Ellis Medicine to make PILOT payments on Cushing Center

PHOTOGRAPHER: Marc Schultz

Ellis Hospital, located in the northside of Schenectady, in June 2011.

After years of paying no property taxes, Ellis Medicine has agreed to make payment-in-lieu-of-taxes payments on the Cushing Center in Schenectady, providing additional revenue streams for the city, county and school district.

The 45,000-square-foot medical office complex, built in 1996 next to the former St. Clare’s Hospital on McClellan Street, was one of few properties operating with a payment-in-lieu-of-taxes [PILOT] agreement that saw its annual payments decrease over time. For that reason, the Schenectady County Metroplex Development Authority, which administers the PILOT agreements, was eager to revamp the terms of the original agreement, which expires in 2019.

“It was a disturbing PILOT,” said Metroplex Chairman Ray Gillen. “Instead of like every other PILOT, where the payments increase each year, this one was shrinking. We’re still fixing the problems and the messes that were created before we got here. When we came in, we inherited a lot of PILOTs from people who just did not understand how to get maximum revenue into the community.”

The Cushing Center is an unusual case. Typically a property owner pays taxes or payments in lieu of taxes. But the original owner, Columbia McClellan Group, had its tenants sign a triple net lease, which makes tenants responsible for paying the building’s property taxes and other costs associated with the building. That would include PILOT payments.

Ellis Medicine, which took over the St. Clare’s campus in 2008, was not included as part of that setup, though. Like religious organizations and governments, the nonprofit hospital falls within a category of owners that are exempt from paying property taxes in New York.

“So as Ellis increased its footprint in the building, the way the PILOT was set up, the amount of taxes the building generated went down,” Gillen said.

In 2012, the PILOT generated $54,789. In 2013, it generated $38,771. This year, it’s on track to generate just $29,000.

Under the terms of the newly negotiated PILOT agreement, Ellis will pony up $24,000 in 2015, bringing the total PILOT payments on the building up to $53,000. In 2016, total payments will increase to $76,000, where they will stay unless local tax rates increase.

Of the nine tenants in the building today, just one is not affiliated with Ellis: Fox & Schingo Plastic Surgery. The rest are Ellis-run primary care and specialty care groups including general surgery, internal medicine, pediatric care, breast surgery, child and adolescent treatment, and ear, nose and throat care.

“Ellis Medicine is one of the leading organizations in Schenectady County and the largest nonprofit,” said Ellis Medicine President and CEO James Connolly in a news release. “The agreement provides more tax revenue and support for the community that so generously supports Ellis.”

Metroplex administers 49 payment-in-lieu-of-taxes agreements, up from 47 last year. A year-end report on PILOT revenues will be issued soon.