Town, business park saddled with problems from tax pact

The local headquarters for The Hartford Financial Services Group in the New Hartford Business Park.

By ELIZABETH COOPER

Posted Apr 17, 2010 @ 04:20 PM

Last update Apr 17, 2010 @ 06:46 PM

NEW HARTFORD —

In the fall of 2008, an agreement between the town, Oneida County and the New Hartford School District was unveiled with great fanfare to fund improvements related to the New Hartford Business Park.

Each entity would give up taxes from business park tenants but pool dollars for the greater good by performing public works projects likely to help the business park grow.

But things didn’t go as planned:

* Money reaped by the payment-in-lieu-of-taxes agreement for the park’s first and only tenant, The Hartford Financial Services Group, doesn’t cover debt the town took out for the public works projects.

* Some of the PILOT money that has come in can’t be used because of a glitch in the agreement’s wording.

* And it’s not clear who should pay about $135,000 in attorney, accounting and engineering fees -- the town or the park developers.

Additionally, the county, town and school district had agreed to create access to the park from state Route 840. But more than two years later, ground hasn’t been broken, and developer Larry Adler says the lack of access to the busy roadway is scaring away prospective tenants.

That's left the business park a far cry from its potential peak.

In 2008, officials predicted that once the park fills with tenants, there would be -- over a period of time -- new tax revenue totaling between $10.8 million and $24.8 million.

Today, with only one tenant in the park, the tenant's payments in lieu of taxes are estimated to reach only $115,000 in 2010.

Some officials question how the PILOT agreement and the assumptions behind it passed muster in the first place.

“How is it that someone didn’t look at this agreement?” Town Supervisor Patrick Tyksinski, who took office Jan. 1, said. “You don’t have to be an accountant or a banker or an attorney to see that, ‘Guys these numbers don’t add up.’”

Now, Tyksinski has been meeting with developer Larry Adler to iron out the wrinkles.

“We’ve had conversations and I think they have been productive sessions,” Adler said. “We are putting issues on the table and reviewing the history.”

Worth it?

Despite the problems, both Tyksinski and Adler said they believe creating the business park is a worthwhile endeavor.

“The good thing for the town and for us is that it’s great real estate and it has a lot of potential,” Adler said. “Eventually, that should result in positives to the town and taxpayers and us.”

Tyksinski recommends following through on the state Department of Transportation’s recommendation to extend Clinton Street so it links into the business park, which would help overall traffic flow.

“It’s been an issue for many, many years, even before the business park,” he said. “It’s one more thing that helps the entire area.”

New Hartford School Superintendent Robert Nole said even in its troubled state, the business park had already benefitted the school district. Property around it is already getting more valuable, he said.

“There have been assessments that have been more than what the original vacant land had produced,” he said of properties near the park. That means more tax dollars for the school district.

As for the future, the school district would conduct a comprehensive review of any new tax-break proposals to "evaluate the impact on the school district, business park and community," Nole said.

"Without any specifics, it's difficult to make a determination," he said. "However, the district and Board of Education will entertain a proposal that benefits all involved."

The agreements

There are two agreements relating to The Hartford property:

* The PILOT agreement, dated March 13, 2008, creates a tax-break agreement between the Ryan Companies, which owns The Hartford’s building, The Hartford and the Oneida County Industrial Development Agency.

Initial calculations valued the property at $10.2 million. Each year, The Hartford pays a percentage of its total taxes for all the jurisdictions to the Industrial Development Agency. The agency then passes the funds to the town of New Hartford.

The savings for The Hartford has been estimated at $1.5 million over 10 years.

* An agreement between the town, county and school district, dated Oct. 15, 2008, states that each is willing to give the funds to the town for business park-related improvements and outlines how the money will be spent.

Such agreements are not uncommon, said Brian McMahon of the New York State Economic Development Council, a group representing economic development organizations.

“Municipalities throughout the state have reached agreements with local taxing jurisdictions to apply PILOT revenues,” he sad.

He has not, however, heard about too many problems with such agreements, and is not familiar with the issues with New Hartford’s, he said.

The history

When the tentative agreement between the taxing jurisdictions was announced in 2008, officials from the town, county and schools visited the O-D editorial board to tout the benefits of the plan.

It was presented as an example of how collaboration between governments can work to improve a community.

“The advantage of going with the PILOT was for the potential economic growth of the area,” former New Hartford School Superintendent Daniel Gilligan, who held the post when the agreement was conceived, said in a recent interview. “Obviously, our number-one job is to educate the children, but in terms of economic growth in the community, if the community doesn’t grow economically, the school districts don’t thrive either and you end up with a shrinking tax base.”

The Hartford had been planning to vacate its offices on Middle Settlement Road and possibly leave the area, officials say. If that had happened, the company would have taken more than 600 jobs with it to the new location.

The PILOT and the business park improvements in the agreement were meant to make it easier for the company to remain in the area.

PILOT money

Going forward, a PILOT gap exists.

In the years 2010 through 2012, the amount generated by the agreement doesn’t cover what’s needed to pay off a $2.3 million bond.

The gap: A total of $290,000.

Adler said that he would cover the difference.

“We have maintained that if there was a shortage between the PILOT payments and the debt service, we would be responsible for that,” he said.

Also, about $115,000 in PILOT payments from both 2008 and 2009 are in limbo. One of the agreements states that the money must be paid out in the year it is brought in, but no bond payments were due in those years.

Tyksinski said the jurisdictions are working to change that language.

At the same time, Adler said he doesn’t think he should have to pay $135,000 in legal accounting and engineering fees incurred at the park.

“These things were never discussed,” he said. “We continue to object to these.”

Adler had hoped for a medical office and a hotel to come to the business park. But neither has materialized.

That’s hurt the park’s financial plan, Adler said.

“We had hoped that between the medical office and the hotel, which should have been up and running by now, that all the issues would go away,” he said.

A plan for building for Costello Eye Physicians & Surgeons and Mohawk Valley Urology was scotched because of delays in the Route 840 access. Hampton Inn and Suites is still interested in locating a hotel there, but is waiting for assurances on the access, Adler said.

So near and yet so far

The agreement clearly states that each of the three taxing jurisdictions “fully intends to pursue and support a break in access to NYS Route 840.” In other words, an exit, a stoplight or some other form of intersection.

Yet disagreements on the nature of the access caused significant delays. After Tyksinski took office, the board passed a resolution endorsing a right-in-right-out in the eastbound lane of Route 840, at a cost of $800,000.

But even then, action isn’t likely to occur soon. The town now needs to perform a new environmental study before the project can move forward.