GUEST APPEARANCE: A PILOT for all of Geneva
GENEVA — New York state invested more than $1.4 million in taxpayer money to help shore up the crumbling Dove Block in downtown Geneva.
When the work was completed, the 19th-century building appraised at more than $750,000. Yet, when a Philadelphia design firm finally purchased the iconic building, it had sold for less than half that amount.
The reason behind this anemic sale was the impact a $750,000 sale would have had on establishing the property’s city tax bill — taxes so high it would have made no sense for the new owner to try to operate a business here.
The Dove experience holds a difficult lesson for the many Genevans who erroneously spoke last week against granting initial tax relief to the developer planning to transform the American Legion property on Lochland Road.
It is understandable that Geneva property owners might grasp this opportunity to vent their frustration over the local property tax environment. Unfortunately, in using the American Legion project to take on this issue, they are choosing a comfortable, convenient but self-defeating position. The enemy here is not a developer trying to return a tax-exempt property to the tax rolls — an effort that eventually will add millions to city coffers. The problem is that Geneva homeowners are using this project to start fighting decades of self-serving fiscal operations in both the city and town of Geneva.
Before we drive out of town another opportunity to grow the city tax base, Genevans need to confront the reality of this city’s business environment. And someone needs to speak for the poor and working poor who will benefit not necessarily from using this new residential and tourism facility but from the jobs generated by building and operating the redeveloped property.
Development projects are collaborative efforts
The truth is a business investor — like the company that eventually purchased the Dove Block — will pencil out the costs of building and operating a business and then make rational decisions weighing the quality of what they build against what they hope to earn from the investment. As wealthy as any developer might be, the project is not solely in the control of the owners, as market forces, bank financing and city oversight play a big role in the purchase and construction costs as well as eventual revenues generated from the project. In sum, the success or failure of the project over time will determine the value of the property and the tax revenues it contributes to the city’s revenues.
In many ways, the payment-in-lieu-of-taxes — or PILOT — application by River’s Edge Capital for the American Legion property project should warm the hearts of long-suffering Genevans, not anger them.
After decades of new development fleeing the city for the lower taxed town locations, River’s Edge is planning to invest more than $25 million and add a hotel, restaurant and desperately needed new housing options. (Imagine Geneva seniors having an option of downsizing to lake-view condominiums rather than moving to Canandaigua.) While the developer takes the risk, the PILOT process allows a local public authority to grant some incentive by allowing the project tax payments to grow as the business grows.
In this case, River’s Edge is asking to pay about $7 million less in property taxes on the hotel and restaurant portion of the business over the first 15 years of operation. Still, over the first 20 years, using conservative city estimates, the project will contribute more than $22 million in taxes — even with the PILOT. And this comes from a property currently fully tax exempt.
While the PILOT slows the growth of property tax on a portion of the project, the condominiums would not be part of the PILOT and occupancy taxes, sales tax, sewer and water fees will generate funds to the city as the project opens. All of this from a property that is currently tax exempt.
If the PILOT process can manage to result in a new, high-quality project that distinguishes Geneva and helps establish it as a true “heart of the Finger Lakes” tourism industry, this tax incentive is a small and very smart, timely investment for this community. There are already rumors of other developers seeing Geneva as a great place to rise with the Finger Lakes, so the signal we send to investors is crucial. Canandaigua already has an excellent new waterfront hotel and there are many other Finger Lakes for projects to target if Geneva remains the highest cost option.
Attacking the source of the problem
The reality of the city’s tax situation continues — for all its residents — with or without the American Legion project. The question is how to improve business conditions. Counting solely on out-of-town developers to solve this tax problem will result in more development — outside Geneva.
Geneva’s tax situation for decades has resulted in most developers locating new stores and homes outside the city. A new commercial development planned for the corner of Pre-Emption and Routes 5&20 is just yards west of the city’s aging Town & Country Plaza. And the burden of paying for Geneva’s professional police, fire and city services increasingly rests on fewer and poorer city residents. This is not a sustainable model.
Further proof of the weight of this tax system can be seen in the new development that has occurred in the city. Like the Dove, the vast majority of downtown development — and all of this current downtown street construction — has occurred with government subsidies of some kind. Really PILOTs with various names.
Under these conditions, allowing a developer to titrate their assumption of this tax burden while growing their new business is not only understandable it is prudent. The Industrial Development Agency, which has the power to grant this relief, has designed the program to keep step with surrounding communities, which also use incentives to attract development. The only difference is Geneva’s out-of-line tax rate.
Geneva — including the Town of Geneva — needs to attack the fundamentals that have historically put headwinds in the way of efforts to grow the city tax base. The American Legion property may be redeveloped with or without a PILOT. It is unique land. However, as its new owners pencil out this investment, we should use the city’s influence and incentives to support the quality of the project. We need it to be more like the Belhurst and Geneva-on-the-Lake than a Howard Johnson with pre-fab townhouses.
Property and sales taxes have decades to flow from a great facility that distinguishes the Finger Lakes. If we ask a developer to ignore business fundamentals because of our historic inability to reduce the high tax rate and our high concentration of tax-exempt property, we are being naive. And the major good happening as the Finger Lakes rise will continue to happen — just outside the City of Geneva. That trend is clear.
We should grant this PILOT and work hard to assure the quality of this build. In this time of growth and opportunity, we should send a signal to developers that we understand the unique tax situation in Geneva and will work with them. Giving up an estimated $22 million in tax revenue because of a $7 million discount in its early years is applying short-term thinking to a long-term problem.
And, most importantly, we should start going about the difficult work of consolidating city and town services, reducing the property tax burden by urgently returning city-owned parcels to the tax rolls and growing the tax base as quickly as is economically possible. Only then will the Finger Lakes’ rising tide raise Geneva boats.
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Article written by: Chris Lavin
December 21, 2021
Chris Lavin is a long-time Geneva resident and a former reporter and editor for newspapers across America. He is a former Times reporter and writes occasionally for the Times. He is co-author of the recent #Porch Portrait: “Finger Lakes Rising.”
Original article linked here.