www.ithacatimes.com/business
My comments are in blue. This article talks about the abatements used in downtown developments, and the CURRENT MORATORIUM that has stopped any new proposals at this time. I'm vexed, oh and look, Jason Fane is complaining about the abatements...it's rant time!
The Waiting Game
By: Jake Bakkila
03/21/2007
A moratorium on tax abatements in the "density zone" of the City of Ithaca, meaning the very core of downtown, went into effect April 7, 2006, and remains in effect to this day. In the five years prior, from 2000 to 2005, projects utilizing abatements represented about $62 million in private investment in the downtown core. Since then, of course, there has been none.
Gary Ferguson looks at tax abatements designated for development in the city's downtown core as sort of investment into the future. And, with the moratorium presently holding up possible abatement approvals, he thinks some misperceptions about the municipal economic strategy need to be cleared.
"You have to understand: abatement is like a tool - it's not an end product," explains Ferguson, executive director of the Ithaca Downtown Partnership. "A good abatement policy allows you to bring in large, complicated projects that need a little bit of help to get off the ground, and once they're going, they're fine."
Tax abatement is the lessening or modification of taxes for new development projects, approved in order to entice developers to choose one area - in Ithaca's case abatements have been applied to encourage growth in the immediate downtown area. For example: a business wants to build a new hotel, and one city offers space in their downtown, and another city offers a similar space, but also promises that the developer will have to pay fewer taxes for five years; that's abatement.
Among the projects in Ithaca Ferguson says wouldn't have happened include the Hilton complex, the Cayuga Green projects, the Gateway Commons, and more. Tax incentives are used throughout the country as a way of stimulating growth. In particular, they are often the only way to get particularly large or expensive projects going - it's much easier to open up a corner store than a nine-story mixed-use project with high-rent condominiums and retail space.
Proponents of abatement policy say proper abatement can bring in projects that would otherwise go elsewhere; abatement acts as an initial financial boost. Opponents to abatement have many arguments, often saying that, if not carefully regulated, abatement can be shortsighted, costly and biased against smaller developers.
Tax abatement throughout Ithaca and the rest of Tompkins County is a tricky issue. Abatement policy is controlled by the Tompkins County Industrial Development Agency. The IDA is staffed and managed by Tompkins County Area Development, or TCAD. Although the two are legally distinct entities, 5 of the 7 voting members of the IDA are also on the Board of Directors at TCAD. Together, the two organizations represent what most would say are county-wide interests - they use abatement to bring in factories, industrial projects, hotels and the like to areas throughout the county, usually outside of Ithaca.
Representing the interest of continuing development in Ithaca, especially downtown Ithaca, is the Ithaca Downtown Partnership. Along with the Department of Planning and Development for the City and the Ithaca Urban Renewal Agency, the IDP fought for the specific abatements in Ithaca that allowed for projects, such as Cayuga Green, and Gateway I & II.
As something of a third side to the issue are people - citizens and members of government alike - who want to see future abatement adhere to standards more immediately beneficial to the community. Many of them are in a group called the Community Investment Incentive Program, or CIIP, which is proposing a list of "Benefits and Processes." This list would normalize, as much as possible, the process of awarding abatements to developers; that is the "Processes" part of the list. Further, and most importantly, it would also create a "score sheet" that would need to be passed in order for a proposed project to get approval; that is the "Benefits" part. The score sheet contains a list of 36 benefits, ranging from questions like "Does this project create local jobs?" to "Will this project use Union labor in its construction?" In order to be approved for an abatement, a proposal would have to get 18 out of a possible 36 points.
Interesting idea...
Proponents of a Benefits and Processes clearance for abatement say it brings greater consistency to development, and that it also forces developers to make projects that better "fit in" with the eco-friendly, labor-friendly atmosphere of Ithaca, and then demonstrates clearly the different ways that the project intends to do so. On the other side, many claim that forcing developers to adhere to so many demands will drive them away. In addition, most of the benefits listed cost additional money to meet - Union labor, for instance, adds cost to a project - which in turn will force developers to ask for larger abatements.
Needless to say, there has been debate on what type of abatement, if any, is best for the future of downtown Ithaca. Since there was disagreement on the specific institution of a Processes and Benefits list, TCAD and the IDA placed a moratorium on abatements in downtown Ithaca until something is worked out.
Ferguson is one of the people in the City most responsible for bringing in new developers. It was under Ferguson's watch that Cayuga Green and Gateway were brought in. He primarily wants the moratorium on downtown lifted and a workable abatement policy back in the city's hands.
"Abatement doesn't take anything away from what we have currently," he adds. "A common misconception is that abatement takes away money we have right now, money we promised to other things. That's not the case. Abatement is the promise that, down the road, for the next few years, that the city won't collect something, or won't charge something. It's good, because this is money that hasn't been promised to anything."
Ferguson adds that he wants to see the moratorium lifted as soon as possible, as it has affected only the city, while abatements have been continued throughout the rest of the county.
Michael Stamm, President of TCAD, says that both his organization and the IDA are in support of continued abatements for downtown Ithaca, but also want to see the installation of a Processes and Benefits list.
"[The TCAD and the IDA] would like to see more controlled abatements for the future of development in Ithaca," says Stamm. "And we are working on getting a [points] list that will be manageable and useable for future development."
Stamm emphasizes that the moratorium was placed on the city in part because no future developments were in the works. He estimates that a unified abatement policy for the city will come into effect within 4 or 5 months, at which point the moratorium would be lifted.
TCAD and the IDA also are aware of the risks associated with a Processes and Benefits list, Stamm adds, and believe in talking to past and current developers about their feelings about changes in the abatement process.
"We think it's a simple step of talking to developers and asking them if changes [like a points system] would cause them to change their mind about development," Stamm says.
Another change TCAD and the IDA would like to see would be the use of dynamic abatement for future projects, or an abatement policy that would allow for reevaluation during its term. As an example, suppose a developer asks for abatement on property taxes for a planned building. While a standard abatement would offer a specific discount on taxes for a specific period of time, a dynamic abatement would allow the IDA to check in with the project every year and either increase or decrease the level of abatement based on what the developer needed.
While this type of abatement can lessen the financial burden on the IDA, Ferguson says that it can also dissuade developers, as well as their financial supporters.
"When a developer goes to a bank, the bank wants to see, in writing, how much everything is going to cost," Ferguson explains. "And if you tell a bank that, well, this year your project is going to get a million [in abatement,] but the next year it might get nothing, the bank is just going to say 'No thanks' and walk away."
One thing both Stamm and Ferguson agree on is the need for an abatement process that doesn't force developers to have to go though the city and the IDA separately.
"It's not a unified process," says Stamm, "because the City and the IDA are different. But we'd like to make it so that we're working closely with the City, in tandem, so that Developers don't have to fill out similar paperwork or answer the same questions over and over."
At least you guys are doing something right...
"You want to make it as easy as possible for the developers to do what they need to do," says Ferguson. "You don't want to make them have to jump through hoops."
Lastly, of course, are the developers themselves. While some developers are in favor of abatements, others, such as local developer Jason Fane, see the incentives as biased and flawed.
Like you have a right to talk, Fane. You didn't put up those high-rise towers in Collegetown with your own cash. You depended on a huge chunk of cash from Cornell, plus an abatement from Ithaca back in the 80s'.
"Tax abatements to selected taxpayers to subsidize development, overall, accomplish little and damage the economy," according to Fane. "It helps the favored project, but then takes the market away from other projects that are then not built."
Fane blames high property taxes on abatements
Well, of course Fane would complain about taxes, he owns two-thirds of Collegetown, not to mention the student slums surrounding it, and says the incentives often go to out-of-town companies and developers. He believes a better approach to development would be for developers to have more carefully-crafted projects that do not require economic help.
The next few months will determine the fate of tax abatement in the City of Ithaca. The CIIP is expected to bring their proposal for Processes and Benefits before Common Council in either April or May, and, if approved, the IDA would be expected to adopt these standards into law and lift the moratorium.
Until then, new abated projects in Ithaca are at a standstill. But the construction of previously passed projects like Cayuga Green continues. Perhaps in five years, when Cayuga Green is finished and has either grown in to the skeleton of the city or sat underused and become financially burdensome, the success or failure of recent abatement law will be more clear, more obvious. But for now, the opinions are as varied and many as the parties involved, and all anyone can do is wait.