Revised PILOT schedule for hotel will see no assessment reduction in plan

by Dan McClelland

Jeremy Evans, the executive director of the Franklin County Industrial Development Agency (IDA, brought good news with him when he outlined for the town board’s benefit details of the payment in lieu of taxes (PILOT) proposal his agency has crafted to help Betsy Lowe and Nancy Howard finance their $10.888 million hotel plan. Jeremy was a guest presenter at Thursday’s monthly town board meeting.

The good news he brought to the meeting was that a revised schedule of payments in the tax abatement plan will see no loss in assessment from the outset, unlike the original plan.

At a public hearing on Tuesday, January 5 at the village court room, with most of the two dozen guests participating via the Zoom computer application, Mr. Evans had explained the process of offering the hotel developers a number of tax breaks including the PILOT plan that would see them enjoying a 50% cut on all local property taxes for a 20-year period. In the revised schedule he produced Thursday, over those years the developers would pay about $2.07 million in property taxes, based on an estimated assessment of $4.3 million. Property taxes for them without a break would amount to about $3.77 million in taxes over the 20 years.

At Thursday’s meeting Mr. Evans said he appreciated the opportunity to address the town board and the several dozen people who tuned into the meeting. He also said it was timely for him to also hear the Tupper Lake Business Group’s new recreational strategy for the town.

“Tupper Lake is a fun place to work. There are many good things going on. There’s a great community effort underway here,” not found in many communities today.

He called the PILOT plan “an important topic, but no where near as interesting” as the plan advanced by the business group earlier in the meeting.

Mr. Evans was able to include on everyone’s computer screens some visuals of payment schedules and the like.

He mentioned that Jim Ellis, the Tupper Lake representative on the county IDA board, is a very strong advocate for Tupper Lake. “You do not need to worry that the interests of Tupper Lake are not being voiced by Mr. Ellis!”

He said the IDA is a public benefit corporation created in New York State law.

An IDA can undertake commercial and industrial projects to “promote the economic well being of communities,” he told the officials and guests.

“There are four different ways an IDA can support an eligible project. We can issue tax-exempt bonds that allow a project to raise money and financing that is cheaper than conventional financing. We can offer a property tax exemption, which comes with a PILOT agreement. That’s the main discussion this evening. We can provide a sales tax exemption on equipment, supplies, fixtures, materials that are purchased in the development and construction of a project. -And we can provide a mortgage tax exemption.”

The last three are what are being proposed for the Tupper Lake Crossroads Hotel project.

On the property tax abatement, a PILOT schedule details what the local taxing entities can expect to receive over the life of the agreement, he explained.

He said the county IDA’s board of directors can extend PILOT plans for up to 30 years. “Our general policy, however, is 20 years or less.

He said the payment each year comes in two parts- a basic value based on the assessment of the worth of the parcel on which the project sits. The PILOT is calculated, however, on the added value of the improvements to the property. A variety of graduated scales are used to determine how the PILOT figures increase over the period of the contract.

In the case of the new hotel proposed here, those payments would increase by 5% from $0 the first year to $216,058 in the 20th year.

He said after the 20th year of their proposal, the hotel owners would be paying “full taxes” on their property.

Mr. Evans said the proposal that has been advanced for the hotel project “does not deviate from IDA policy,” although it could.

He outlined the general criteria the IDA board members look at before approving a PILOT.

“If a project fails to perform under the agreement, the IDA has the right to recapture its funds. If there are payments promised that are not fulfilled then the IDA has the right to take recourse.”

He said the Crossroads Hotel project involves 44 rooms for lodging on a 1.2 acre tract at the corner of Park and Mill comprising seven different parcels.

Mr. Evans said the IDA board reserves the right to negotiate the terms of any PILOT agreement with the applicant “at any point right up until the actual approval by the board.”

The initial resolution by the board came on November 17, calling for the public hearing on January 5, he said. Over 30 people tuned into the hearing, with only two actually appearing in the village court room.

He said “there were multiple requests” made to expand the time period for public comments.

Based on those requests, the IDA board at its meeting last Tuesday set the close of the public comment period to be February 3, according to Mr. Evans.

He said they had tried to publish the notice of the public hearing in the Tupper Lake Free Press as well as the Adirondack Daily Enterprise but the date of the submission to the hometown weekly, in his words, “did not align” with legal publishing requirements for a hearing on January 5. “Had we had the opportunity to redo, we would have made sure we had that timing right so the notice could have appeared in the Free Press.”

“We take responsibility” for not having the notice in the local weekly. We wanted to publish it in the Free Press.”

He said the IDA also had the obligation to notify the heads of the local governments affected and that was done by registered mail.

Mr. Evans also said the hearing was intentionally not scheduled between Thanksgiving and New Year’s Day because in this pandemic year. “We knew know one would be paying attention. We purposely waited until January.” He said if he were to do it over, he would have not published the notices of hearing until the new year for a hearing in later January.

He said the agreement proposed calls for the new hotel owners to continue to pay the taxes on the bare property or what is called as “base value.”

“In the first year that’s all they would pay.” The amount is $12,770.”

That amount is based on the current total assessments of the parcels as they now exist. The total is $338,900.

In the first draft of the schedule considered at the public hearing, that figure was only $1,153- based on an total assessment of only $30,600.

In the second year they would pay that plus 5% of the new assessed value of the improved property.”

The amount of the taxes on the assessment of the hotel would increase by 5% until the 20th year.

Mr. Evans said the applicants have also asked for abatements of the mortgage tax ($44,000 savings) and sales tax (estimates at $445,000).

The property tax exemptions over the 20 years would total about $1.7 million, he said. The total of the three types of abatement would total $2.2 million.

Mr. Evans said since the hearing his office has been receiving comments, via e-mail and would continue to until the Feb. 3 deadline.

“They’ve been good comments and they come with good questions. We’re not getting that ‘I hate this...or I love this’ types of comments with no reasons. The comments so far have all been very thoughtful!”

His e-mail address can be found on the Franklin County IDA's web site.

He asked if the board wanted him to review the schedule of payments in depth, but Supervisor Patti Littlefield thought it would be enough for him to send her those schedules and she would forward them to anyone who requested them.

She said she thought his schedules were quite self-explanatory.

Mr. Evans said there was one change in the schedules presented at the recent public hearing.

“I had asked the town assessor to confirm the current assessed value of the properties. He also indicated what the assessed values would be once the buildings were removed and the parcels merged. The numbers I shared at the public hearing were based on that the merged parcels would be approximately $30,600. The assessed value today with the buildings is $338,000. Since the public hearing I have been looking at those figures closer and talking to our legal counsel. The intent of our exemption policy is to make sure there is no initial loss to the taxing jurisdictions. That being the intent, it is our intention to make sure that if approved the base value that we use would be the $338,900- not the $30,600.

He promised a revised schedule would be forthcoming, “because that’s quite a difference.”

“The intention of our policy is that any community is held harmless at the outset” of any PILOT plan. “So that there is no loss or reduction and that the PILOT agreement is based on the improvement to the property.”

He said it was “nobody’s fault” that the $30,600 was used in the schedule, noting he wanted to show the worst case scenario in his calculations.

With the change, in year one, none of the taxing jurisdictions would see any decrease from those properties.”

He noted that many of the criticisms so far have centered around that proposed loss in taxes those first two years in the schedule he advanced based on the $30,600 basis for basic rate.

In the new schedule, he said the PILOT plan won’t now require the rest of the taxpayers in the community to pick up the decreases in tax revenue those first two years.

Supervisor Littlefield said she had spoken to Mr. Evans in a telephone conversation earlier that day and told him “that you don’t want to have any local taxpayer feel the pain of a loss in assessment and you don’t want anyone to have to pick up the tab for a PILOT.”

“When we first heard about this PILOT thinking we were going to lose $300,000 in assessment for the first few years...that was a harder thing to take on our part!”

“So that’s good news that the IDA has revisited” that calculation “and not have a hit for taxpayers in those beginning years.”

Councilman John Quinn said he appreciated the time Mr. Evans took to discuss this directly with the town board. “I wish we could have done this before the hearing so a lot of (misunderstandings) could have been avoided” when the board discussed it at its Dec. 31 year-end meeting.

“I’m really relieved to hear about the hold harmless part of it. That’s great news for the taxing jurisdictions!”

He asked Mr. Evans if fiscal impacts on the local governments had been completed yet.

Mr. Evans admitted that analysis hasn’t been completed yet. “There’s no descriptive way” the IDA has the means to do that. He said the taxing entities could estimate those impacts and submit them to the IDA board members for their consideration.

“So you want the taxing jurisdictions to tell you what they think?” asked Mr. Quinn, obviously looking for clarification.

“We do it (this analysis) to an extent, but you guys are the ones who know your financials the best,” the IDA official told him.

“That’s why we are here having this discussion tonight.”

He also said that the PILOT numbers need to be plugged into the school district’s tax cap formula, admitting that figuring out that very complex state formula is a challenge for every school leader. “I wouldn’t pretend to know how to estimate that kind of impact to the school district!”

Mr. Quinn said he thought the IDA’s hold harmless intention with the new calculations “will go along ways to resolve any concerns I had.”

“During the hearing there were many questions raised and you responded you would get those answers. Do you know how that will be done and when?”

Mr. Evans said he is working on the questions, including the new ones he’s received in recent days.

“I’m trying to compile a question and answer fact sheet and I will send it to everyone including the boards here.” He said it will also be posted on the Franklin County IDA web site.

Mr. Quinn suggested that information be submitted to the Free Press for publication in the weeks ahead. “I’m sure Dan McClelland would be only happy to run that.”

The councilman questioned him about the 20-year term of the proposed agreement, saying that 20 years is the maximum under current IDA policy. “Has the IDA considered something shorter. I hope this hotel is wildly successful. But if it’s not in ten years, I don’t think it will be any more successful in 20 years.”

“Are these PILOT contracts renewable?” the councilman asked.

“Generally a project that comes through the IDA has to have a meaningful impact on the economic wellbeing of the community in order to be approved,” Mr. Evans replied. “So theoretically, the applicant could come back at the end and ask for another PILOT for so many years. But they would have to show some meaningful increase on community impact above what they were doing at the time of that request which is why PILOT agreements like this are for new projects and new construction.”

“If an applicant just said ‘we want a PILOT extension,’ that would be a tough argument. But if the applicant came back to us and said they wanted to add more floors and more rooms and create more jobs through a $30 million renovation, that would be something to consider.”

“But if a business that received a PILOT was just plugging along and wanted their PILOT renewed, it would be hard for it to meet our criteria.”

Mr. Quinn also asked if a PILOT would be transferrable, if the hotel was sold to a new owner.

Mr. Evans said it would be, but that transfer of ownership would have to be reported to his agency and would involve “some paperwork.”

Any new owners would also have to be investigated by his agency, he added.

Mr. Quinn said his only remaining concern as a private citizen here is the term, and asked the IDA to consider at ten-year term instead. “-And maybe renewable for a second ten years if so needed?”

“I’m not against the PILOT” Mr. Quinn told the IDA representative, but he said he disagreed with its premise of transferring a tax burden to others.

He said he appreciated Mr. Evans’ presentation and his candor with them.

Contrasting the new and old schedule of payments, in the first draft that was presented at the public hearing the four taxing entities here would have only received $1,153 on properties that currently generate about $12,000 in tax revenue shared by the four. In the new schedule that amount would grow to $12,770 that first year- approximately what is generated now.

In the first draft the governments would have received $9,044 the second year of the schedule- still below what they now receive. In the revised schedule the total payment in the second year would be $20,302 instead.

In the third year, in the new schedule of payments, the governments would share about $28,000 or more than twice what is currently being paid versus the $17,251 forecast in the first draft.

More on the IDA discussion at the town board meeting next week.