The IDA and the Proposed Hotel

When the developer of 620 Union Street, the home of Robert and Sally McKinstry which for more than a century was the Home for the Aged, first appeared before the IDA (Industrial Development Agency), it was February, and people were still able to gather in rooms for meetings.

Yesterday, seven months later, it was expected that the IDA would vote on whether or not the project would be granted the financial incentives it sought: exemption from mortgage tax; exemption from sales tax on materials purchased in the development of the hotel; and a property tax abatement in the form of a PILOT (payment in lieu of taxes) agreement which would run for eleven years. Given that expectation, Christine Chale, legal counsel to the IDA in this matter, had prepared two resolutions: one granting the tax abatements sought; the other denying them. Neither was voted on. Instead, the members of the IDA present--Tiffany Garriga, Rebecca Wolff, John Cody, Heather Campbell, and Kamal Johnson--decided they weren't happy with the terms of the PILOT agreement.

Under the terms proposed, the hotel would pay $41,564 a year, the amount of taxes currently paid on the property, for the first three years of the agreement. In Year 4, the amount would increase to $49,877 a year; in Year 6, it would increase to $58,190 a year; in Year 8, it would increase to $66,503 a year; in Year 10, it would be $74,816; and in Year 11, it would be $83,129. During the eleven years of the PILOT agreement, the hotel would pay a total of $631,777. After the eleven years, the hotel would pay the full amount of property tax based on the assessed value of the hotel. 

Yesterday, city treasurer Heather Campbell expressed concern that there were "no growth assumptions in the PILOT." She said she was in favor of the project but was concerned that the proposed PILOT agreement assumed "no increase in assessment or tax rate" during the eleven years. She argued that the PILOT agreement could be "more aggressive and still be favorable" and cautioned "the jump from Year 11 to Year 12 could be tremendous."

Joe Scott, attorney for the hotel project, responded by saying that "typically the starting point is much lower," but they were "starting at a relatively high rate." He added, "We recognize that there will be a jump at the end." He questioned why, "after reading the Camoin report," there should be "any concern about benefit" of the project to the city.

In defending the proposed PILOT agreement both Scott and David Kessler, the developer, made reference to the PILOT now in place with The Wick. Scott said the numbers they were proposing "reflect the structure of the PILOT for The Wick." Kessler said that The Wick, now up and running, is paying $30,000 a year in taxes, whereas they were proposing to pay more than that during the construction period. Because the PILOT for The Wick figured in the discussion of the PILOT proposal now under consideration, it is useful to review the terms of that agreement. The PILOT for The Wick was approved in June 2016. In Year 1, the tax payment was $20,000. (It will be remembered that before Redburn Development acquired the property it was owned by a not-for-profit and hence was off the tax rolls and paid no property taxes.) In Year 2, the tax payment was $25,000. Beginning in Year 3, the tax payment increases by $9,375 every year until it reaches $100,000 in Year 10, the year the PILOT agreement expires. By my calculations, The Wick is now in Year 4 of its PILOT agreement, and its payment in lieu of taxes is now $43,750.

Correction: Although the PILOT agreement for The Wick has approved in June 2016, it did not begin until January 2018. The Wick is now in Year 3 of its PILOT, and the payment in lieu of taxes for 2020 was $34.375.

Scott urged the IDA to look at "the package as a whole," stressing the developer's commitment to jobs, job training, and job levels. "Those have some costs that will be borne by the developer," he noted. He went on to say, "Undertaking a project of this magnitude is a severe risk to the developer." He stressed the level of benefit to the level of cost in forgone revenue and maintained that the proposed PILOT structure was not out of line.

Although Scott said they were hoping for a decision so they could close on the property, Garriga, who chairs the IDA, said the treasurer's concerns were being "backed up by the board" and she wanted them addressed. Chale advised that restructuring the PILOT would have to happen before a vote could be taken. Johnson said he wanted a special meeting to review the numbers. And so it was decided that the IDA would hold a special meeting to review a restructured PILOT agreement.

The date and time of the special meeting have not yet been announced, but Wolff requested that a second topic be added to the agenda for that meeting: the specific population to be addressed by the proposed workforce training. She suggested that the population to be trained and hired by the hotel "must be defined as lifetime residents of Hudson in danger of displacement because of rising housing costs." She also spoke of the inability to secure full-time employment.

COPYRIGHT 2020 CAROLE OSTERINK