DUNKIRK – 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 more than 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
The 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 unusual for the CCIDA because the business classification does not fall under business descriptions in its uniform code. It is not industrial, does not promote tourism and it 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.
“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,” Dixon said. “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. 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 said 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 said.
The PILOT amount, Dixon said, was for 10 years but when potential buyers of Covenant Manor approached the IDA they said they were in discussion with the city assessor and it was their understanding there would be a special provision in the tax law that would allow them to not have to pay full taxes for the property.
The Cleveland-based company however soon learned they did not qualify for the tax reduction.
“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,” Dixon said, noting the tax compromise starts at 50 percent of the full amount. “That amount increases every year … and in year 11, it will be full tax. So we thought that was fair.”
According to CCIDA Director Bill Daly, some local non-profits have passed on purchasing the Covenant Manor.
“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,” Daly said, adding that the property hasn’t been on the tax roll for decades and that the sale would bring in well over $400,000 in revenue for taxing jurisdictions.
Auer asked about terms previously discussed with the city as he questioned the motion.
“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,” he said.
Dixon said that 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 approved the deviation and to 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.