Tompkins County IDA protest

Labor union members picket for new local labor laws outside the Tompkins County legislature chambers before an Industrial Development Agency, Aug. 13, 2015.

When a city program that grants millions in tax breaks is putting in new qualifications for developers to get those benefits, it's probably best that those numbers not be based on a “wild ass guess.”

The Wild Ass Guess in this case, or WAG, for short, is about how much local labor is getting used on city building projects that receive tax abatements. Alderman Seph Murtagh (D-2nd) said that WAG was the term thrown around during a series of meetings held on new abatement requirements, the results of which were presented to the Planning & Economic Development committee on Nov. 19.

Alderman George McGonigal (D-1st) asked Heather McDaniel of Tompkins County Area Development why there aren't numbers available for which workers come from where. She responded, in short, that a reporting requirement hasn't existed before, and asking post facto for a general contractor on a $25 million project to track down residences from 20 to 30 subcontractors wasn't feasible.

City planner Jennifer Kusznir said that because of the uncertainty on local labor numbers, making a new, more solid requirement later after a few projects have provided data could be a possibility.

On the matter of finances, though, McDaniel, Kusznir, Nels Bohn of IURA, and Herman Sieverding of Integrated Acquisition & Development were adamant there's no wild ass guessing going on with the numbers.

In response to a question from Murtagh why downtown construction is so expensive, Sieverding cited both the specialized expenses of putting up tall buildings—like cranes—and the revenues a developer can expect.

“It has everything to do with the income generation of the property,” Sieverding said. “You can put in four or five bedrooms on Dryden Road and get $1,350 a bed. The student market doesn't seem to abate. You can't get those sort of numbers downtown.”

McDaniel responded to an earlier comment by John Bentkowski, a local real estate assessor, that developers have to enter a project with guaranteed loans, and thus abatements only line their pockets.

“It's true that they get a loan at 80 percent of value, but banks also look at income,” McDaniel said. “My experience is [developers] have had significant cash flow issues. Their income is less than their expenses projected. They can only charge so much for rent in this market. A lot of times it's about cutting your expenses.”

Bohn noted there are often legacy issues downtown, like remediating gas stations, that don't add to the value of a project. Bohn said he was talking to the project manager of the Canopy Hotel recently, who told him that they “wouldn't have been able to pursue this project” if they had known what the cost of construction would become; construction and materials there are coming in well above the architect's estimates.

For the “they'll build it anyway” without abatements believers, McDaniel had this to say: “In the early years [of the assessment program], we paid an independent third-party $3,000 to $8,000 to go through and verify everything. It's now just as rigorous a process in-house. We look at all of the income numbers and expense projections. How'd you get this vacancy rate? How are you calculating tax dollars, your marketing budget? All of that is submitted and gone through over a significant period of time.”

•     •     •

For those just catching up to this issue, the city's tax abatement policy is known as CIITAP (see-tap; Community Investment Incentive Tax Abatement Program).

An abatement now gives developers a steadily declining break on property taxes over the first 7 or 10 years after their project is complete. The current policy starts the tax break at 90 percent off the assessed value and declines by 10 percent every year until it runs out.

There are three current abatement requirements. One is that a building live within the appropriate density district, which covers downtown and parts of the West End. A second is that it's at least three stories high or is a rehabilitation of a historic property. And, most importantly for taxpayers, the development should increase the tax value of the property by at least $500,000 a year. (The tax break applies to the difference between the original value and the value of the new building.)

Whenever a new project comes up for an abatement, there are always people asking for guarantees that the building will be environmentally friendly, that it will use local labor, that the completed project—often a hotel, recently—will pay a living wage.

Those oft-repeated concerns led Mayor Svante Myrick to task a committee of stakeholder-types—business and labor leaders, city and county reps, those sorts—with coming up with some new recommendations that could increase “broad community benefits” that might include addressing the most popular concerns.

Alderperson Ellen McCollister (D-3rd) chaired the committee's six meetings; she reported on Nov. 19 before getting into other issues that it was quickly decided by consensus that tax abatements weren't the appropriate tool to encourage affordable housing, always a need in the city. The sense was, McCollister said, the county Industrial Development Agency (IDA) that makes the final call on abatements wasn't suited to the task.

“Affordable housing would be better monitored through inclusionary or incentive zoning,” McCollister said, referring to requirements the city doesn't yet have for developers to put in a certain percentage of rent-controlled units.

Eventually, McCollister's committee came up with a proposal to offer a base-level 7-year abatement and offer a 12-year abatement for those doing a little bit more for the Community. In addition to the current requirements, the entry-level 7-year proposal would require developers to do a lot of self-reporting. They would have to employ energy-use tracking, or get certification as a base LEED design. They would have to report where their workers live. And they would be required to make demographic reports and give stated goals for workforce diversity.

Those aiming for a longer, 12-year abatement could choose from one of three options: building a project that uses energy at a level 20 percent below state code; hiring 40 percent local labor; or, in a single-use building like a hotel, guaranteeing a living wage for 100 percent of a workforce numbering at least 25 people.

Just because the working committee came up with this proposal didn't mean that every member was happy with the results.

Stacey Black of IBEW Local 241 was calling for a 95 percent requirement in our Sept. 16 feature on the issue (“City, County, and Local Labor Argue About Tax Abatements”) and his tune hasn't changed.

“It's been a struggle for people to believe there is enough labor and contractors willing to hire local workers on these projects,” Black said. “The tangible data is hard to come by because we don't have a recorded history.”

One hundred percent local labor, Black admitted, wasn't feasible because of specialized skills that are required on high-cost downtown jobs like sheet pile walls, elevator construction, and crane operation.

“When that crane comes today, it comes with Joe, and if it goes to Buffalo, Joe goes with it,” Black said. “Some of these guys are used to traveling all over the state, even the Northeast. You're going to see weird numbers on certain trades.”

The committee will “circulate” the new CIITAP requirement proposal over the holidays and return to it in January. The public is invited to comment.

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