County, city want what they say Steve Aaron owes them

A Kingston developer is headed for a showdown with county economic development officials over his failure to live up to a tax incentive agreement. The dispute between Steve Aaron and the Ulster County Industrial Development Agency over Aaron’s Birchwood Village affordable housing complex could result in the developer losing a lucrative Payment in Lieu of Taxes (PILOT) agreement, or even foreclosure.

Back in May 2004, when Birchwood Village was under development, the IDA awarded the Birchwood Village Limited Partnership a 10-year PILOT agreement. Under the terms of the deal, the company would pay no taxes on improvements to the land (the land itself remained taxable) for the first few years of the agreement. Starting in 2009, however, the agreement called for the company to pay city, school and property taxes at a rate of 25 percent of assessed value. The rate climbed to 50 percent of assessed value in 2011 and remains there until 2016 when the agreement ends and the property is due to be taxed at full market value.

But Aaron has paid no taxes on the 82-unit apartment complex on Flatbush Avenue since 2008. Currently, he owes $89,686 in PILOT payments to Kingston, $24,023 to Ulster County and $135,878 to the Kingston City School District. Unpaid water and sewer bills, inspection costs and $77,807 in penalties bring Aaron’s total tab up to $331,245.

Aaron’s failure to pay anything on the PILOT stems from an ongoing court battle over the assessed value of the property. In 2006, after Aaron entered into the agreement, state lawmakers added an amendment (Section 581a) to state Real Property Law which significantly lowered assessments on low-income housing like Birchwood Village. In his lawsuit, Aaron contends that he is entitled to benefits under both the PILOT and 581a.

But the IDA and Kingston’s previous and current assessors say it must be one or the other. “Quite honestly, if you overlaid it, he would pay no taxes,” said Dave O’Halloran, chairman of the Ulster IDA.

According to O’Halloran, the agency began taking steps to resolve the impasse in June after a compliance check revealed that Aaron and another PILOT holder, Northeast Center for Special Care proprietors Hudson River Valley Associates, were delinquent in their payments. The IDA board voted to commence formal enforcement actions against both companies. Hudson River Valley Associates promptly entered into a remediation agreement and to date has paid off about $500,000 of its $750,000 in back taxes.

Slideshow image: Steve Aaron. (Photo by Beth Blis)