WPCNR QUILL & EYESHADE. By John F. Bailey. August 6, 2008 UPDATED 12:30 A.M. With Financials Updated with Financials Clarification August 7, 2008: LCOR, developer of the financially high and dry 55 Bank Street 80-20 affordable housing project will get $50.5 Million in tax abatements in their new 55 Bank Street deal with the city expected to be approved Friday morning.
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LCOR presenting their preliminary site plan for the new 55 Bank Street Two Phase Affordable Housing and market rate complex Monday evening. The Council delayed approval pending receiving written financials. Tuesday evening they arrived. The media received copies Wednesday.
The $50.5 Million in tax abatement is $31 Million more in tax relief over the 24-year life of the project more the $29 Million in tax abatement it would have received on the original One-Phase two tower 55 Bank project the developer said was unable to be financed in today’s credit climate.
In an explanation for this today from city hall, it turns out that the original figures for the previous project, that consisted of $42.7 Million in total taxes and revenues were based on 75 affordable units and not the 107, and going out 18 years, instead of the current 24 years under consideration. A fact that was noted until it appeared in the financials Tuesday evening and was easy to miss.
This explains part of the escalation of the abatement.
One, the agreement goes out 24 years, not 18. 2.) Revenues were estimated as $42.7 earlier, and a lower rate of return was used. 3.) There were 32 less affordable units in the first two-tower project.
The tax abatement on that first agreement was figured at $29 Million which brought the value of that configuration to $71.7 Million over 18 years at less units. Six more years of inflation are added at 4.5% a year raising the abatement to $36,000,000, and you have to compute the extra amount of cost on 32 more units as $14 Million in change to make up the rest of the abatement. All becomes clear.
However the project has always been publicly talked of as a 107 affordable unit project with 536 units. Confusion on the financials city hall said today was that the number o affordable units had changed considerably, and 75 had been the working figure during discussions.
This was stated in the financials to the Westchester Industrial Development Agency that signed off on the original project that would receive $29 Million in tax abatement, which we learned in the new financials was based on 75 units.
The total tax abatement on the LCOR rental/affordable housing experiment on bank Street will cost the city $50.5 Million in taxes for 107 affordable housing units over the life of the PILOT ending in 2033
Former White Plains Mayor Alfred Del Vecchio said the financials as described at the meeting were not too clear and urged the Common Council to get a copy in writing before approving the agreement. The Council postponed the vote on approval of 55 Bank as a Two Phase project with a $50.5 Million tax abatement until Friday morning, pending the financial details.
$5 Million to Come.
LCOR is currently holding in escrow with interest the $5 Million in the second payment on the property where the project is to be built, which they apparently say will be paid in late September (three months late). No explanation has been given why the payment was delayed to date.
The 5-page financial shows that by breaking up the 55 Bank Street project into two phases, LCOR, the developer will save $50.5 Million in property taxes over the next 25 years, about $2.25 Million a year, while the city, school district and county will receive $51,726,925 in taxes out of an estimated full property tax estimate of $102,240,681.
The city anticipates $51.7 Million in taxes (Payments In Lieu of Taxes) to the city, school and county taxes according to the financials report.
The Commissioner of Planning explained today that the abatement is based providing property tax relief that would give the developer back an equivalent return on the money it costs them to build the affordable housing units in today’s dollars if it was invested for the 24 year period elsewhere. The Commissioner, Susan Habel, said this abatement makes the project more attractive to lenders for the project that is having problems financing in the present market.
“Phantom Hotel” Funds Half the Tax Payments
The “tax profit” comes from from anticipated revenues making up the abatement from the as-yet unsigned hotel project ( taxes from the hotel are estimated as $28 Million, presuming the hotel is built), $1,000,000 in full tax on retail, $5.7 Million on additional market rate units and $8.8 Million in the parking fee to the city, and the full tax on the land
The “Preliminary Site Plan” which has gone from a design layout two weeks ago to being described as a mass blocking plan, with an official site plan to come later after approval of the Two Phase Deal and new tandem PILOT agreements on Friday’s agenda. An official site plan would be due in January 2009 if it were to be approved by the Council Friday morning.
LCOR has consistently refused to name the hoteliers they have been close to a deal with for months, and the Common Council has failed to ask whom the developer is negotiating with on the hotel and how real the negotiation talk is to being consummated.
Timing
The New Deal taxes LCOR on the full value of the land beginning from Year 1 over 24 years through 2033 when the properties become fully taxable realizing $28.6 Million in taxes.
The city projects the full amount of Payments In Lieu of Taxes for the full 24 years as $51.7 Million plus $43.4 Million in other revenues over the 24 years as $95.2 Million. If you deduct the total tax abatement of $50.5 million, the city, school and county realizes $45 Million in taxes over 24 years, or $2 Million a year in taxes for the entire two phases if built.
Completion
Readers should note that Phase I – reported to consist of construction of the first building and partial construction of the garage providing parking for all rental units in the first phase, and parking for the hotel and some retail, is scheduled to begin in 2011, and be completed in 2013, and will return to full value on the tax rolls by 2028, when this reporter will be 83 years old.
Phase II construction, consisting of the rest of the garage and the other two residential buildings according to the site plan increases to full tax equivalent 2029 to 2032, at which time this reporter will be 87 years old.
The Old Deal
The previous 536-unit 55 Bank Street Deal agreed to on approval in 2007, was to cover 18 years and the 107 units created $22 Million in taxes from the Residential component and anticipated $20.8 Million in taxes and revenues from other sources for a total of $42.8 Million in taxes through 2025.
The total value of the tax abatement of that deal was $29 Million, according the city calculation, leaving a tax “profit” of $13 Million for city, school and county.
This indicates the city makes an additional $32 Million in tax payments. ( That is computed by taking the $45 Million tax handle in PILOT payments under two phases, subtracting $13 Million in tax profit after abatement is subtracted from the one phase project) with the two phase project.
Assumptions 6.6% Increase In Tax Rate a Year Lifts abatements.
The financials assume a property tax rate increase of 6.6% per annum. This is based on the Average Annual Property Tax Rate Increases of 4.1% for the City, 8.1% for the School District and 5.29% for Westchester County over the last fifteen years.
Take the first year the PILOT kicks in on Phase I scheduled for 2014.
LCOR pays PILOTS beginning when a Building Permit is taken out in 2011.
In that first year of the Phase 1 Project they pay $290,725 in a PILOT payment when they take out the Building Permit/ which is equivalent to the full taxes on the land. When they occupy the building three years later in 2014, a tax abatement of $1,115,211 is deducted from the full tax payment of $1,467,382 for that building, creating a PILOT payment of $352,171. The Abatements rise until 2024, when the rise at 20% a year to come up to a full tax payment of $3,827,377 in 2029. You will note the same occurs for the Phase 2 Project only it reaches full tax payment in 2032.
Each year out to 2024, the amount of abatement increases against the Full Tax. In 2024 the abatement amount starts to decrease at the rate of 20% to bring the Phase I building up to full tax.
The financials did not make clear whether inflation factors other than those assumed in the 6.6% property tax increase annually over 24 years were used for city, county, and school expenses were filtered into the calculations.
$471,000 Cost per Unit of Affordable Housing Beats
median price of a Westchester Condo: $400,000.
The tax abatement sets a high watermark in the cost of building one affordable housing unit: $471,963 based on lost tax revenue for each of the 107 “affordable housing” units LCOR will make available (half to be completed in Phase I by 2014 and the other half in Phase II by 2018).
Previously affordable housing unit costs built within the last five years in White Plains ranged from $285,000 per unit when first proposed (which included a $848,497 city grant out of the housing fund) for the 42-unit Kensico Terrace to $335,000 a unit for the 17 Horton’s Mill townhouses, (including a $327,474 city grant) based on cost of the entire project.
The Commissioner of Planning said today that Kensico Terrace now pays $265 a unit (42) in taxes.
This means it will take Kensico 76 years to pay back the city grant (in cheaper dollars).
Horton’s Mill pays $532 a unit according to the Commissioner on 17 units.
It will take Horton’s Mill 36 years to pay back the city their grant in taxes in cheaper dollars.
The cost per unit in the 55 Bank Street project is put by the city as being $221,000 to construct each affordable unit (107) in 2008 dollars.
However, if you consider the total tax abatement on the project to create the 107 affordable units ($50.5 million) the cost per unit put another way – another way of looking at the number –is $472,000 per unit, though the Commissioner of Planning said Thursday that is not the way to look at, saying that the abatement makes the project more attractive to potential lenders.
The city could take that $471,000 per unit and purchase condominiums on today’s market to fill affordable housing “gaps.”
Developer Perks
The developer appears to make a $251,000 tax savings “profit” on every affordable unit.
By the time one of the buildings is opened in this new deal, the tax savings is enhanced by ten years of the inflation effect devaluing the tax dollars they will pay with the next 24 years. The developer appears to get a nice tax dividend: they are spared paying the inflated tax payments brought about by inflation, by paying with dollars of lesser value.
Not only that but the rent on affordable units can go up according to inflation, perhaps turning a profit on the affordable by the time they open if the city allows.
Money
According to the financials, the city would receive $26,944,000 over the 24 years in taxes, the County, $16,416,000, and the school district $51,840,000 in taxes.
The Complete financials:
