When Pat Zollinger looks at downtown Schenectady, she sees a block of beautiful buildings filled with businesses making money.
She also sees a problem. Many of these buildings are tax exempt, and she cites this as a reason taxes are so high for Schenectady property owners.
“People ought to know what is going on downtown. We have the largest tax burden in the Capital Region, but not everyone has a large tax burden. There are businesses downtown making money but not paying taxes,” Zollinger said. “We are paying an extreme amount of taxes and downtown is burdening us.”
Zollinger, a longtime government critic, has twice run for City Council, once in 2005 and then again last year. In the last election, she created her own party, S.T.O.P., the Schenectady Taxpayers Outrage Party.
Zollinger said the city is looking at a $13 million deficit in 2012.
“Everybody has got to pay. That is the only way the city will make it,” she said.
Zollinger outlined her latest anti-tax effort on her blog, listing downtown properties as exempt on the 2010 city tax rolls. “This means that we the average taxpayers are footing their bill while many of these corporations enjoy large profits while thumbing their noses at us. How can this be?” she asks on her blog.
In a telephone conversation, Zollinger explained: “The direction of who city government is representing has changed. They are representing their own personal likes, not the taxpayer.” She described “personal likes” as supporting arts and entertainment venues run mostly by Proctors, a nonprofit.
Ray Gillen, chairman of the Metroplex Development Authority, who helped craft most of the tax-exempt deals that created the beautiful buildings, disagreed with Zollinger’s data.
“With all due respect, the notion that these projects are not paying taxes is simply incorrect,” Gillen said. He produced his own data, which he posted on the Metroplex website, showing the tax-exempt properties downtown are actually paying revenues through PILOT, or payment-in-lieu-of-taxes, agreements. He said the city property tax rolls do not indicate that properties have PILOT agreements.
“It is a very positive story. Almost 90 percent of our PILOTs involved projects built on vacant land or in vacant buildings that paid nominal taxes before, or on former government-owned land that paid no taxes before. This is all new revenue,” Gillen said.
Metroplex administers 40 PILOT agreements itself or through public authorities it controls, namely the Schenectady County Industrial Development Agency and the city of Schenectady Industrial Development Agency. PILOT agreements are a tool used to entice economic development; they are generally long-term agreements which exempt the property from assessment rolls in return for paying revenues annually.
The PILOT agreement is often a percentage of the total assessment and usually increases until it reaches 100 percent of the total assessment.
Gillen said the PILOT deals generated $4.5 million for local municipalities and school districts in 2010, plus created another $1 million in estimated sales tax revenues. The amount generated is less than what the owners would have paid if a PILOT were not in effect. All of these PILOT agreements will increase in coming years, thereby producing additional revenues, he said.
“We are taking property that paid little or no taxes and we are putting it back to use while we create new jobs for the community and new revenues for local governments,” Gillen said.
As an example, Gillen pointed to 411 State St., home to Paul Mitchell The School.
“You have to look at the before-and-after picture,” he said.
The before picture is that the property was home to a Family Dollar store that closed in early 2000. The building at the time was assessed at $50,000 and was paying approximately $3,000 in taxes.
The building is now valued at $2 million. Although tax-exempt, it paid $25,000 in 2010 under a PILOT agreement that will increase to $40,000 within 15 years.
“That building was falling down and it paid nominal taxes. It was a closed dollar store in the heart of downtown. We redeveloped it as Paul Mitchell The School and now it pays eight times what it paid in taxes before we redeveloped the building. It also is a people generator because it brings people to downtown and it generates sales taxes,” Gillen said.
Gillen said PILOT agreements are important economic development tools. “We need to use PILOTs because we had to provide an incentive to get businesses to develop the buildings,” he said.
Gillen said downtown projects also qualify for the city’s 485-B program, even if they do not obtain a PILOT agreement through Metroplex. The program grants a property tax exemption to commercial businesses for construction, alterations, installations or improvements.
Gillen also said Metroplex does not grant zero-tax PILOT deals, as do some economic development entities. A case in point is the deal Saratoga County Industrial Development Agency granted to SEPSA. The deal grants SEPSA economic development incentives totaling more than $500,000 over 10 years, including no property taxes for 10 years, in return for building a manufacturing plant in Malta. SEPSA is relocating from Schenectady.
Gillen said the company wanted to pay no taxes for 10 years in return for remaining in Schenectady; he called this deal “too aggressive.”
“We refused their request to pay no taxes for 10 years,” Gillen said.
Other downtown properties with PILOTs, and their current annual payments, include:
* 376 Broadway, a 24,000-square-foot office building, paying $58,262.
* 565 Broadway, Marcella’s, a new 16,750-square-foot facility, paying $24,508.
* 625 State St., the MVP building, paying $256,569.
* 450 State St., the Hampton Inn, paying $104,038.
* 400 State St., paying $20,892.
* 1 Broadway Center, paying $294,282.
* 135 Broadway, Utech, paying $12,339.
* 426 State St., paying $75,000.
* Center City, paying $150,000.
* 226 Broadway, Villa Italia, paying $21,150.
* 401 State St., paying $63,250.
* 409 State St., paying $33,000.
* BN Partners, 1510 Maxon Road, paying $140,150.
* 469 State St. paying $65,000.
* Bombers, paying $8,407. The Bombers PILOT agreement was a partial payment for their first year of operation, Gillen said. It will double this year and will then increase in the same way as the other PILOT agreements do.
Also under a PILOT agreement is PT Redevelopment, a for-profit corporation Proctors formed in 2005. Proctors formed it after securing $4.6 million in tax credits given by the federal government for preserving a historic building. Proctors made $4 million when it sold the credits to Sherwin-Williams Co.
PT Redevelopment controls several properties downtown, including Proctors itself. Proctors CEO Philip Morris said PT Redevelopment makes a PILOT to Metroplex, which uses the payment to pay off debt on Proctors’ $30 million renovation. Metroplex provided a $10 million grant to the project.
In addition to the PILOT payments generated by the 40 projects, each project also pays so-called ad valorem taxes, which cover special district taxes that are not covered by PILOT agreements. This provides additional payments to local governments in terms of fire district taxes, special district assessments and other special fees and charges, Gillen said.