IDA can decide on Crossroads Hotel PILOT
Agency seeks public input in hearing today
TUPPER LAKE — The head of the Franklin County Industrial Development Agency said the organization wants to hear from the Tupper Lake community on a proposed 20-year tax break for a hotel project the IDA is considering.
The IDA board has not yet authorized this payment-in-lieu-of-taxes (PILOT) agreement, awaiting public input at a public hearing to be held at 4 p.m. Tuesday at the Tupper Lake village office. A maximum of 10 attendees are allowed in person, due to COVID-19 restrictions, but anyone can call in over Zoom at https://zoom.us/j/4035865192.
IDA Director Jeremy Evans gave more details on Monday on what this PILOT would mean for the taxing and assessing entities and developers.
A PILOT allows developers to not pay certain taxes on the property and instead compensate the taxing entities with preset, lower payments. In this case, it is estimated to exempt developers from $2,334,319 in local propery taxes to the town, village, school district and county over the course of 20 years.
The hotel — a project of Crossroads LLC, owned by Tri-Lakes area residents Betsy Lowe and Nancy Howard and managed by Skyward Hospitality of Saranac Lake — is proposed to be built on the corner of Mill and Park streets. The hotel has traveled a long and complicated road to get to this point and still needs state Adirondack Park Agency approval.
Last week the Tupper Lake town board expressed its displeasure that board members were not notified about this public hearing. While board members unanimously welcomed the hotel as an economic driver, they took issue with the PILOT agreement process being handled through the IDA, saying it leaves the town and its residents out of the process.
Evans said the IDA board alone will approve or deny this PILOT request, adding that the state authorizes IDAs to enter and facilitate PILOT agreements, bypassing the local government that would get the tax revenue.
Though town board members felt this skips the usual PILOT process, which is conducted through the town board with consultation from village and school officials, Evans said this is a common practice for IDAs. An IDA is a private, nonprofit organization generally associated with a county, without any elected officials.
The IDA will take ownership of the property and lease it to the hotel owners. Since the IDA is a tax-exempt organization, it extends its tax exemption to the property. The hotel owners, who benefit from this, would pay a fee to the IDA.
“An applicant aligned with some sort of improvement project will often come to an IDA seeking a PILOT because the alternative is to seek individual PILOTs from every one of the jurisdictions,” Evans said. “If you are looking at it from a developer’s standpoint, you might say, ‘I’d rather negotiate with one entity than three or four of them.'”
Jacob Wright, head of Skyward Hospitality, said these IDA PILOTs help low-profit projects get done in difficult areas — which he said applies to Crossroads.
“Any economic incentives that New York state and county offer are very helpful,” Wright said.
Tupper Lake is a difficult area to develop, Wright said. He also said Crossroads Hotel will likely have lower financial returns than a “normal” hotel. He said Lowe and Howard see it as more of a community asset than a profitable venture.
Wright said the PILOT did not have everything the developers would have liked to ask for, but he called it “fair.”
“I think that’s one of the reasons IDAs were set up: to be able to negotiate PILOT if those incentives make sense to the community,” Evans said.
He said local residents will get to be heard at the public meeting.
How the PILOT works
Evans said the PILOT will last for 20 years, starting with 100% exemptions from new taxes on the first year, 2023, and decreasing that exemption by 5% annually until developers are paying 100% of their taxes in 2043.
This does not mean they will not pay any taxes at all. Developers will continue to pay the taxes they would pay on the undeveloped property, forming a baseline for what will be paid each year. As developers improve the property and their assessment value increases, the IDA will not immediately begin paying taxes on that increased assessment, but will be phased into it, 5% at a time.
For example, the 2020 assessment of the combined seven parcels which make up the hotel property is $30,600. The developers would pay taxes on this $30,600 every year as a baseline.
The first year, only this baseline assessment would be taxed. The second year, it would be the baseline assessment and 5% of the new assessed value.
After 20 years, the developers would pay 100% of their taxes.
This dollar amount would be determined by what the assessed value of the hotel becomes and what village, town and school tax rates are at the time.
Using estimates, a spreadsheet from the IDA shows that the developers would pay $3,776,847 over the course of 20 years with no PILOT compared to $1,931,807 over the same time period with a PILOT.
The total financial assistance the IDA would provide is estimated at $2,334,319. The IDA would charge a $108,800 administrative fee.
Wright said after years of work and setbacks on the hotel, things are finally starting to look “real.”
He said past public hearings have been positive and he hopes the project will receive APA approval soon.
He is hesitant to give exact dates, but if everything pans out, construction may be able to begin this year.