The Glen Cove Industrial Development Agency and Local Economic Assistance Corp. in 2016 approved an estimated $263 million in tax breaks for Uniondale-based RXR Glen Isle Partners to build Garvies Point along the city’s waterfront.
The 56-acre project, currently under construction, is set to include 1,110 condominiums and apartments, public parks, marinas, restaurants, stores and offices. The agencies also approved a bond to fund the parks, an esplanade, three marinas, road reconstruction and other “public amenities.”
But more than two years later, the tax breaks and bond remain controversial, and discussion of them has resurfaced as city officials this month grapple with cutting programs to balance the 2019 budget.
The bond will cost $283 million with interest and other costs. That money will come from the estimated $615 million in payments in lieu of taxes (PILOTs) that RXR and condo owners will pay the city, the Glen Cove City School District, the Glen Cove library and Nassau County over the next four decades.
The city will receive its first PILOT of $470,170 in 2019. At a recent City Council meeting, residents questioned why a nearly $1 billion project would yield only $470,000 in revenue while officials struggle to minimize tax increases.
“What happened to all those promises that this would be good for us?” resident Dave Nieri said in an interview. “It’s never going to fulfill the promise of stabilizing” city finances.
Scott Rechler, chairman and CEO of RXR Realty, majority partner of RXR Glen Isle, said the project would not have been economically viable if it weren’t for the bond and PILOTs. As contaminated, vacant land, the site had no tax revenue for decades.
The PILOTs are “an enormous amount of money,” Rechler said. “That would be zero if it wasn’t built.”
Here are answers to five common questions about the PILOTs and bond:
How do the PILOTs work?
RXR and future property owners will pay about $614.8 million in PILOTs through 2056. Forty-six percent of that revenue is to pay off the bond. Of the remaining 54 percent, the schools will receive about $174.8 million; the city, $131.2 million; the county, $21.3 million; and the library, $4.5 million. The PILOTs are estimates because some are fixed amounts and others depend on future land values, said Jaymie Sheehan, senior associate with Maryland-based MuniCap Inc., administrator of the PILOTs and bond.
When do the city, schools, county and library receive their PILOTs?
The schools, county and library received PILOTs totaling about $761,000 in 2017 and 2018. The city will receive its first PILOT — $470,170 — in 2019. The PILOTs gradually increase through 2038, when, for example, the city will receive $1.41 million. The PILOTs going to the city, schools, county and library are relatively small in the first two decades because most PILOT revenue will pay off the bond. Starting in 2044, all PILOT revenue will go to the four entities, increasing every year to a peak of more than $23 million in 2056. Much of the PILOT revenue will pay for costs associated with Garvies Point, such as the education of the children from Garvies Point who will attend city schools, and fire, police, water and other city services. An IDA-commissioned study shows PILOT revenue will be higher than the costs, but residents have questioned those numbers.
Reginald Spinello, mayor and IDA chairman when the PILOTs and bond were approved, defended the financing. RXR sunk tens of millions of dollars into the project before construction began and, with fees, paid $25 million for the land, he said. “This was a project that had a very high cost and a very high risk to it,” he said.
When will RXR and future property owners pay full taxes?
The PILOTs end in 2056, and all of Garvies Point will be on the tax rolls after that. The rental buildings will begin paying full taxes 20 years after receiving certificates of occupancy, said IDA attorney Milan Tyler. The expected rental-building taxes are why no PILOT money will go to the four government entities between 2039 and 2043, Tyler said. RXR expects the first building, which will have 385 units, to be complete by late 2019, said Rebecca D’Eloia, an RXR senior vice president.
Why isn’t RXR paying for the parks, road and other public amenities?
D’Eloia said the parks and other amenities open to the public “are non-revenue-generating items.” Most public amenities will be complete by late 2019, she said. The bond also will pay for electric and other infrastructure.
How much money is RXR saving?
Full property tax revenue over 40 years would have been $1.05 billion, according to a report from Mineola-based Standard Valuation Services, a real estate consulting and appraisal firm. The revenue from PILOTs and from rental-building revenue is about $805 million, said Michael Zarin, a White Plains-based attorney for the city on the project. That means a tax savings of about $245 million. In addition, RXR is receiving about $17.9 million in sales, use and mortgage-recording tax exemptions, Tyler said.