Last week, the plans for the second Depot District building, 75 North Seventh Street, came before the Industrial Development Agency (IDA) seeking a PILOT (payment in lieu of taxes) and other tax benefits. It will be remembered that this was to be the low-income building in this Galvan development which was originally to be "mixed income." The opportunity to finance the building with state money was lost when Galvan demolished the three houses on the site before funding had been secured for new construction. Now what is being proposed is a 75-unit building: 15 units will be reserved for households with incomes less than 80 percent of the AMI; 5 units for households with incomes less than 130 percent of the AMI; the rest of the units will be market rate.
This chart from Galvan's application to the IDA shows the proposed rents for the units in this building--those for households with incomes up to 80 percent of the AMI and market rate. (Click on the image to enlarge.)
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Galvan is seeking a twenty-year PILOT for this building. In presenting the proposal, Dan Kent of Galvan spoke of "urgently needed housing" and argued that the risk to investors was greater because Hudson was not a major metropolitan area and "in order to get investors to take the risk, they need to see an appropriate return." BJH Advisors, the consultants hired to do a financial review of the application, determined that the project could support a shorter PILOT and are recommending the length of the PILOT be fifteen years not twenty. (The building across the street, 76 North Seventh Street, has a twenty-year PILOT.) Charles Millar, who is the community member of the IDA, asked, "Is the project viable without the assistance of the IDA?" Kent answered simply, "No."
Margaret Morris, who as Common Council majority leader serves ex officio on the IDA, spoke of a matrix for assessing the actual cost to the city of new development, considering the costs associated with increased population. She also noted that the building is to be more than 70 percent market rate, commenting, "It's not so clear why there needs to be public investment."
The next meeting of the IDA takes place on Wednesday, February 5, at 9:30 a.m., at One City Centre, Suite 301, and on Zoom.
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At some point Hudson needs to come up with an equation that determines what amount of below market housing qualifies for what amount of pilot years. Something transparent, equally applied, and thoroughly debated. Deals like these where the benefit of meager affordable housing provided is minimal to negligent should not reap an astonishing 25 years of no tax revenue. If they are developing market rate housing treat them like a developer and collect your tax revenue, there should be no civic contribution to developers making millions as a developer, your in business to do that, it’s in no way altruistic. In the words of Don Draper, “that’s what the money is for!”
ReplyDeleteExactly! Why isn’t there a clear, published formula, or set of guidelines, for how a project can qualify, or not, for a PILOT? The current approach is ad hoc, inconsistent and lacks transparency. It is unprofessional and even if there isn’t any actual abuse (I’m not in a position to judge) the possibility of favoritism is obvious and troubling.
DeleteHow will city services and the schools support all of these tenants without the tax money that should be coming from these units? If this project is given a PILOT, what other income would be provided to the city if this goes through?
ReplyDeleteIt's interesting that the other market rate housing project, on the boulevards/Fairview, doesn't seem to need a PILOT . . . as it gets continually delayed and nibbled away at by the Planning Board. How desperate is our housing need if the PB can't perceive it?
ReplyDeleteI was always curious about the specifics of a given PILOT and how much the city actually loses out on them.
ReplyDeleteI finally found it on the IDA website, at least with respect to this 75 N 7th St project: Instead of the projected regular property tax payments of $3.97m over 30 years, they - if the PILOT gets approved - will be paying only $1.28m.
This is from the impact study that Galvan had commissioned. It's worthwhile pointing out that that study is from July 2021 and there's some reason to believe that now in 2025 the estimated assessed value used in the property tax projection would be higher. It also explains why that study is talking about 30 years rather than the 24 year runtime that is being discussed now.
Needless to say, the impact studies (there's more than one) still find a way to spindoctor this into something that is hugely beneficial for Hudson. I remain doubtful.
Above mentioned PDF with the financial implications laid out on PDF page 13: https://cms3.revize.com/revize/hudsonnynew/Report%20-%20July%20Impact%20of%2075%20N%207th%20Street%20Project%20-%20Galvan%20Foundation%20(1).pdf
The building that was proposed in 2021 is quite different from what is being proposed now--not in appearance so much as in income makeup. It's a brand-new application before the IDA. You should probably take a look at the report from BHJ, which can be found here: https://cms3.revize.com/revize/hudsonnynew/Hudson%20IDA/HIDA%20mtg%20pkt%201%2022%2025%20revised%202.pdf--beginning on page 60.
DeleteOne thing that those seeking PILOTs from the IDA often do is compare the tax revenue currently generated by the site with the tax revenue from the project with a PILOT. In the case of 76 North Seventh Street, it was a cinderblock warehouse. In the case of 75 North Seventh Street, it was three single-family houses and is now a vacant lot. Of course, that argument assumes that if their project doesn't go forward, no other project will ever be proposed for the site.
I did notice there were several impact studies. I must have picked the one I found most readable.
DeleteThe most recent PILOT in the document you linked seems just as bad a deal for Hudson. It's also backloaded where very little money comes in initially. In the tenth year it's only up to 25% of what the actual property tax would be.
All that for 15 units at 80% AMI.
That's how PILOTs are typically structured. The payments increase incrementally over the life of the PILOT until they finally reach 100 percent of the assessed tax. A 95 percent exemption for the first three years, however, seems unusual, in my limited experience of watching the IDA, and inappropriate for what is essentially a market rate building.
DeleteI agree with the peanut gallery above. I think we can all reasonably debate the need and how much the city can afford to subsidize below market housing as well as standardizing a Pilot structure. But this is clearly Galvan asking current taxpayers to subsidize an overwhelmingly market rate development. And the suggested market rents they put down are merely what they are willing to share now. They will definitely be higher if this second building is built and there’s nothing to stop them, not the IDA or the flawed Good Cause Eviction law that targets small landlords but leaves the door wide open for all of these new mega developments. I wonder when they’ll start advertising the rents on the first, soon to be done building?
ReplyDeleteBuild more housing, there is demand, Hudson is a smart investment. Charge what you want. But don’t ask the rest of us to fund your luxury lofts that seem so cold inside that everyone in your marketing photos are wearing beanies.
P.S. any member of the IDA who has a tenant-landlord relationship with Galvan should recuse themselves or publicly disclose their current and prior leases with Galvan since holding an office of public trust
💡 R.I.O.T. is better than P.I.L.O.T. 😜
ReplyDeleteResidents in lieu of (non-resident) Tycoons > Payment in lieu of Taxes.
Wouldn't it be wiser to give everyone an equal tax break or don't give tax breaks at all? Didn't the city have to take ~$1m from its rainy day fund last year to cover the budget deficit?
📉 Certainly unwise to give very wealthy entities tax breaks and not regular resident families or local SMB / resident property developers?
≠ Maybe I am missing something… but it is also inconsistent to give select PILOTs (tax breaks) to one or two rich entities all the time to incentivize investment in housing… months after passing Rent Control/Good Cause Eviction laws, which disincentives bottoms up investment in housing.
The implication is that you are encouraging one big developer, and you are discouraging many smaller and medium developers from developing different types of housing.
[ I guess in Galvan's defense they do have a portfolio of different types of housing? But it is still pretty concentrated ownership for a small town.]
The reason why many Americans fawn over European towns is because they emerged more organically without the extreme bar bell of American suburbia on one end and urban high-rises / superblocks on the other.
Good book on this topic: https://missingmiddlehousing.com
What is the good faith argument for another PILOT for Galvan? Former Mayor Rick Scalera, if you are reading this maybe you can share the counter argument in good faith? Would love to understand the reasoning. I ask you (a current County Supervisor and former mayor, because you have previously supported PILOTS in public, and if I am not mistaken work (or worked) directly with the Galvan Foundation/entities today?).
❓Separately… it is suspicious / curious that said largest recipient of PILOTS (Galvan) is the landlord of Mayor Kamal and other local political leaders. This remains an issue of public trust and a conflict of interest.
Oh and if any one wants to email with me directly editors [at] hudsoncommonsense.com. The inbox is visible to all the editors. If you are sincere and want to make Hudson's political economy more apolitical and efficient, I'd love to buy you coffee/tea and learn from you.
Zingers and online repartee can be fun… there is a time and place for a witty one liner… and we are all free to do what we want… but ad hominem comments are the sugar high (for some) of online discourse… in the long-term it would be better for Hudson if we also eat our meat and veggies and engage substantively.
So what is the reasonable case for PILOTs for Galvan? Can anyone write that op-ed/opinion piece for Hudson residents?
If Galvan F. can’t afford the taxes, how are the rest of us living on our own paychecks supposed to ?
ReplyDeleteGalvan has done miracles in Hudson but should pay full property taxes for this new building, and the City should cut the rates for all residential property-owners.