Point of View: Agreement will keep Birches at Saugerties rents down

By Steven L. Aaron

A lot has been said recently about The Birches at Saugerties’ amended payment-in-lieu-of-taxes agreement [PILOT]. The issue can be easily misunderstood. I’d like to walk you through it to put the matter in perspective. First, The Birches at Saugerties exists to meet the affordable-housing needs of an important segment of our local residents — seniors on fixed incomes.

Ask anyone who lives in this or any other Birchez community and you’ll immediately sense the pride and security they feel in having award-winning housing that’s clean, safe and affordable in their home community.

Second, it’s vital to these residents and to the entire town of Saugerties that we keep the rents affordable.

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This lets our residents — including former schoolteachers, police officers, firefighters, secretaries and nurses — stay in the community. Without the affordable housing, many would have to move to lower-quality housing or to another community.

Now, to the point, recent news coverage focused on the amended PILOT (payment-in-lieu-of-taxes) agreement. It is a well-established fact that under state law, affordable housing projects, which have PILOT agreements, are exempt from local property taxes.

While our rents are lower than those of comparable market-rate apartments, our costs are generally higher. Affordable-housing operating costs are typically higher than market-rate apartments, due to increased personnel needs in property management for compliance and services.

Affordable housing typically pays for all special district taxes, such as library and fire protection. In addition, The Birches at Saugerties paid a substantial recreation fee at the outset of the project, and has continued to pay for water and sewage usage at the same rate as market-rate housing.

When Birchez Associates, which sponsored and manages The Birches at Saugerties, worked out the original PILOT agreement with the town in June 2005, both sides agreed that if the PILOT was not sustainable — if it threatened to change the very nature of the affordable-housing project, lowering its quality or requiring an onerous rent increase — we would discuss amending it.

This was important because our rents are regulated; we’re not allowed to raise them to market rates. Indeed, we consistently work to keep rents for our local seniors significantly lower than typical rents for comparable market-rate apartments in Saugerties.

The Birches at Saugerties has never been able to reach the income-to-expense ratios we were directed to achieve. The financial interests in the project told us to cut expenses, raise rents or both.

As a matter of conscience, we refused to reduce maintenance and services or to raise rents. After all, that would contradict the property’s reason for being.

The state Legislature amended the Real Property Tax Law to allow affordable-housing properties to be valued-based on income only. This was after the original PILOT agreement was executed.

The new method, known as Section 581-a, became effective Nov. 1, 2006. The town of Saugerties applied 581-a when it lowered the Hickory Ridge affordable-housing development’s assessment.

We asked the town in 2007 to apply 581-a to The Birches at Saugerties. The town agreed to consider our request. In negotiations, town tax assessor Frank V. Orlando determined the property’s valuation was $707,000, based on the 581-a formula. We accepted his figure.

The new valuation would bring the per-unit payment to $95.50 a dwelling, which in our formal request we increased to $100. This is the same per-unit PILOT that the towns of Esopus and Ulster agreed to for Birchez senior housing. Sometime in June of this year, the town attorney communicated to our attorney that the town was prepared to amend the PILOT, which would allow us to pay $200 a year per unit, with a two percent per unit annual increase retroactive to 2008, regardless of whether or not we receive any increases in rent.

In the interest of moving forward, we agreed.

The attorneys formalized the agreement on June 24 and the arrangement was formally approved by the Town Board on Aug. 15. (This PILOT agreement does not include special-district and local-improvement fees, which we’ve paid on time throughout the negotiation period.)

As reported, the only person who voted against the new PILOT agreement was town supervisor Kelly Myers. She refuses to sign it, suggesting the town is somehow getting cheated.

The truth is that the amended PILOT benefits the town.

The biggest benefit is that the amended PILOT allows the town to control the distribution of the PILOT money to other jurisdictions, such as to the school district and the county.

By contrast, if the amended PILOT were to be eliminated and the property returned to the tax rolls, it would be eligible for a 581-a assessment and the town’s share would be substantially less than the $200-per-unit PILOT to which we agreed.

Myers also suggests Birchez is receiving preferential treatment while regular homeowners have no tax recourse. The fact is that all taxpayers have a right to protest their assessment and taxes using the same type of processes Birchez is following.

Birchez is a responsible citizen and a good neighbor, and we demonstrated this when we built The Birches at Saugerties. We paid $1.5 million to develop a drainage and fill system to avoid the need for a special storm-water district to resolve the town’s flooding issue on this and adjoining sites. We did this at no cost to the town or the taxpayers.

Besides serving The Birches at Saugerties, the system helps nearby properties, including homes whose basements previously flooded regularly.

These homeowners benefit from The Birches at Saugerties improvements, free of charge. If Birchez hadn’t done this, the homeowners would today likely be paying for a special storm-water district.

The drainage and fill system also transformed a commercial property on Route 9W and Glasco Turnpike from an undevelopable site to viable real estate. That property, now used by Guardian Self-Storage, is currently assessed at $1.2 million.

Before the drainage and fill system, it was assessed at $105,000.

Please understand that the amended PILOT agreement does not increase Birchez’s profits. It simply keeps The Birches at Saugerties rents and services in line for local seniors — including some very low-income elderly and disabled seniors living there through the federal government’s Section 8 housing choice voucher program. The local housing authority pays an even lower rental rate than we normally charge, and we absorb the difference.

So when thinking about The Birches at Saugerties, please know that we at Birchez and 80 percent of the Town Board agreed to amend the PILOT so that our seniors can keep living in Saugerties in housing that’s within their means. Both sides compromised.

But the decision reflects a public-private partnership and a community commitment to keep affordable housing affordable.

Steven L. Aaron is the founder and managing partner of Birchez Associates, the sponsor and managing agent of The Birches at Saugerties.

There are 3 comments

  1. David Radovanovic

    It’s an insult to expect Saugerties to accept [any] developers’ reneging on tax agreements. Period. When businesses don’t pay their fair share of taxes the hosting community suffers. There is no reason why a wealthy business should be able to renegotiate a binding contract. If every Saugerties’ citizen did the same as Mr. Aaron, we would be a lawless, bankrupt community.

  2. Mark

    The spin Mr. Aaron puts on what amounts to his company’s bottom line is despicable! The seniors in Saugerties are not going to be sleeping on the streets or moving away. These types of developments leverage every government subsidy to build and income property for a private developer. In many cases the rent may even be guaranteed by the government. Its so shameful you are able to write such an article trying to justify your greed!

    Make more money and pay less taxes!, sounds familiar!

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