The Update Desk: Vending Machine Tax Breaks (Again)

Time for another update on the section 485-a tax exemption New York State offers to developers of historic buildings.

That's the one that's designed to get historic buildings repurposed into mixed use properties and back on the tax rolls. Here's the chronology of my posts on this subject, starting with this Meanwhile Back in Albany post back in July 2018.

Got a vending machine? Get a tax break!  Wouldn't that make a great billboard along the highways leading into all of the cities, towns and villages in upstate New York, instead of those silly signs we have on the Thruway?

Can you imagine anything so silly? Of course you can - it's economic development incentives we're talking about, and we're in New York.

State law created the tax break to help turn old and underused buildings into the kinds of places that filled downtowns in the old days. The idea was to restore the buildings with upper-floor apartments and street-level businesses - restaurants, offices and stores - to bring back the bustle of urban life.  

For Copper Beech Commons, vending machines did the trick. Without the tax break the owner would pay $560,000 a year in property taxes. With the vending machine incentive, the annual bill comes to less than $33,000.  

There were 39 properties in Syracuse getting the 12-year exemptions, the first eight years of which are fully exempt. Many of the properties here do have legitimate commercial enterprises, located in renovated historic properties - others, however, don't have commercial space and/or are in brand new properties built on land where historic structures were demolished.

In August of 2018, I had my first update on this, talking about Copper Beech Commons again.

A small office at the property has been cleaned up, with new doors added, to try and entice a small business to lease the space and preserve the tax break. Why? Well, as city assessment commissioner David Clifford noted,

Vending machines are not a commercial use, especially when they're owned and operated by the building owner. As far as I'm concerned, that's just like having a washing machine in the basement.

The assessors last warned the developer that the vending machines did not count for the exemption four or five years ago, so there should have been no surprise that there could be problems once the last (and only) tenant of the space moved out in 2015.

I wished the developer well in finding a tenant, but

More importantly, I hope we can count on city officials to consistently be good stewards of our tax dollars, and that our legislators can find a way to correct these 'good ideas gone bad' laws...

In the second update, I let you know that the NYS Assembly passed a bill submitted by local Assemblyman Bill Magnarelli to cut opportunities for abuses.  Among the changes?

• limits on the commercial purposes and uses that can quality, and they must be publicly accessible;
• at least 75% of the floor area of an eligible building must be a pure-existing structure;

• annual certification of properties to ensure the developer is in compliance; and

• revoking the tax benefits of non-compliant properties, as well as penalties if someone makes a material misstatement on their application for the tax break.

 And today, we learned (again from reporting by Knauss) that the Syracuse Common Council took action:

The council voted unanimously to amend local law by giving the assessor more explicit authority to reject applications for the so-called 485-a exemption, which the city first adopted in 2010. The amendment specifically aims to exclude projects that involve demolishing old building to make way for new construction. 

You know - projects like those brand new luxury student apartments, for which the developers get around $4M a year in 485-a tax breaks.

The amended Syracuse law says the assessment office should "narrowly construe" the 485-a exemption by excluding "projects that primarily consists of demolition of the existing real property (i.e. 60% or more of the existing building.)"

The second measure passed by the council Monday asks state legislators to further clarify the law on 485-a exemptions. 

This is a good step, even though it will only apply to new development, not the existing abusive properties. Mayor Ben Walsh is said to support the legislation; but won't make a final decision on the bill until after an upcoming public hearing.

Now, if the State Senate can get it passed (fingers crossed), we'll get this fixed for good.