The developer of a proposed 244-unit condominium project in the Village of North Hills has asked the Nassau County Industrial Development Agency for $4.6 million in property tax breaks.
But Village of North Hills Mayor Marvin Natiss said he will oppose any tax relief for the proposed upscale development known as the Ritz Carlton Residences at North HiIls – despite a payment by developer RXR Realty of $21 million to the village in lieu of amenities under an earlier proposal.
“It has no right as a residential development to make an application,” Natiss said. “The rationalization is that it creates jobs. So what?”
Natiss said he will also block the condo project if RXR plans to initially lease units as its IDA application indicates.
Natiss, who is a lawyer, said the state’s intention in permitting IDAs to offer tax relief was to create industrial or manufacturing uses, not residential development.
The mayor’s response to the proposed tax breaks for the Ritz Carlton Residences mirrors his opposition to an application by the Bristal of North Hills to the county IDA for an extension of tax breaks given nearly 10 years ago.
Natiss, who said the extension of a payment in lieu of taxes agreement known as a PILOT would have cost local municipalities more than $2 million in property taxes, had been joined in opposition to the Bristal’s application by officials of the Herricks and Great school districts. The property at The Bristal at North Hills, which is located on the South Service Road of the Long Island Expressway, straddles the line between the Herricks and Great Neck school districts.
The property on which the proposed Ritz Carlton Residences would be located entirely within the Great Neck School District.
Great Neck Superintendent of Schools Thomas Dolan said he also did not support RXR getting a tax break.
“We are opposed to a PILOT and we will be present at any hearing we are aware to express our opposition,” Dolan said.
Along with the estimated $4.6 million property tax exemption, RXR Realty’s application filed with the county IDA as Midtown North Hills LLC on Dec. 20, 2012, is also seeking estimated sales tax exemption of $3.3 million and estimated mortgage tax exemption of $1.5 million. Existing property taxes on the undeveloped property of 16.3 acres adjacent to the Long Island Expressway in North Hills is $415,170, according to the application.
“They just can’t keep granting these real estate people tax benefits. It reaches a point where the damage to the taxpayer far exceeds the benefits of having something like this built,” Natiss said. “What good is building it if it doesn’t go on the tax rolls?”
IDA Executive Director Joseph Kearney acknowledged that RXR is seeking a PILOT with its duration and terms still “under negotiations.”
“We’re just doing our due diligence here. We’re a long way from what will or will not be,” Kearney said.
In its IDA application, RXR states that “due to economic constraints created by the downturn of the real estate market and economy in general,” it considers the IDA’s assistance “critical” to the Ritz Carlton project and the development “will not be possible” otherwise. Ritz Carlton is scheduled to the manage the condos once its built, according to the application.
Robert Leonard, a spokesman for RXR, said the company is seeking a multi-year PILOT and its goal is to have leased units converted to condos within two years.
The company, he said, thinks leasing is a “smart” opening gambit.
“There’s a demand for high-end, high-quality premium rental product in the marketplace,” he added.
Once 50 percent of the units in any building convert to individual ownership, that building will come off the PILOT, Leonard said.
RXR, which is based in Uniondale, describes itself in the application as a company which manages or has interests in approximately $4.5 billion of assets comprising 105 operating properties and 17.1 million square feet of mixed-use assets, in addition to seven development properties in the New York tri-state area under its corporate “umbrella.”
Natiss said RXR’s plans to lease the units it’s planning to build is unacceptable.
“We approved them for Ritz Carlton condominium residences. The fact they don’t want to build that or think they can’t sell them is not our problem,” Natiss said. “That’s why I have to oppose it.”
He said he’s told RXR he won’t permit the project to go forward as rental residences and will reiterate that point to Scott Rechler, one of RXR’s executives, in a meeting on Friday. In addition to his position with RXR, Rechler is vice chairman of the board of commissioners of The Port Authority of New York & New Jersey.
“If you’re not going to build condos, I’m not issuing a permit. Period,” Natiss said.
A public hearing on the IDA application is scheduled in the North Hills Village Hall on Feb. 19 at 10 a.m.
RXR paid the Village of North Hills $21 million in lieu of community amenities when the North Hills Village Board approved the condo project in mid-November of 2006. Natiss said the payment was made because the project was approved as an incentive zoning plan that permits the developer to build units at a higher density rate than permitted under village zoning regulations.
“We didn’t negotiate that. We had nothing to do with it,” Natiss said.
Natiss said the $21 million was earmarked for the purchase of a village golf course. That still may happen, but some of the money is currently being spent to sustain the free North Hills commuter shuttle bus service for its residents between North Hills Village Hall and the Manhasset Long Island Rail Road station. In any case, it can only be spent on village amenities, Natiss said.
“The fact that they made those payments doesn’t reduce the village tax or the school tax,” Natiss said.
RXR’s application projects an initial construction phase in the first quarter of this year at a cost of $110 million.
Subject to availability of construction financing, the company said it plans a second phase in the first quarter of 2015 at a cost of $120 million. It puts the total cost of construction for the Ritz Carlton Residences at more than $133 million with the cost of labor at $59.9 million, materials at $53.2 million and “other” costs at $19.9 million.
The company reported that it bought the property for $25.5 million. It lists engineering and architectural fees for the project at nearly $2 million and other professional fees at $1.7 million.
RXR puts its payroll costs for the project at $1.98 million for the first year, more than $2 million for the second year and $2.18 million in the third year.
When the project is completed, RXR’s IDA application estimates the project will consume between $1.25 million and $1.5 million in services.
