The Chautauqua County Industrial Development Agency held a meeting in the SUNY Fredonia Technology incubator in Dunkirk on Thursday, but most of its business centered on Covenant Manor Apartments, LLC in Jamestown and unusual tax terms the CCIDA has negotiated.
Located at 23 W. Third Street, Covenant Manor provides low-income housing to seniors. The eight-story building is a former hotel which was renovated in the 1970s as senior housing.
The building is under a purchase agreement with a company in Cleveland, but is currently owned by the Chicago-based Evangelical Covenant Church. According to its 2011 annual report, the church has had plans to sell the establishment for over 10 years. It also reported the sale would not be possible until February 2012 after refinancing steps with the U.S. Department of Housing and Urban Development. At the time of the report, it was believed a purchase agreement with a Cleveland-based for-profit company could be closed by June 30. The housing has been managed by a division of Lutheran Social Services since 2009
OBSERVER Photo by Shirley Pulawski
CCIDA Chairman Michael Metzger, Director William Daly, Counsel Jonathan Taber and Chief Financial Officer Richard Dixon discussed PILOT terms regarding the sale of Covenant Manor in Jamestown.
A PILOT, or payment in lieu of taxes, has been negotiated with the prospective buyers by the CCIDA The agreement is a deviation from typical negotiations. Working with rental housing is also unusual for the CCIDA because the business classification doesn't fall under business descriptions in its uniform code: it is not industrial, doesn't promote tourism and isn't adapting a parcel to a new use.
CCIDA Chief Financial Officer Richard Dixon said, "The city feels we should only be doing industrial projects. ... It's one of their objections to the project," but said regarding the legality of the CCIDA doing business outside its normal scope, "IDAs in New York City do mostly housing projects."
The deviation from its normal scope prompted Thursday's public hearing in Dunkirk, which followed a public hearing Wednesday in Jamestown at which letters and comments were submitted regarding the PILOT agreement. Thursday's hearing was strictly for the CCIDA to address its own policy and vote on whether or not to allow the deviation as part of its scope of business. All members of the CCIDA were present, including the newest member Hans Auer of Bemus Point, who was introduced at the meeting.
Dixon explained the policy. "The agency has ... a uniform tax exemption policy, and it's something that the IDA has adopted, so it is something that was made and amended a couple times over the years. What it does is set forth standard tax abatements based on type of project. So there is sort of a general, catch-all that says if you apply for financial benefits and you receive financial benefits, your tax abatement will be X, and it's this sliding scale," he said. "It's a parcel that's been off the tax roll. It's not brand new, but it's coming on the tax roll, but it's not a new parcel. ... so it isn't really your standard uniform policy."
Dixon continued, "The IDA has very broad statutory authority to apply benefits. ... Because it doesn't fit in that number scheme, the deviation (hearing) is all about saying OK, this project is something we still want to consider, but it doesn't fit within this standard number system for purposes of tax abatement, so we're going to negotiate something that's very project-specific."
Dixon told the board, "The PILOT amount was a 10-year PILOT. The people who are buying Covenant Manor, from Cleveland, approached us and said they had been in discussions with the assessor of the city of Jamestown; it was their understanding ... there would be a special provision in the tax law that would allow them to not pay full tax on this."
However, Dixon explained, the company learned from the tax office it did not qualify for a tax reduction. "So that meant they were going to have to pay full tax," which Dixon said was unacceptable to the company.
"At that point, they came back to the IDA and said 'If we don't get this tax abatement, we will be unable to proceed with purchasing this,' which would have left the parcel off the tax roll, paying no tax. They also wanted to invest $3 million in the project," he explained, and said the tax starts at 50 percent of the full amount.
"That amount increases every year ... and in year eleven, it will be full tax. So we thought that was fair," Dixon said.
CCIDA Director William Daly said, "It was our understanding some local non-profits have passed on purchasing this building. Even though they would have paid no tax, they still didn't feel they could make a go with this. ... We thought it fit in nicely with the downtown development plan," and noted the property, "hasn't been on the tax roll in literally decades.'
When the company learned its tax amount, they approached the IDA. Daly explained, "They said it's way beyond what they wanted to pay because they plan to invest another $3 million in this building that's had no money put into it in years and years ... This brings in well over $400,000 in revenue to the taxing jurisdictions the city, the school system and the county over the next 11 years.
Auer asked about terms discussed with the city. "It sounded like, in the letters (he read from the city) ... the city felt like they had a deal with the developer, and then we came in at the eleventh hour and squashed the deal."
Dixon replied it wasn't the case.
"That's not true. That's the perception of what happened. The developer (Jim Wells) actually came to our last board meeting and he made a very thorough presentation ... One of the key ingredients was that they initially only wanted to pay about $20,000 a year in a PILOT, but you can see we've started them at about $37,800, so we were (asking) substantially more than they wanted to pay."
After discussion, the board unanimously decided to approve the deviation and continue with the negotiated terms and a straight lease transaction. Another resolution was unanimously adopted declaring no negative environmental impact to the area should the project move forward in a SEQR application, which is part of meeting obligations to the state Department of Environmental Conservation.
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