ROTTERDAM — Plans to relocate town operations to ViaPort are no longer moving forward after lawmakers on Wednesday voted to nullify a lease agreement signed last year due to a procedural issue with state law, blindsiding mall management and setting the stage for a potential legal battle.
The move comes after months of growing pressure from residents to break the 10-year agreement, signed last year under the previous administration, that would have relocated the Town Hall, Police Department and court offices to a roughly 50,000-square-foot space that once housed a Kmart at a cost of millions to taxpayers.
In a 3-0 decision, a slate of new board members seated this year — including Supervisor Mollie Collins, Jack Dodson and Joseph Mastroianni — voted to nullify the agreement after it was determined the town did not properly advertise a permissive referendum for the lease as required under state law. The three board members also voted against reauthorizing the lease agreement subject to a referendum and to enter into negotiations with ViaPort to purchase the Kmart space, effectively shelving all plans to relocate town services to the mall.
Board member Evan Christou was not in attendance due to a prior engagement. Samantha Miller-Herrera, meanwhile, abstained from voting on all the resolutions because she “could not in good conscious” potentially involve the town in a “prolonged legal battle” with the mall owners.
The decision to nullify the agreement was met with applause from dozens of residents opposed to relocating town services, but raises questions about what steps the town will take next to address its aging facilities, including the town court, which has been outgrown and does not comply with the Americans with Disabilities Act.
Wednesday’s vote also brings to light concerns about a potential legal battle between the mall owners and the town, which paid which paid a $1 million deposit last year to secure the Kmart space using federal coronavirus-relief funds.
Collins, who has been critical of the Kmart move since it was first discussed, said it’s unclear if the town will be able to recoup the $1 million deposit, but hopes the mall owners will be amenable. She added there has been no communication between mall ownership and the town in the lead up to Wednesday’s vote.
“Obviously we don’t want any legal ramifications from it, but I understand like all of us as adults, you have to weigh one side with the other, and we pray to God there won’t be a protracted legal problem, but we’ll have to deal with whatever comes,” Collins said.
She added it’s unclear what direction the town will take now that a decision to void the ViaPort lease has been made, but said numerous options will be considered, including upgrading current facilities, buying and retrofitting an existing space or purchasing land to construct a new building.
“It’s not that there’s not a clear path forward, it’s just that we need time to hear from residents, and we need time to explore all options,” Collins said.
Fuat Agsak, the business development director for ViaPort, said mall management was “blindsided and shocked” by the Town Board’s decision to nullify the lease, adding that they were not aware of the procedural issue until last week despite being in communication with town officials since negotiations began to lease the space last year.
Under state law, towns are required to post a notice of a permissive referendum within 10 days after approving a resolution to “purchase, lease, construct, alter or remodel a town hall, town lockup or any other necessary building for town purposes.” The permissive referendum would allow residents to collect signatures to hold a referendum on the decision. No notice for a permissive referendum was ever given prior to the town entering into the lease agreement last November.
“It has been 15 months since the town reached out to us to lease and purchase the subject space. We have been patiently working with the staff and board members since then, and have accommodated all of their requests,” Agask said in an email Thursday. “We have also asked them multiple times to bring up any concerns so we can work together to address them. We believe the current board members will confirm the same. For that reason, it was shocking to see the voting last night.”
Agsak also pushed back on comments made by residents in recent weeks about the current state of the mall, noting that owners have been a good community partner since acquiring the property seven years ago. He did not answer questions pertaining to whether the mall owners had intentions to sue the town or whether they intend to return the security deposit.
“We have been a proud partner of this community for over seven years,” he said. “Despite the fact that it has been an extremely tough period for the malls and retail industry in general, we have worked tirelessly to come up with alternative uses to serve our community.”
The Town Board voted to enter into negotiations with ViaPort to lease a portion of the more than 80,000-square-foot Kmart space last August. A lease was signed in November and the $1 million in American Rescue Plan Act funds to secure the property was paid out a month later.
But questions of how much the move would cost taxpayers were never fully answered prior to the lease being signed. Preliminary information estimated it would cost $5 million to retrofit the Kmart space to meet town needs.
Residents have criticized what some have called a “backdoor deal” and have raised questions about how the town would pay for the move as well as the monthly lease payment, which would cost around $33,000. Others have said the town should not be paying to keep the ViaPort open and that the town should own its facilities instead of leasing.
“I believe we should own our buildings,” said resident Linda Testa. “Moving our offices is keeping the lights on at ViaPort.”
Wednesday’s comes a week after engineers from the firm Barton & Loguidice presented a cost-analysis study for the ViaPort move. The town contracted the firm to complete the study in January — two months after the lease was signed.
The study estimated it would cost the town $9.2 million to retrofit the Kmart space, nearly double the original $5 million price tage, and projected cost to lease the facility would be $54 million over a 30-year period. The added cost were were brought on by inflation and changes to a preliminary site plan, including a carport for police and upgrades to the building’s exterior.
Upgrading the town’s current facilities would cost an estimated $14.4 million, and would cost $34 million to maintain the properties over 30 years, the study found.
It was also determined the town would pay $37 million over 30 years to maintain the Kmart facility if it were to purchase the property, though the estimate did not include a sale price for the building or take into consideration any revenue associated with selling the town’s current buildings or costs with maintaining the properties.
It’s also unclear if the town would be able to purchase the building. The lease agreement only included a first right of refusal and not an option to buy, raising questions about what would happen to the town’s locations if the lease is not renewed after 10 years.
Christou, last week, admitted he thought the contract included an option to buy and would not have supported the move if he had known otherwise. He blamed the town’s previous attorney, Kate McGuirl for misleading him, and said still supports moving town operations to ViaPort, but only if the town can purchase the Kmart space.
Meanwhile, Miller-Herrera called for the Town Board to set aside “egos and political discourse” to find a solution, but criticized the new administration for not having a clear path forward to address the town’s aging facilities and for not fully examining the ramifications of breaking the lease agreement.
She added that she would not be in favor of upgrading the existing Town Hall and police department.
“I also cannot say that investing between $15 million to $20 million into [Town Hall] or the police department is the right move for our police department, for our courts or for the public when they enter these buildings,” Miller-Herrera said.
But Mastroianni pushed back, saying after Wednesday’s meeting that the former Town Board should have been more transparent in its decision making and should have examined exactly how much it would cost to retrofit the Kmart space before signing a lease.
“The reason that the buildout cost doubled is because there was never a cost buildout before hand,” he said. “We actually did the due diligence to find out what it would cost.”
He added that he hopes there will be no legal ramifications for the decision to nullify the lease. ViaPort, he said, represents a large commercial district in town that he hopes will bring in new businesses, though he questioned if having town services there would be the best move.
“I want to see the best possible outcome there,” Mastroianni said. “I want people to shop there. I want it to be a great bridge between the city of Schenectady and the town of Rotterdam, and I don’t think proceeding with the lease is going to be the best benefit in that regard.”
Contact reporter Chad Arnold at: [email protected] Follow him on Twitter: @ChadGArnold.