Harold’s Square On Its Way: Tax Break Granted Over Vocal Opposition

Categories Housing & Development, Ithaca, Labor, Politics

By Josh Brokaw

Construction on the Harold’s Square building is finally close to starting on the south side of the Ithaca Commons, so it seems, after four-plus years of public starts and stops.

Developer David Lubin, of Horseheads’ “L Properties,” and the “Harold’s Holdings LLC” entity set up to build the 12-story building, received a 10-year tax abatement from the Tompkins County Industrial Development Agency on June 8, one of the final hurdles to the project. Lubin appeared at the May city planning board meeting, where project engineer Jamie Gensel told the board that they plan on starting demolition this summer. Harold’s Square received most of its final building approvals at that meeting, pending a few approvals yet to be made on specific materials this June 27.

David Lubin, center, developer of Harold’s Square at Industrial Development Agency meeting, June 8, 2017. Photo: Josh Brokaw/TruthSayers

The IDA granting the abatement, by a 6-0 vote with Jennifer Tavares excused, was not without its share of controversy. Ten people spoke at the June 8 meeting who questioned or outright opposed the project receiving a tax abatement – an “abatement” meaning that a project pays less taxes than it otherwise would, if taxed at its full assessment value. Property owners typically still have to pay taxes on what the property was worth at the time of improvement, but are given a break on the value of the improvements.

For downtown projects, the developer first has to go through the city’s Community Investment Incentive Tax Abatement Program [CIITAP], which requires the property owner add at least $500,000 to the property’s value, build at least three stories, and that the return on investment annually is below the 20 percent annual profit, to demonstrate financial need.

The Harold’s Square project is estimated to cost about $43 million, with 108 beds planned in 40 studios, 31 one-bedrooms, and 37 two-bedrooms. In application documents, Harold’s Square says it will have residential rental rates “slightly above” others downtown, like the Carey building and the Gateway Commons – a two-bedroom in the Carey Building is between $2,450 and $2,677 per month, with no studios or one-bedrooms listed for rent, to give you an idea of what that market rate looks like right now. No affordable, rent-controlled apartments are planned for Harold’s Square.

The value of the abatement over 10 years was estimated to be about $5 million, not including an abatement on sales tax for construction materials that the IDA offers to many of its projects. Harold’s Square ended up receiving an “enhanced” abatement for energy efficiency measures, so the total estimated value is as yet unclear – more on that later.

The arguments made on both sides for and against granting the property tax abatement followed lines often drawn in debates over tax breaks for high-profile, downtown projects. Those opposing the abatements want the IDA, and the city, to require more of developers to achieve the abatements. Those arguing for the breaks point out that construction is very expensive downtown and that the tax break is on property value that wouldn’t occur without the construction. Let’s break these arguments out by topic, with voices both against and behind the IDA’s decision to grant the abatement from the June 8 meeting.

Rendering of Harold’s Square. The brick building at left is the current Sage Block – all other construction will be new. Source: City of Ithaca Planning Board

Why No Affordable Housing?

Theresa Alt, Collegetown resident, restated an argument she made, according to meeting minutes, about the City Centre abatement granted in April 2017 and in a previous, May 30, hearing on Harold’s Square held at the Ithaca Town Hall. [At that meeting, all eight of the citizen commenters spoke out against the project receiving an abatement.]

“If the IDA must abandon its mission to create jobs and intead give abatements for housing, it should do this ONLY for affordable housing,” Alt said at the May 30 meeting.

“It’s good to have green energy, good to have density at center of city,” Alt said on June 8. “But you are working against yourself when you put these residential buildings in that have no affordable apartments in them because you are driving the working population out of the city, far away, and they will simply have to be buying cars that they can’t afford, driving into the city, filling parking spaces. And those low income cars won’t be electric ones.”

“What good does it do anybody in a low income job if they can’t afford to walk to it,” Amanda Kirchgessner, a restaurant server by trade, told the IDA board last week. “Putting market rate housing on the Commons is great for wealthy people. But when I walk around this community I don’t see lots of wealthy people. I see lots of working people.”

Kirchgessner suggested that if the IDA is now in the business of housing – its charter is focused on economic development through industry – the IDA might consider bailing out 11 potential foreclosed homes that owe $150,000 in back taxes.

Amanda Kirchgessner speaks at an Industrial Development Agency meeting, June 8, 2017. Photo: Josh Brokaw/TruthSayers

Aislyn Culgar, once of the Bay Area, California, warned Ithaca not to go “right down that trap” of gentrification, so that “all people that makes this a funky and fun palce to live can’t live here anymore.”

“It’s not something the market will stop,” Culgar said. “The market pushes for an increasing wealth divide. Just to say the market will provide an increased number of units and take the pressure off, I really think that’s a flawed logic. If we don’t do something to stop that fall into the pit of gentrification, that massive wealth divide, it’s just going to happen.”

Questions about the validity of “trickle-down” housing economics were on several lips. Ithaca Mayor Svante Myrick, an IDA member, took about 15 minutes to make the argument he has frequently made in recent years that building more market-rate housing, no matter how expensive, will lead to more availability in affordable units those far too poor to live in a new downtown high-rise.

Responding to comments from a couple of people who mentioned Myrick’s mother, the mayor said “she would not be able to afford to live at Harold’s Square, and I would not be able to afford the rent.”

“I thought at first like those I heard in this room,” Myrick said, of his early thinking in public office on housing policy. “My thinking has changed … there’s a resistance to the logic that increasing supply with demand constant won’t lower prices.”

Myrick took on the example of the Bay Area: “Good paying jobs, which everybody here wants, have come to the Bay Area. Housing has not increased. Great resistance to housing projects like this dominate the thinking in the Bay Area.

“Go to the science,” Myrick continued. “There is established science around housing prices. Around the policies that deliver the lower housing prices and policies that deliver higher housing prices … In the ‘50s, there was a diversity of socioeconomic classes in the city of Ithaca. Right now, people are being pushed further and further out.”

Myrick said that in the 1950s, there were about 30,000 housing units in the city. Now, there are about 32,000, he said. He said that from 2000 to 2012, there was a “net zero” in the number of units within the city, and rents went from $500 per month to $980 per month. [TruthSayers will be requesting a source for these numbers.]

People who will potentially live at Harold’s Square won’t go away, Myrick said.

“They’re going to live out in the sticks,” Myrick said. “They’ll move to Cayuga Heights – or they’ll move to the Northside or Southside where they’ll buy homes that used to be owned by African-Americans and poor people of color.”

Heather McDaniel, administrative director of the IDA, said in response to comments about the IDA being outside of its mission scope that “historically, not every project meets every requirement … there are certain other benefits that are legally in our mission,” including diversifying the tax base and quality of life considerations.

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Philly DiSarno speaks at Industrial Development Agency meeting, June 8, 2017. Photo: Josh Brokaw/TruthSayers

Where’s the Local Labor, Where’s the Jobs?

Several commenters at the June 8 meeting asked why Harold’s Square should receive an abatement when it has put “N/A,” i.e. “not applicable,” in the places where an applicant is supposed to answer questions about job creation. With an outside building manager and no control over what the potential retailers might pay, Lubin won’t be employing anyone directly once the project is finished. [There is a 12,780 square foot retail space planned on the ground floor, along with one other smaller space – that large space is more than double the size of the 5,700 square foot West End Green Star store, for comparison.] McGuire Development, of Buffalo, is the contractor on the project, and citizens brought up a long-standing request to require local labor on this and any project that receives abatements.

McDaniel’s response to that ask is that there are “no contractors in adjacent counties that can handle a $5 million job or above – and we don’t have all that many subcontractors willing to bid on those projects.”

Since the IDA put in a policy to collect data about who is working on its projects in late 2015 – after finding that numbers about local labor were simply a “wild ass guess” – no projects have started, McDaniel said. The City Centre project will be the first to collect labor data.

Site of Harold’s Square on Commons. To left is Sage Block, which will be preserved – the following three storefronts will be demolished. Photo: Josh Brokaw/TruthSayers

Sympathy for the Developer and the Merchant

During comment at the June 8 meeting, three people spoke in favor of granting the abatement to Harold’s Square.

Philly DiSarno, deputy director of economic development with the city, Vicki Taylor Brous, a consultant and co-owner of Ithaca Bakery/Collegetown Bagels, and Mike Cannon, a vice president of Tompkins Trust Company.

“This type of construction needs to be subsidized,” Taylor Brous said, “it’s difficult with a big crane. They’re staging it on a postage stamp sized property and they want to do it in an 18-month window.”

Myrick and other IDA board members echoed the difficulty of development: the mayor said that no project that’s failed to get tax abatement approval has gone forward in 40 years. And Harold’s Square, besides providing housing, is needed to fill in the newly renovated Commons.

“The empty storefronts that remain in the assembled properties for this project are a deterrent,” DiSarno said. “The clients and customers [of merchants] are saying it looks bad. We put so much time and effort into the Commons, why would you allow this project to wait so long and hold up to keep these storefronts empty?”

Green Building

The area of most agreement between what developers can do and active citizens want seems to be that of environmentally friendly, energy-efficient construction. Harold’s Square was awarded an “enhanced” abatement for “green” building practices that came out of a study done by Taitem Engineering. Harold’s Square is the third project, behind City Centre and the Computing Center, in Lansing, to receive the abatement. Heat pumps and about 60 kW of solar generation are included in the project.

Instead of taxes increasing by 10 percent every year for 10 years, 100 percent of taxes will be abated for the first three years, then 90 percent of taxes will be abated for the next three years, until no abatement after the 10th year.

The debate over the role of the IDA and how it should use its power will be ongoing. It is worthwhile to note here that the IDA does not have zoning power, so while it could, in theory, decide to require affordable housing in a project, that’s not in its mission and it could not make it a zoning requirement.

Hopefully, if you have read this far, in this meeting wrap-up story that spiraled far out of control, you have some more understanding of these complex issues – your correspondent has spent numerous hours on this story, refreshing himself on this debate, and is still not sure of all the moving pieces.

If we must simply characterize the two sides of the debate, there is one which asks for more pie, and the other that asks the pie be sliced more evenly.

In favor of more pie, Myrick noted that city tax rates have fallen in recent years, with more development on the tax rolls. McDaniel used the new Marriott as an example – worth $4,500 annually undeveloped, it brought in (she said) about $100,000 in property tax last year.

In favor of a more evenly split pie, there are the active citizens questioning this, and other, abatement decisions.

“You don’t have to wait for the county, the state, or a sign from God,” Stephanie Heslop said to the IDA board. “You could carry out your primary mission of promoting good jobs and walkability and sustainability by enabling more people to afford to live and shop where they work. You could do those things, but you won’t because that would require you to be progressive and inclusive.”

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Josh Brokaw is an independent reporter based in Ithaca, N.Y.

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2 thoughts on “Harold’s Square On Its Way: Tax Break Granted Over Vocal Opposition

  1. Are you going to post an update when you get the sources for the mayor’s housing unit and pricing numbers? Also: did he provide any citations for the “establish science” about housing availability and prices?

  2. I’ll give you a citation with links to more citations. Warning, this is LONG and is a specific discussion of San Francisco.


    Spoiler: Myrick knows exactly what he’s talking about. He has done his research. We need tens of thousands of new bedrooms in Ithaca just to keep up with job growth and student growth since the 1950s, and the zoning code has prevented them from being built. He’s doing his best to make it happen. If it doesn’t happen, if the supply of housing in Ithaca remains constricted, as jobs keep growing, people will keep moving further and further out — past Cortland.

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