Newburgh has been in such a critical state for such a long time that some people believe some development is better than no development. However, after the post yesterday on Facebook, we are starting to see more people think critically about long term planning and the best outcome for this lot, looking at other cities that have seen gradual decline and how they have been able to pull themselves out of it. For further insight into what others see wrong about this site, read the following bullet points from Stuart Sachs who was involved in the lawsuit against Mill Street Partners in 2014.
The taxes are critical, and the injury to the City’s future is palpable. They want to pay a total of 45k/yr for 30 years with a construction budget of $30M, they should be paying $1.5M/year based on tax load of 5% of assessed value. Computed as rental units, which is probably more accurate, would typically be 2.5k-3k/unit, or $250k-$300k / year – this may be a more realistic estimate. Subsidized units would be closer to $2k/unit/yr.
The Commercial space alone should generate at least $86k in taxes. (13,800ftx$125/ftx.05). In other words, the City is leaving an enormous amount of revenue on the table, and we, the taxpayers will have to make up for the shortfall, or suffer reduced services. $300k + $86k = $386k/year in expected revenue – $45 = a shortfall of $341k which will have to be made up by other taxpayers.
We can’t fix the streets without revenue. We Can’t upgrade water and sewer systems without additional revenue. We need more police, fire, DPW, etc, but can do nothing without new tax revenue. It is unfair to allow one store to have subsided rent when all others pay full freight. This puts existing stores at a competitive disadvantage. Newburgh is known as a high tax low service city… we must change that if we hope to develop. As a point of reference, 7 city counsel members pay $67k/year, or 50% more than this entire project, 92 apartments, and two commercial spaces. All of our taxes will go up, but not the taxes of this development which will be fixed for 30 years.
The nature of a PILOT, or payment in lieu of taxes is that the City gets a one time payment instead of a lifetime of taxes to support the City, and the Services it provides. The fact is that this structure means that for the next 30 years, the project will consume far more City services than it will pay for. So each year, the taxes will go up on the rest of the City to compensate for the lack of taxes paid by this developer. The development proposes 91 units with 155 bedrooms. Many of those will be for kids, and the school system costs $22,395/yr / kid. 155 bedrooms might have between 50 and 100 children. That means school cost alone would be between $1M and $2M+. That huge shortfall of money gets paid somehow. If we give them a PILOT, the developers walk off with millions in profits, and we are stuck with the tax increases to pay for that. And that’s just the school taxes.
Promises, bait and switch
When Mill Street Partners made the proposal to the City, they promised to add taxes to the city, and they are subtracting instead. Master plan. The city’s master plan requires that this area along Broadway generate tax revenue for the city…Mill Street quoted this part of the Master Plan in their proposal, and specifically stated that they will be “adding new real estate revenues to the City’s revenue stream. As soon as they were selected to be the preferred developer, they reversed themselves and asked for a tax subsidy.
The Newburgh Sustainable Master Plan was adopted by the City Council, and thus has the force of law. It has a section devoted to land use called the Future Land Use Plan which clearly states that this area is set aside for generating new tax revenue. Setting a tax subsidized project with a PILOT on this downtown Broadway lot violates the City’s Master Plan, and thus violates the law.
Mill Street Partners also showed a portfolio full of highly energy efficient elegantly designed projects. Often receiving very high LEEDS ratings – LEEDS gold or LEEDS platinum. This was left behind as they turned around so fast they left skid marks on Broadway. Now they propose everything at the level of barely meeting minimum requirements in terms of environmental, construction standards, and the design stinks, utilizing plastic and siding where brick is more appropriate.
This is a disaster and full of deception mostly because Mill Street Partners propose very high density, but they do not want to provide the infrastructure required meet the needs of that density. As a result, they will harm the surrounding neighborhood, and make many of the existing buildings undevelopable. Typically we, as a community, desire the restoration of abandoned buildings, and we develop policy to encourage that. For example, an existing connected structure with no garage or driveway will have to rely on street parking, so we offer them a variance to allow that, but new developments are expected to include parking. How much? Based on an average of the requirements of surrounding nearby cities, this development should provide 228 spots. But… that would cost more money than the developer wants, so Mill Street commissioned a traffic study which specified a need for only 165 spots. Even that was more than they wanted to build in, so they commissioned a new study, and guess what… now they claim they only need to provide 111 spots… They use selective information, ignoring peak time, and existing parking use of the DMV lot which Orange County claims exclusive use of, and most notably, they do not address where they will push their snow, nor how the reduced parking availability after a snow storm will affect their plan. The result will clog the neighborhood with street parking, and render many of the existing abandoned buildings much more difficult to develop.
They could easily reduce the density by 43 units which would bring them into compliance, or build a parking deck to accommodate the higher density, and add a garage under each house. The reason they fight these obvious solutions is $$$. They are expecting $7M in profit on a $30M project, and they do not want to cut into their profits. The developer has put maximizing their profits over the quality of life and future development possibilities for abandoned buildings in the neighborhood.
It is also important to note that typically the parking study should be done by the City, and the developer should pay, and, by the way, this is detailed in their Contract with the City. By allowing the Developer to control their own study, there is a conflict of interest similar to wall street banks paying a ratings agency for a high bond rating for junk bonds. The fact that they can commission multiple studies and get dramatically different results, proves that their hand is on the scale. The studies are supposed to be based on independent and uniform guidelines, AND allow responsible development without destroying the quality of life in the neighborhood. The study is NOT supposed to serve the desire of a particular developer to get a pre-determined result and thus squeeze
maximum profit out of a project.
The parking they are providing: a 1 acre parking lot is ugly… they should not be allowed to do this on Broadway.Build a structure, park under the supermarket, garages on the ground floor of buildings, something, just not surface parking – we are a beautiful City, and an acre of cars on Broadway is ugly!
Permeable pavement. This is good sense with storm runoff. They are proposing making 2 full acres now permeable to be not permeable. This was done when the Mount paved a parking lot on Gidney, and the result was sewage backup into surrounding homes. There needs to be a sewer capacity study done by the City, and paid for by the developer (that is what the contract with the City says) to see if the Sewer can sustain the added runoff. Permeable pavement must be used to help control runoff.
All storm runoff must be diverted into the groundwater through retention rings diverting the vast majority of all runoff into the groundwater before the line connects with the city sewer system.
Newburgh is under a consent order with the DEC to stop sewage treatment overflow during storms. The way this project is proposed, they will dramatically worsen this problem. They propose to have separate storm and sanitary, and then leave it up to the City to replace the entire sewer system. That is backwards and destructive to the city, and to the Hudson River. The developer must separate storm runoff, and insure that it does not enter the sanitary sewer. The design is ugly, and not fitting the historic district.
Open Space, for the public
There is no open space for the public included in this design. The developers proposal specifically stated that it would leverage NYS DOT, DOS, and EPF funds to rehab and create new open space. None of this is included in the project. Another bait and switch! The 1 acre parking lot should be in part open space for the public. I suggest ¼ acre active park, and ¼ acre passive park. Then the rest could be open space and a parking deck.
Again this is all about maximizing the developers profits at the expense of the quality of life for the surrounding community, and the residents of the development. This point is brought home further because the lot right now, is a defacto play ground for dozens of kids who have set up hoops, and leave balls and bikes on the lot, and play there every day.
There needs to be a public amenity of open space as part of the development. In NYC large developers are routinely required to add a public amenity to any large development. This brings the project into the neighborhood, and creates a better planned city. Frankly, in exchange for the right to make a substantial profit on the development, an amenity is created for the community. In the long run, it also makes it a better project, and a better neighborhood, and a better city. It’s just good planning.There needs to be green space that is beautiful, accessible, and maintained as part of the project.
Heavy Trucking in residential area
Heavy trucking next to houses with children. Really??? yes, really! They request a 13′ variance to allow heavy trucks to pass closer to existing houses than the law allows. This is a health and safety regulation, also to protect the foundations of historic masonry buildings from excessive truck vibration, and very little flexibility should be offered.
Poor compliance and unsafe working conditions
When Mill Street first investigated the site for a required archaeological review, they needed to do a minor dig. Instead of filing this with the Codes department as required by law, and submitting to inspection as required by law, and shoring up a deep hole before inserting workers as required by law (and OSHA safety regulations), the developer hired an out of town excavator and tried to sneak the dig in early on a Saturday morning. They dug a very deep trench and placed a worker below ground, way over his head with no shoring and no safety gear or precautions of any kind. This is strictly prohibited because trenches collapse, sometimes killing workers. They denied the dig, denied the depth of the trench, denied having a worker in the trench, and they denied improperly filling the trench… until each time I submitted pictures to the City, proving them wrong. They were called to account by the City, and promised to do everything properly in the future. Except… a month ago they did it again. Except they were even more deceptive this time, they declared the dig, and filed it with codes, but only showed the inspector one of the holes, guess what, they showed the one that was only a few feet deep, and no real issue…. Somehow they “forgot” to show the much more dangerous 11′ deep trench with no shoring, and a worker within… until I submitted pictures, and once again, they were reprimanded, and promised not to do that again. Basically, this is not a good start. They have not even poured a foundation, and they have already deceived the codes department, lied about it, and put workers at risk… not a good start and not a responsible developer.
Poor building standards
Stick structure over steel commercial. This is a poor choice designed to save money at the expense of fire safety. The Fire Department opposes this because, while it meets the minimum requirement of code it is not advisable. When you privilege profits over fire safety, you are asking for trouble.
The taxes I am ok with. I hear the need to gain taxes, but just the action of all these units being added to the city will increase the tax base through increasing the population. The fact of the matter is that no building structure = zero taxes of any type and a continued blight in the heart of broadway. And I don’t expect something else to miraculously arise out of the ashes if this project is blocked. Just look at Beacon – the entire train station was going to be developed and a connection to main street was to be created. That was beaten back by a group that promised something better. Yet there is still nothing to replace what could have been and there will be nothing for decades. Beacon has enough momentum that this is ok. Newburgh can’t make the same claim. The city desperately needs any type of development that can start the ball rolling.
Having said that, I am not ok with the other points raised. If the city gives in on the taxes, then it had better not give in on the other issues especially open space and parking.
If the city wants $45K in taxes, the city just needs to get about 6-7 multi families on the tax rolls. And those 6-7 properties will put far less drain on the infrastructure AND bring residents with earning power who can pay taxes.
As an investor with properties in Newburgh I’m happy to see development, but I’m not so sure this project is what the city needs. Acres of parking lots with cheap plasticky (that a word?) buildings. Long term the city and residents will lose.
Agree. A huge net loss to the city budget each year for 30 years (or beyond) and an uninspired use of what is one of the most valuable parcels on Broadway. Development fees in the millions walk away with the non stakeholders, while residents of the city will be left to live with a poorly sited residential project that will clearly make use of low end construction to maximize profits . This makes no sense in the center of the re emerging commercial district. If the citizens of Newburgh, through their representatives in government, see fit to grant a PILOT, it should be for a project that is of EXCEPTIONAL benefit to the city for now and for posterity. We need to respect ourselves and our city. That calls for a BROAD vision that goes a long WAY.
It’s time to lessen the correlation between property and school taxes to a more user centric model. Individual properties (regardless of use or status) pay a base edu. voucher of equal value to ‘keep the lights on’ so to speak. An additional voucher will be paid per child by the ‘household’, respectively, to cover the remaining actual education and administration costs. Institute ‘earned $ credits’ for ‘households’ based on grades (exceptions for special needs).
This approach does not fully dismiss the notion of ‘it takes a village’ so we all benefit. It would piggyback the current tax base and the intended one…especially in communities such as Newburgh with its new varied districts (think the Liberty Street corridor that is transitioning into a live/work district). It shifts the accountability of education to those that require it. Accountability is power. Developments, to include commercial-residential-schools, would gain scrutiny as future ‘return on investment’ is weighed by the first hand beneficiaries.
Essentially, the quality of the tax base pulls the ‘City in a predetermined direction versus the quantity of the tax base pushing on the ‘City ad hoc. As a community, we better come to terms in understanding that the ‘legacy’ municipal models that we’ve grown accustomed to are no longer sustainable. Otherwise, we won’t be building chit, the ‘state’ will do it for us on their terms.
I agree that this seems like a poor use of tax breaks. However, I want to respond to this statement about the parking issue: “Based on an average of the requirements of surrounding nearby cities, this development should provide 228 spots.” Donald Shoup’s The High Cost Of Free Parking has a great chapter on how parking minimums in modern zoning codes are generally set. In short: they are largely arbitrary numbers with extremely limited empirical basis. To the extent that they are based on observation at all they are based on almost no data points. And they are set without taking into account the costs that parking imposes (which are not only borne by the developers, but by the rest of us as well).
The fact is that Newburgh’s downtown is already extremely parking-rich by the standards of urban centers, and that adding more parking is in direct conflict with other goals of the city’s master plan (walkability, bikeability, transit accessibility, etc.) Competing with suburban big box stores on the basis of parkability is a losing game.
And let’s not forget real estate depreciation, a little known and rarely discussed benefit to developing commercial real estate. Essentially, the developer/ owner can deduct the value of the building over a period of time (generally 27.5 years) based on the assumption that real estate loses value over time. Depending on the corporate structure, this deduction can be used to offset building profits or passed through to the developer’s personal taxes to offset other owed taxes. It cannot be overstated how valuable depreciation is to developers, especially given that (unlike cars, printers, computers, etc.) most buildings appreciate over time. (There has been a loss of value in Newburgh over the last few decades, but that will soon be a thing of the past and depreciation is valuable to developers regardless.) Depreciation is also the reason that many suspect that Donald Trump, like many developers, has paid ZERO taxes many years. And there are other benefits available to developers like additional credits for low income housing, etc. My point is that Newburgh doesn’t have to give the developer everything they want, I bet that we could give them 10 years of much less substantial tax breaks and they’d still be interested in pursuing this project.
Really great piece by Stuart. Newburgh is on the rebound. Let’s be careful what we give away.
? Most ‘buildings’ do not appreciate over time, hence the depreciation period. But, point taken. ‘Two ways to value CRE, and, in turn, base depreciation; the buildings age and/or net operating income. Big corps. understand this and use the latter method. It’s why we see vacant malls or large apartment buildings seldom remodeled. Its why they tear down and rebuild. It’s why they went as far with the LOOP as they did. New commercial buildings, especially apartments, are depreciated at a higher rate. As far as revenue, the large volume food stores operate with slim margins already and would shut the doors if it wasn’t for the floor in the prices set by subsidies. It’s why the bodegas need to charge a premium. This project wouldn’t work if it wasn’t for its clientele, guaranteeing a noi. In that respect, this project isn’t all that different from the large med and college expansions we see.