less affordable for those of us who live and pay our fair share here.
3. Instead of hiring contractors, builders, electricians, and plumbers from the community, Galvan uses its own work crews -- who take their orders from Galvan, ignoring Hudson's building codes and safety regulations. This means fewer jobs for Hudson and buildings that are poorly constructed and UNSAFE.
4. Galvan has a long track record as a negligent landlord in Hudson. How good is "affordable" housing if the electricity constantly goes out, the ceilings leak, there is mold, or the landlord is nowhere to be found when the pipes burst?

Regarding the assertions made in the handbill: Over the years, Gossips has documented the acquisition of Hudson property by Galvan, and although 100 may be rounding the number up a bit, it is not rounding it up by much. Gossips has no firsthand knowledge or experience to confirm the third and fourth claims, but the one sticking in most people's craw is the second one: the tax break. Nearly half the City's revenue--the money needed to run the city--comes from property taxes, and many property owners in Hudson struggle with the burden of taxes, most of which goes not to the City of Hudson, which gets about 29 percent of what is paid in property taxes, but to the Hudson City School District, which gets more than 51 percent of property taxes. So, the idea that this building, which will have 77 apartments, will pay $80,000 a year in a PILOT (pilot in lieu of taxes) agreement, when the average homeowner in Hudson is paying between $10,000 and $15,000 a year in property taxes, strikes most as totally unacceptable. 

When it was announced that the Benjamin Center for Public Policy Initiatives was doing a study of the proposed PILOT, some hoped the study would examine the impact on our small city of 77 households requiring city services and not paying their fair share in property taxes to support the commonweal. Instead, the study merely demonstrated that the PILOT was in line with PILOTs for similar projects in Kingston, Poughkeepsie, and Newburgh, all much larger cities, and suggested that the City might want to extend the PILOT to 50 years, the period of time the building is required to remain affordable housing by the Low-Income Housing Tax Credits program, because, at the end of the PILOT, Galvan could take the building off the tax rolls altogether. 

The acronym PILOT is a dirty word to many people, and the lore of Hudson contains tales of bad PILOT agreements in the past that failed to deliver the benefits promised. But it is important to remember that all PILOTs are not the same. Recently, a reader pointed out to me that Bernie Sanders used PILOTs to redevelop Burlington when he was mayor of that city. 

Right now in Hudson, there are two PILOTs being considered: the PILOT for the proposed Galvan project on North Seventh Street, which is being considered by the Common Council; and the PILOT for the proposed hotel at 620 Union Street, being considered by the Hudson Industrial Development Agency (IDA). Recently, Mayor Kamal Johnson, who sits on the IDA, made this comment on Facebook, in a thread about the PILOT being proposed for the Galvan project.



The mayor's comment seems to imply that the two PILOTs are comparable, but let's examine the two projects to understand what's being proposed. 

Investment  The hotel project represents an investment of $14 million in the City of Hudson, and the financing is being done without any state or federal money. The Galvan project is expected to cost $22 million, but, as Alderman John Rosenthal (Fourth Ward) noted at the last Common Council meeting, Galvan is only investing $500,000 in the project. The rest is coming from state and federal programs, all of which involve tax dollars. 

Job Creation During Construction  The hotel project drew from Hudson, Columbia County (Chatham and Philmont), and the Capital District (Troy and Albany) for its architect, landscape architect, engineers, and kitchen design consultant. The developer intends to hire a construction manager who will commit to hiring local workers. When it was announced in November 2019 that the Galvan Foundation had won a $1 million Buildings of Excellence Award from NYSERDA for the building being proposed for the east side of North Seventh Street, River Architects in Cold Spring were the architects who came up with the winning design. Presumably, they are also the architects for the building proposed for the west side of the street. Galvan has provided no information about firms that would be involved in the construction of the building.

Job Creation After Construction  The hotel project will create thirty full-time jobs, and the developer has committed to hiring at least fourteen Hudson residents for those jobs. He has also committed to coordinating with Columbia-Greene Community College in hiring and training and to provide in-house training. So far, it seems the only long-term job to be created by the Galvan project is that of building superintendent, who will reside in the building.

Financial Contribution to the City  It is predicted that the hotel will bring to the City a total of $54,980 in sales tax--$22,441 from the hotel operation and $32,539 from other spending in Hudson--and $118,625 in local lodging tax. The financial contribution in sales tax from the 77 households residing at 75 North Seventh Street is likely to be small by comparison, since, after rent, the biggest expense in a household budget is typically food, and much of the money for food will be spend in Greenport not Hudson.

The PILOT Structure and Duration  The PILOT being proposed by the developer of the hotel at 620 Union Street will begin at $41,564 a year and remain at that amount for the first three years. In Year 4, it will increase to $49,877 a year; in Year 6, it will increase to $58,190 a year; in Year 8, it will increase to $66,503 a year; in Year 10, it will be $74,816; and in Year 11, it will be $83,129. In the duration of the PILOT, the hotel will have paid $631,777 in property taxes, which will be divided up among the city (29 percent), the county (20 percent), and the school district (51 percent). But the PILOT will end after eleven years, and from then on, the taxes will be levied on the assessed value of the hotel.

The PILOT for the proposed Galvan project would be $80,000 in the first year and increase by 2 percent each year for the duration of the PILOT, which is now thirty years. At that rate of increase, the PILOT payment in Year 30 will be $142,067. But, thirty years from now, when the PILOT is over, the building will very likely not start paying taxes as other buildings in the city do. As the Benjamin Center study pointed out, after the end of the PILOT, Galvan could take the building off the tax rolls altogether because it fulfills its mission as a not-for-profit. Alderman Dominic Merante has been pressing for a commitment that Galvan will not take the building off the tax rolls at the end of the thirty years, but the best assurance he has managed to get from Dan Kent is the statement that Galvan "was completely onboard with entering into another PILOT when this one is up."

The decision about the two PILOTs isn't either/or. Both PILOTs could be accepted, or both could be rejected. But if the two are going to be spoken of as if they are comparable, it is important to be clear what each involves.

An independent group in Rochester is now doing a cost-benefit analysis of the PILOT proposed for the hotel, which may be ready for review by the IDA at its next meeting, which takes place on Tuesday, August 11, at 1:00 p.m.

On July 21, a resolution in support of the PILOT for the proposed Galvan project failed to get the six affirmative votes needed to pass in the Common Council; it came one vote short. It is expected that the resolution will be brought back this month. The Council's informal meeting takes place on Monday, August 10; its regular monthly meeting takes place on Tuesday, August 18. Both meetings are at 7:00 p.m.
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