Sometimes doing the right thing means taking a political risk. Case in point: this week, the New Rochelle Industrial Development Agency (IDA) approved a request from the owners of 255 Huguenot Street for a payment in lieu of taxes (PILOT) that will start in 2029 and run for 11 years.
If you don’t recognize that address, it’s the La Rochelle building, originally developed by Avalon as the first, shorter phase of its downtown project. (The second, taller phase, now called Halstead, is unaffected by this new deal.)
255 Huguenot is presently in the 19th year of a 30-year tax abatement through which it annually pays the City a percentage of its net operating income, but is exempt from property taxes. The new PILOT just approved by the IDA does not extend these terms, but is instead modeled on the PILOT structure associated with the City’s recently-approved downtown development plan; it begins at a deep discount in year one and then phases up to full taxes.
What’s going on here? Why even consider this step? The purpose of the PILOT is to facilitate the construction of a new street that would bisect the current superblock at 255 Huguenot and thereby connect the train station to the core of downtown. Right now, folks exiting the train station to the south run smack into a blank wall, and that greatly diminishes the value of our most important transit asset. By contrast, an accessible and attractive physical and visual connection would deliver significant economic benefits to the entire downtown area and assist our overall development objectives.
But getting it done entails major surgery to the site, and it comes with a hefty price tag: about $17M. This cost includes construction of the street itself, partial demolition of 255 Huguenot, and foregone rent from the elimination of several residential units in the building. No property owner in their right mind would consider such a step without incentives — thus the PILOT, which has an equivalent value of approximately $17M, spread over 11 years. Absent this PILOT, the project could not proceed, and we’d be stuck with 255 Huguenot’s current, flawed design.
In addition to opening a valuable connection between the downtown and the train station, this action will also create a new development site on the eastern portion of the superblock. There are several possible scenarios that could unfold on this new site, the most probable being the construction of a roughly 300-unit residential tower.
So what does this mean for taxpayers? The City and its consultants carefully evaluated the fiscal impacts of both the PILOT and the new building, and found that this arrangement will increase revenue for both the City and the School District. To be specific, without the new PILOT, new street, and new building (the status quo scenario,) the School District would receive revenue of approximately $34M over the next 30 years. Under this new arrangement, the School District will bring in approximately $49M, less roughly $9M for new education costs, for a net benefit of about $6M. For the City government, the net benefit over this same 30-year period will be about $4M. Not huge numbers in the context of our overall budgets, but still squarely on the positive side of the ledger.
It is also possible that the new building will be developed as a hotel or office structure, in which case new education costs would be zero, and the net fiscal benefits would be greater.
Finally, the City Council is considering — and is likely to approve — a revenue sharing arrangement with the School District that would cover the final 11 years of the existing tax abatement on 255 Huguenot (through 2029.) This would transfer approximately $1.7M to the School District.
When you see it all laid out, this becomes an easy call, right? Well, not so much. Despite its many virtues, this measure is still controversial. Why? Because the original Avalon deal, negotiated a generation ago, remains a highly contentious subject, and, therefore, any action which gives the impression of further giveaways on this same site immediately generates intense feelings. The IDA is taking a lot of heat right now.
My point in writing today is not to re-litigate the original Avalon abatement; it was negotiated at a time when downtown New Rochelle was in its worst condition, and reasonable people can disagree about the terms in hindsight. My point, instead, is that the original deal ought to be immaterial to the choice before us now. The important question is what is best for the community going forward.
By this standard, on the merits, the IDA made a good decision. A fair reading of the evidence shows clearly that the new package will improve the local economy, generate additional revenue for taxpayers, and strengthen our city as a whole. From both a planning and fiscal perspective, everyone will be better off. And when a public body like the IDA looks past the tough politics and casts a courageous vote from which all of us benefit, I think part of my job is to defend their action and say thank you.