A deal has been reached which will permit the sale of Avalon on the Sound at 255 Huguenot Street. Under the deal , Avalon Bay Communities, the owner of the property, will pay the City of New Rochelle about $9mm, spread over several years, with $3mm coming in 2010. The City is expected to use the funds to offset future tax increases.
The transaction will be discussed at tomorrow's City Council meeting.
The announcement yesterday is being billed as an early payment to the City of the existing 30-year agreement between Avalon and the Industrial Development Agency. If ratified by City Council, Avalon would be free to sell the building and transfer the 30-year tax abatement to the new owner. While the City is in dire need of revenue this is the same old song with a new political twist. Whether you talk about the notorious 10, 15 or 30-year tax abatements you are talking about a quick money grab with total disregard for the future. You may ask what money grabs if they are paying little or no taxes. There are building and other permit fees which total million$ of dollar$ to grab up front with disregard for the decades that follow with little or no property tax revenue and $0 school tax revenue while increasing the school district’s burden with an influx of students. It has been known for months that Avalon has a buyer in the wings so if this agreement is ratified by council Avalon could finalize the sale and transfer the balance of the original 30-year abatement.
It has been reported that Avalon will pay the City $9 million http://news12.com/articleDetail.jsp?articleId=243097&position=4&news_typ... by 2014. It would be $3 million in 2010 and $1.5 million for four years after. Avalon’s taxes would be over $3 million per year at 100% taxation so in reality Avalon will be giving back the tax dollars already saved, have the ability to sell at a hefty profit and transfer their onerous tax abatement to the new owners for the 20 plus years remaining. Once again New Rochelle’s future is sold for a quick money grab. I say once again because there is a long history of this dating back to the day of the tax-cap which was a quick money grab, coincidentally $9 million a year on average over the lifespan, then there was Home Depot/Costco (10-year tax abatement), New Roc City (15-year now extended to 20 plus years tax abatement IF Kohls & Target ever come) and finally Avalon (30-year tax abatement).
The problem I have is this; if I concede (and I don’t) that Avalon was taking a great risk then the 30-year tax abatement was appropriate. What justifies the transfer of the abatement to a new owner who is taking no risk? The only answer is that the City must have been asleep at the wheel when the contract was signed and again there is a history of this. Home Depot filed and won a tax certiorari long before their abatement expired. Why? Because the City wasn’t sharp enough to include a stipulation that barred Home Depot from filing for certiorari during the abatement period. Now history repeats itself in that the City was not sharp enough to include a stipulation that if the land which Avalon sits on and is owned by the IDA is purchased before the end of the 30-year abatement period the abatement is not transferrable. Granted, if I were responsible for these agreements the lapses would be understandable. But considering all of the professionals with $100,000 plus salaries and all the lawyers, teachers, business persons and Ivy League graduate’s on council, one must wonder how this could happen?
In closing I will explore the new political twist; if ratified the City will receive $3 million in 2010 which will go directly into the fund balance. This is very important in that the 2011 budget will be adopted in 2010 as required by the City Charter. 2011 is a re-election year which means that the City Council will have an extra $3 million in its coffers to lower the property tax increase. By 2010 standards, $3 million represents a 6.7% property tax adjustment. If the City Manager presents a proposed 10% increase the City Council can reduce that to 3.3% with $3 million from the fund balance. This would be touted by the incumbents in their re-election bid. Using fund balance to reduce the tax levy has become the norm but flies in the face of Finance Commissioner Ratner’s opinion that one-time revenue infusions be used for one time capitol expenses as opposed to artificially reducing the tax levy.
While the $9 million is very attractive and would be welcome in these tough economic times this deal is truly a Trojan Horse as the negative effects will be felt for decades. All we are doing is robbing Peter to pay Paul and mortgaging our children and grandchildren’s future.