ITHACA, N.Y. — The Tompkins County Industrial Development Agency can expect a busy meeting on Wednesday, as it reviews a trio of tax abatement applications. Rather unusually, however, they all stem from one project – the Carpenter Park mixed-use development located on Carpenter Circle, between the city’s waterfront and Northside neighborhood.
The reason for the three applications is that the three major components of the project – the affordable housing component, the mixed-use retail and market-rate housing component, and the medical office building and clinic are each seeking a different set of abatements, some more generous than others. This would complicate the tax structure of the development such that the developers, Cayuga Medical Center and Park Grove Realty, are returning to the city Planning Board this month to break the 8.9-acre property, which has already received preliminary site plan approval, into three separate tax parcels, one for each potentially tax-abated component.
The Affordable Housing Application
First up, let’s have a look at the affordable housing component. This is a standalone $10.1 million, 4-story, 42 unit apartment building. 32 of the units (26 one-bedroom and 6 two-bedroom apartments) would be set aside for those making 50% AMI or less, which is about $30,000/year or less for a single person, $34,250/year for a two-person household. The other ten apartments (8 one-bedroom and 2 two-bedroom units) would be priced slightly higher, for those making 60% area median income. The building would be built to LEED Certification standards and designed to comply with the city’s incoming Green Building Policy.
Technically, this applicant isn’t actually a property tax abatement, because it’s not based on the future property tax assessment. The developers are seeking a 30-year Payment in Lieu of Taxes, or PILOT agreement, for the affordable housing building, as well as sales tax exemptions on building materials and state tax exemptions on the mortgage recording filing. The annual PILOT payment would be the current tax assessment for that portion of the Carpenter Park property, plus 12% of the net operating income, and allowed to increase 2% per year. The figures are modeled on a similar abatement awarded by the IDA to the rentals in INHS’s 210 Hancock project back in 2015.
The PILOT would save $701,434 over 30 years, the sales tax exemption on materials would save $400,000, and the mortgage recording tax exemption would shave $4,125 from the project’s expenses, for a total savings of $1,105,559 over 30 years. Over the same 30-year time period of the PILOT, the project would pay an additional $728,461 in property taxes on top of the current taxes paid for that 0.83-acre chunk of the property.
The argument is that the PILOT would reduce expenditures and put the affordable housing proposal in better financial shape. It’s something that the state looks for when awarding affordable housing grants – they won’t give money unless the project is financially resilient, in that expenditures are paid on-time and in full, and that there’s demand for the affordable housing. The grants are very competitive, and the project has already been turned down by the state once. A PILOT or other local tax reduction makes it more appealing to the state, and more likely the housing would get the grants needed to obtain construction loans and actually be built. If they are awarded in the next funding round this fall, the project could start in the spring and would take about a year to build.
The Medical Facility Application
Cayuga Medical Center’s application is what comes closest to a normal IDA application, though it also comes with the most substantial tax reduction request. This abatement would apply to the 2.08-acre property that would host a new 5-story, 64,000 square-foot building to be occupied by CMC. Non-profit CMC will lease the $32.2 million building from the development team, which they are a part of, but it’s a for-profit entity. Like the affordable housing, the building would be designed to meet the City of Ithaca’s incoming Green Building Policy.
The primary selling points here are 62.5 full-time equivalent jobs and a walk-in clinic, which would be a welcome addition to the Northside neighborhood. According to the application, “CMC will offer many essential healthcare services at this location that will be Medicaid eligible including women’s health, quick urgent care, imaging and specialty services. The programs and services will be targeted to the at-risk minority and low-income community in the City of Ithaca’s West End Downtown District. This will allow lower-income families to have much better access to health care and essential services.”
In return comes a fairly hefty 50-year PILOT request, along with the sales tax exemption on construction materials and the mortgage recording tax exemption. CMC has an unusually strong hand to play with this particular application. Being a non-profit, this portion of the project could be taken off the tax rolls and made tax-exempt through direct CMC ownership, and it’s noted in the application. If the PILOT is awarded, the application stipulates the ownership, non-profit or not, will be required to stay taxable throughout the PILOT period. A similar deal played out with Cornell and developer John Novarr’s Breazzano Center project several years ago.
The PILOT would save $2,739,078 in property taxes over 50 years. The sales tax exemption on the construction materials would reduce costs by $1.1 million, and the mortgage recording tax exemption would save $70,000, for a total of $3,909,078 in savings. Over the same 50-year time period of the PILOT, the project would pay an additional $8,560,514 in property taxes on top of the current taxes paid for that 2.08-acre chunk of the property.
If awarded, CMC would start construction on the project next March, and the new building would open in around March 2023.
The Market-Rate Apartments and Retail Application
The bulk of the site is included with this submission. This application includes the site improvements (including costs associated with re-configuring the Ithaca Community Gardens) and two mixed-use buildings that would be built in Carpenter Park, 303,255 square-feet in total and carrying an estimated cost of $47.1 million. The six-story buildings would have ground-level retail, parking on the back of the ground floor and on the second floor, and a mix of 1-3 bedroom apartments on floors 3-6. In total, the mixed-use buildings will include approximately 166 market-rate units, 23,000 square feet of commercial space, and 187 internal parking spaces. The project also comes equipped to meet the city’s Green Building Policy
Given that this is only creating a few jobs directly and does not fill as critical of a need as affordable housing or a medical clinic to serve lower-income households would, the request here is a more typical 10-year tax abatement. The abatement would save $4,172,103 in property taxes over 10 years. The sales tax exemption on the construction materials would reduce costs by $2.4 million, and the mortgage recording tax exemption would save $95,000, for a total of $6,667,108 in requested savings. Over the same 10-year time period of the tax abatement, the project would pay an additional $2,083,571 in property taxes on top of the current taxes paid for that 5.66-acre chunk of the property, and indirectly supports new sales taxes from the future retail tenants.
If the abatements are awarded, the stated plan in the application is to begin construction in the spring of 2021, with completion two years later. Discussions at city planning board meetings have indicated this portion is the “Phase II” of the site’s buildout, to start construction after private equity and affordable housing grants have been secured for the medical building and affordable housing respectively.
Along with the 66.5 full-time equivalent jobs offered in the applications, the project promises over 750 construction jobs over the buildout period (typically, one-third to one-half may be on the site during any one phase, so if they all moved in tandem, it would be more like a few hundred at any given time). The project team estimates 30 to 35% of the construction labor will be locally sourced.
For those interested in having a closer look, the applications are here.
The IDA will have their first look at the application on Wednesday at 2:30 p.m. The meeting will be livestreamed here when the meeting starts. Comments, questions and concerns can be sent to Tompkins County Area Development’s Ina Arthur at firstname.lastname@example.org and should be sent no later than 9 a.m. on Oct. 14.