Nathan Tailleur contributed reporting to this story.
Ithaca, N.Y. — More housing. A lower cost of living. A boost to the city’s tax base.
These benefits are all predicted to come to Ithaca if developer Jason Fane’s proposed Clinton Street apartments come to fruition.
But there’s a catch. Fane is requesting what essentially amounts to a tax break — in this case, what’s called an “abatement” — for the project.
If he doesn’t get the abatement, Fane’s lawyer said Friday, the developer will nix the project. The city would lose out on what even Fane’s many critics see as an undeniable gain for Ithaca.
The tax abatement process is complicated. Essentially, according to Common Council member Seph Murtagh, the mayor sees if a project for the city meets certain technical requirements for an abatement.
His endorsement goes to the Industrial Development Agency, which votes on whether or not the abatement gets granted. (The IDA is comprised of local leaders like Mayor Svante Myrick, Democratic Congressional candidate Martha Robertson and former Congressional candidate Nate Shinagawa.)
So what should the IDA do?
Three possibilities open up (a note to readers … it would be useful for you to brush up on your game theory at this point):
1 — The abatement is not approved, then Fane cancels the project.
2 — The abatement is not approved, but Fane turns out to be bluffing and moves forward with the project anyway.
3 — The abatement is approved, then Fane moves forward with the project.
The decision for government officials appears to come down to a matter of calculated risk. If the IDA is willing to bet that Fane will move forward with the Clinton Street apartments even without the abatement, they may pursue option two. Fane’s development without the abatement would prove an immediate boost to the tax rolls and, from the city’s point of view, be the best option.
But if officials take Fane at his word and believe he will cancel the development without the abatement, the local government may pursue option three.
That way, even though the project will not do much to bring in tax revenue in the near future, it will still 1) Help alleviate the affordable housing crisis, and 2) Help the tax rolls in the long-term, after the abatement expires in several years. The local government would be ensured of at least that benefit.
Shinagawa, an IDA committee member, spoke about the challenges faced by the IDA.
“We’re often playing a game of chicken because developers will say that they have to have the incentive and we have to figure out whether or not that’s the case,” Shinagawa said.
Understand the decision over Fane’s tax abatement. Click on your question to get your answer.
1 – Why does the IDA give abatements?
2 – How do we decide who gets an abatement?
3 – Why does Fane say he needs an abatement?
4 – Can we learn more about Fane’s project?
5 – What do proponents of the abatement policy say?
6 – What have critics of it said?
(Did we miss your question? If so, email us at email@example.com.)
1 — Why does the IDA give abatements?
The city has decided to recommend tax abatements that it sees as encouraging development in downtown Ithaca. Its “Community Investment Incentive Tax Abatement Program” gives breaks on property taxes for up to 7 years.
The abatements, according to the city’s website, are meant “to encourage development in the City that would increase jobs, increase the tax base, promote density in the city core, encourage rehabilitation and redevelopment of underutilized sites, and help create a vibrant downtown center.”
3 specifically enumerated goals include:
1 — Strengthening the urban core of Ithaca.
2 — Increasing density of “housing and business space.”
3 — Promoting density by encouraging development of “existing ‘gaps’ left by abandoned buildings and vacant parcels.”
For more about Ithaca’s recent growth spurt, see here.
2 — How do we decide who gets an abatement?
As mentioned above, Ithaca is tasked with deciding whether or not to recommend that the IDA give an abatement to a developer.
This decision is made by the mayor on several technical criteria.
The criteria are:
1 — Added value
The project must add at least $500,000 in assessed value to the property he or she is developing.
2 — Right density
The project must “contain a minimum of 3 occupiable stories” or constitute a “major restoration” of an existing structure.
3 — Location, location, location
The development must fall either at a Brownfield site registered with the state as lacking hazardous waste or be within the “City of Ithaca Density District.” (Image below of bounds.
Fane’s Clinton Street apartments meet all three requirements.
The following list of people are on the IDA, which votes on the abatement:
3 — Why does Fane say he needs an abatement?
Nathan Lyman, an attorney who works for Fane, said the well-known developer has had to contend with unexpected costs in the project.
The projected budget in 2011 for the project was $2.5 million. But a “huge amount” had to be spent to “satisfy the planning board,” Lyman said.
“Without abatements the project will not get done,” Lyman said.
Why the ultimatum?
“Without the abatement it’s not an attractive deal. With the abatement it’s a marginally attractive deal,” Lyman said.
“Mr. Fane has been committed for over 40 years to improving housing in the city of Ithaca, and this is an extension of that philosophy.”
4 — Can we learn more about Fane’s project?
You sure can! The project would go at 130 Clinton Street, near the Ithaca Police Department headquarters.
The project proposal calls for studios, one bedroom and two bedroom apartments. It envisions tenants that include small families.
A story in The Ithaca Times says that the project would add three, three story residential buildings containing 36 units and 48 beds in total.
5 — What do proponents of the abatement policy say?
Common Council member Seph Murtagh noted that several developments — including Island Health and Fitness and Seneca Place — used tax abatements at first but now contribute significantly to the city’s tax base.
“The truth is that it’s very difficult to build downtown,” Murtagh said. “Developing downtown is extremely costly.”
But it’s really important for builders to be able to move in and continue to grow the city’s tax base, Murtagh said.
“We’re trying to encourage development downtown in part to pay for the services Ithacans have come to expect,” Murtagh said.
Murtagh said that he supports the tax abatement policy generally. He added that “in this particular instance the situation is greatly complicated by the reputation of the particular developer.”
6 — What have critics said?
A 2013 article in the Cornell Daily Sun relayed opposition among some residents to tax abatements.
City residents expressed concerns at a public hearing Thursday over a proposal to give the developers expanding downtown Ithaca’s Holiday Inn a tax abatement.
Theresa Alt, a staff member of Tompkins County Workers’ Center and one of approximately 15 people who attended the meeting, said she disapproves of the proposed abatements. Alt said that a “quick look at the application” showed that, should the IDA grant the abatements and facilitate Inn renovations, there would be no increased property value or additional jobs available for city employees.
Pete Meyers, director of the Tompkins County Workers’ Center, said that he would rather see local businesses receive such tax abatements than a corporate business like the Holiday Inn.