Island Buildings Don’t Get 50-Year Tax Relief, After All

by Dick Lutz

It may be a technicality of sorts, but Roosevelt Island buildings will not get the 50-year extension of tax abatements the State Legislature authorized the New York City Council to grant to Mitchell-Lama apartment buildings.

"The [Legislature's] bill itself refers to taxes," said Jessica Lappin, an aide to Council Speaker Gifford Miller, "and the buildings on Roosevelt Island don't technically pay taxes. They look and smell and feel like taxes, but they're not technically taxes."

When the City Council granted the tax-abatement extensions earlier this year, materials accompanying the Council resolution specifically listed Westview, Island House, Rivercross, and Eastwood. It held out the possibility of a Mitchell-Lama future with tax costs remaining low. But that was a mistake.

What "look and smell and feel like taxes" for Roosevelt Island are PILOTs - "payments in lieu of taxes" - made to the State. For those who pay them, they are the functional equivalent of taxes, and for the Island's Mitchell-Lama buildings, they are scheduled to rise significantly over the next couple of years - a provision of the ground leases under which the buildings were placed on land owned by the City, but leased from the City by the State.

The WIRE raised questions about the Island's eligibility for the abatement extensions in February in a report on the City Council's action, and again in April in a commentary written by Tim Johns, an Island House resident who has kept close tabs on the laws, leases, and regulations that apply to the Island's Mitchell-Lama buildings. As a result, State and City lawyers looked into the matter and realized that earlier statements affirming applicability to the Roosevelt Island buildings were incorrect.

The importance of the question to Island House and Westview residents is limited, because the Sheldrake Organization has started the process of removing Westview from Mitchell-Lama, and could exercise that option in the case of Island House.

Now that it is known that the abatements don't apply, technically, to the four Island buildings, a new question arises for the owners and tenants: If they stay in Mitchell-Lama, can negotiators for the owners or the building residents parlay the apparent legislative intent into a deal with the State (the Urban Development Corporation and/or the Division of Housing and Community Renewal) for lowered tax equivalency payments comparable to what would be paid under a 50-year tax abatement? For the Island's Mitchell-Lama buildings, that would appear to be one possible next step.

But for Island House and Westview, the question may be moot if further steps are taken toward removal from Mitchell-Lama. At Rivercross, the possibility of some form of extended tax relief could make a Mitchell-Lama future more appealing in a competitive face-off with privatization when shareholders vote on whether to accept a privatization plan that has yet to be announced. For the cooperative, the option of staying in Mitchell-Lama in favor of some form of reduced PILOT (or tax) expense could also be a factor in ground-lease negotiations with RIOC.

The owner of Eastwood has indicated an intention to leave Mitchell-Lama, in any case, in favor of a program of Section 8 subsidies and a "landlord assistance program" for those not eligible for subsidies.