The Common Council approved a city-drafted Payment In Lieu Of Taxes agreement with the developer of Harrison Lofts on a split vote Wednesday.
First Ward Alderman Joe Oates and 3rd Ward Alderman Mark Devine cast the "no" votes on the agreement, which will reduce Kearney Realty & Development Group's tax payments on an 82-unit rental dwelling, 75% of whose units are to be artist- or artisan-preferred, at Harrison Place Building 3.
Devine said he opposed the approving resolution because he felt that he hadn't been given enough time to digest the PILOT terms before casting his vote. The terms were spelled out for the council in a work session immediately preceding the Wednesday business meeting.
Oates took issue with some of the terms, including the set-aside for certain tenant types, saying he’d like to see someone working at Papa Leo’s also have access to an "affordable" apartment.
Ken Kearney had explained that the set-aside for artists/artisans was the result of his company having acquired housing, brownfield and historic preservation credits from the state. The estimated rental rate for one- and two-bedroom lofts ranges between $700 and $1,000 per month, he added.
Oates also pointed out the development is already getting $1 million in grant funding to rehabilitate the famed atrium in Building 3, which the Kearney group is purchasing, and the city backing tax relief for Kearney on top is a case of putting more money in the same place. It's unfair to local rental property owners who aren't getting any funding from the city, Oates said.
The Kearney group's plan for Building 3 calls for retail businesses on the ground floor, and Ken Kearney told the council that a PILOT agreement is necessary to guarantee his investors — the purchasers of those tax credits — stable income for a 30-year period.
To which Oates replied: “You’re basically asking the tax payer to partner up with you for 30 years and I just think we’re getting the short end of the stick. They’re going to pay us somewhere around $25,000 a year, that’s just for the city, but a project like that, 82-apartment, I’m assuming would come somewhere to $3 million in value.”
Greater Lockport Development Corporation CEO Brian Smith, who worked on constructing the deal between the city and the Kearney group, disputed the idea that the city will lose anything by granting tax relief. The project, he said, promises three positives for the city.
“First … they’re going to be investing $25 to $30 million in that property. It’s an iconic property; it's going to bring that building back to life," Smith said. "Second is that there has been an identified need in our downtown for downtown living. Lockport is fortunate that we do have ... a vibrant downtown. … (The project) addresses this significant opportunity to bring downtown living into our community and reap the benefits. The third (positive) is a financial benefit to the city.”
According to Smith, a study done in 2015 by GAR Associates, to assess demand for apartments downtown, found 154 apartments were needed.
Terms of the PILOT agreement have the Kearney group making an annual PILOT payment of $77,000 on Building 3. From that payment, about $25,300 will go to the city and the remainder will be split between Niagara County and Lockport City School District.
Upon expiration of an existing PILOT agreement struck with the Niagara County Industrial Development Agency, Harrison Place buildings 1, 2 and undeveloped building 3 together would generate about $20,500 a year at most for the city, according to Smith.
With a developed Building 3 on its own PILOT agreement, and buildings 1 and 2 assessed for an estimated $666,000, Smith said the city could collect $37,500 a year from Harrison Place.
Kearney, in response to Oates' criticism of the deal favoring one rental property owner over others, said he believes the others will see their property values increase once his project takes root.
In a later phone interview with the Union-Sun & Journal, Kearney recalled that his first redevelopment project, in Peekskill, drew some flak, too.
“At times perception is greater than reality. ... It was not a bad neighborhood. It was a perception that it was bad," he said. "All we did was change some synergy to change that perception. People’s perception of that neighborhood changed, and I think that’s a byproduct of our project.”
Construction of Harrison Lofts could get underway next spring, according to Kearney.
CORRECTION: Absent a Payment In Lieu of Taxes agreement, Harrison Place buildings 1 and 2 have projected taxable value of $666,000, according to Brian Smith, CEO of Greater Lockport Development Corporation. The original version of this report incorrectly assigned that value to building 3.