In a vote Mayor Michael Villa called the most important for the city of Amsterdam "since we voted on the mall," the Common Council voted 3-1 against extending a purchase option for the vacant Chalmers Knitting Mill site Tuesday evening, effectively killing a proposed $34 million, 120-unit apartment building project.
The vote represents a spectacular reversal of fortune for a project that in 2018 enjoyed unanimous bipartisan support from the same Common Council, and represents a sea change in development strategy as Villa's outgoing Republican administration is set to be replaced in January by incoming conservative Democrat Michael Cinquanti.
Cinquanti attended the meeting and urged the council — including two lame-duck members, 2nd Ward Alderman Republican Paul Ochal and 4th Ward Alderman Democrat Dave Dybas — to vote against the purchase extension. Cinquanti said he would support the proposed project anywhere else in Amsterdam except the waterfront. He said he believes the city can find an owner-occupied model for the parcel, and he intends to make that happen.
"We're going to get right on it. I've got to meet with the people involved and come up with a strategy, which we will do and promote it as hard as we possibly can," Cinquanti said after the meeting. "I know we will come up with a project. I'm not a proponent of one big project for the property, I'm not against one small project. I want it to be something that promotes a professional to live in the space and work in the space."
KCG Development and Saratoga Springs-based DEW Ventures still have a $300,000 purchase option to buy the now vacant 3.3-acre site where the Chalmers Knitting Mill once stood, but that option runs out at the end of the year. The developers have proposed building an apartment building but say they need $18 million in federal affordable housing tax credits in order to build the structure.
The developers were rejected in their first application for the tax credits in May by the state Department of Homes & Community Renewal, but said they were more hopeful of receiving the credits during a second round expected to be announced in March.
DEW Ventures managing partner Bill Teator told the council one of the reasons they were rejected in the first round was that state officials were skeptical that the Amsterdam market could sustain the middle-price-range estimates for apartment units in the building.
According to the project proposal, rent prices for the affordable-housing units would range from $650 per month for a one-bedroom to $750 for a two-bedroom apartment. The rest of the units would be based on a market rate that would start at $1,100 and fluctuate from there.
Teator said his company has spent money on an updated market study that includes parts of the town of Florida and other surrounding areas to prove to the state their estimates are correct and enhance the chances of the same business proposal getting funded in the second round.
"We're going to prove the middle market exists, so as we come online and people rent those higher rates, that goes right into a data stream, right into real estate reports that investors look at when they want to invest in neighboring blocks," Teator said.
Support for the project collapsed Dec. 10 during a 12:30 p.m. emergency meeting of the Common Council when Deputy Mayor James Martuscello, a Democrat representing the 5th Ward, balked at continuing to support a project that hadn't come to fruition after more than two years. Although a Democrat, Martucello has often voted with Republicans Ochal and 1st Ward Alderman Patrick Russo in supporting initiatives of the Villa administration.
Martuscello said he's grown frustrated with KCG Development after they have not paid $10,000 in extension fees for their purchase option for the parcel; not paid the city a $30,000 deposit payment, currently in escrow; and failed in the final months of 2019 to communicate to the council their strategy for obtaining the tax credits in a second round.
"When can we expect to get the $300,000 purchase price?" he asked.
Amanda Bearcroft, Amsterdam's director of Community & Economic Development, said KCG and DEW won't purchase the land unless they know they can get the tax credits.
"Why would they buy a piece of property if they don't get the grant funding?" she said.
Bearcroft told the council the developers have spent $250,000 of their own money on preparation and design for the apartment project, and if the council votes no on the purchase extension they will lose their investment, communicating to all private-sector developers that Amsterdam is now too risky to do business with.
On Friday, Bearcroft released an email detailing her argument for why it was important for Amsterdam to continue to support the KCG and DEW plan at least through one more round of tax credit awards from the state. She said the developer was willing to address community feedback asking for decorative balconies, and was looking at water and power lines for every unit to persuade critics who thought the apartments weren't upscale enough.
Teator said the new construction, including stainless steel appliances, in his proposal could only be built without federal tax-credit assistance if the rental units charged in the range of at least $1,500 each. He said private-equity developers, without government assistance, expect return rates at the range of 18 to 20 percent, and building condos at the site would require raised construction and buyers capable of sustaining $200,000 mortgages — none of which market studies conclude the Amsterdam area is capable of sustaining.
Bearcroft said the city, county and school district stand to lose $8 million in tax revenue over 30 years if the Chalmers project fails. She said she finds objections some have expressed to the "low-income housing" component to the tax credit personally offensive because she and many other full-time professionals in the Amsterdam area fit into the categories eligible for the rent-reduced units.
Dybas said he objects to several aspects of the project although he had voted for an extension in the past. He said he doesn't like that KCG Development for the Chalmers project operates as a limited liability corporation out of Florida, even though the company is based in Indiana. He said the 30-year Payment in Lieu of Taxes agreement approved for the project by the city, county and school district only guarantees about $600,000 in property taxes to the city over 30 years on a $34 million project, and most of the anticipated taxes, about $5.3 million over 30 years, is based on the anticipated $186,000 in annual sales tax generated by the restaurant and banquet facility to be run by the Lanzi restaurant family.
Dybas said he also wasn't impressed by the late addition of the decorative balconies.
"That's lipstick on a pig," he said.
Teator said a federally funded market study conducted by Montgomery County showed Amsterdam loses about $7 million annually to "leakage" of restaurant spending by residents leaving the city, and the banquet-hall component is aimed at addressing that problem. He said the same study showed 49 percent of the city's residents are considered "rent burdened," meaning they spend at least 39 percent of their income on rent, and some of the units in his project could help alleviate that problem, freeing up cash to support people buying more goods and services in the city.
Martuscello said one reason he objects to the Chalmers project is because of a recent proposal for another rent-controlled apartment project on the city's east end, which he believes is moving much faster toward fruition than the KCG and DEW plan.
Bearcroft said Martuscello's estimates are incorrect and the east end project he referenced still needs approval for grant funding, and would start at the earliest in 2021 if it receives the money it needs to be built.
Teator defended the PILOT agreement for the apartment building, stating the federal tax-credit program the project is applying for requires the rent controls to remain in place for 30 years.
"[Projects like this are] taxed based on net operating income, so when we restrict our rents sized to your workforce, we [have less] cash flow ... and all of the tax revenue is additive to zero [on that parcel] since 1985," he said.
Martuscello prior to the meeting Tuesday floated the idea that a new private-sector developer might be willing to develop the site on better terms than KCG Development.
Villa threw cold water on Martuscello's talk of a new developer during a raucous exchange between the often bipartisan allies.
"What are you going to get a [different] project tomorrow?" Villa said. "No, I talked to those people. I know who you're talking about. That's never going to happen. That's fantasyland."
Bearcroft said the city and county have aggressively attempted to market the parcel and developers, and KCG was the best option.
Collins, who had previously made statements supporting the project, said nothing during the meeting and voted against it, along with Dybas and Martuscello. Ochal voted in favor of it.
"I still hope to see something on that property before I die. I'm 73," Ochal said.
Villa attempted to delay the vote with a motion to table the resolution because 1st Ward Alderman Patrick Russo was not there, but the motion failed. Russo had voted in favor of a one-year extension for KCG's purchase option Dec. 10.
Teator said he and KCG Development will now regroup and see what can be done, but indicated the project was likely dead. He said he isn't certain whether the developers will be required to pay the $30,000 deposit fee, indicating most of their deals typically made that refundable to them if the project falls through. He said he also doesn't know if they are on the hook for any of the unpaid extension fees. He said they have already pay about $70,000 for a surface remediation of the site.
Dybas said if KCG and DEW were serious about the project they would exercise their option to buy it for $300,000 by the end of the month and hold it at their own risk.
Cinquanti said he believes he will be able to find private-sector buyers who will match KCG's $300,000 payment proposal, "and they'll actually pay us."