I-Star wants Long Beach taxpayers to pay $109 million of its taxes. Under I-Star’s most recent proposal to the Nassau County IDA, it would develop the Superblock property but basically pay no new taxes over the amount being paid now for the undeveloped property for nearly 18 years. Of this $109 million tax break, about $97 million is taxes that would have been paid to the City of Long Beach and in Long Beach school taxes.
A tax levy for each of City and school taxes is set every year and every residential and commercial taxpayer pays its share of the levy. If I-Star gets a tax break, what it doesn’t pay is paid by every other Long Beach taxpayer. For example, if the City and school taxes for Long Beach for one year are $100 million and I-Star is supposed to pay $5 million, but gets tax relief so it only has to pay $500,000, who is going to pay the $4.5 million I-Star isn’t paying? You. That’s who.
I-Star’s response to this irrefutable fact is that if it doesn’t build, there are no new taxes anyway, so Long Beach is “losing” nothing if it gets a tax break. Well, that’s like any resident saying I won’t build an addition to my house or add an in-ground pool unless I’m not taxed on it, and if I don’t do those things there’s no new taxes, so don’t increase my taxes because you’re “losing” nothing. Um, OK, when it works that way for everyone, let us know. I-Star then threatens that it won’t do the project if it doesn’t get the tax break. I-Star is a public company that has a duty to its shareholders to maximize value. It is highly unlikely to sit on a piece of property for years, tying up cash and paying taxes in a vendetta against Long Beach. Shareholders don’t care about vendettas. It will modify its request dramatically or just build without a break or sell the property and move on. And all the litigation concerning the Superblock is over. Done. There will be no cloud overhanging another owner’s development of the property. Don’t believe the hogwash on that front.
There are lots of reasons that I-Star, in our opinion, should not have gotten its variance approved, but this tax relief request goes to the heart of I-Star’s variance request from another perspective. Not only did I-Star beat its chest about needing no financing and being ready to put shovels in the ground — which undoubtedly was an important consideration for the City Council and Zoning Board — BUT I-Star highlighted the NEW TAXES it would be paying to the City and the school district.
It’s variance application contained consultant reports from Cameron Engineering & Associates LLP and 4ward Planning Inc. (such reports have also been submitted as part of the package to the IDA). Each of those reports notes that the project will result in real property taxes of approximately $5 million per year.
The Cameron Engineering Environmental Assessment, January 2014, at Page 1-6, discussing the impacts from the project on police, fire, ambulance and schools, states:
“For the proposed project, all potentially adverse impacts would be adequately mitigated and offset by the projected increase in revenues for the City of Long Beach and the School District.”
Then at Page 3-15, Cameron refers to the detailed economic and fiscal analysis of the project and states:
“[T]he proposed project is expected to produce over $4.8 million in an annual net new revenue for the City of Long Beach and Long Beach School District.”
4ward Planning in its report (Appendix B to variance application) at Page 4 states as follows:
“The proposed development … is expected to produce over $4.8 million in an annual net new revenue for the City of Long Beach and Long Beach School District.”
The variance application made NO MENTION about seeking a tax break. To the contrary, it touted the new taxes the project would generate. Further, I-Star’s multiple presentations highlighted that it was so financially strong that it needed no financing and was ready to put shovels in the ground.
Given the harsh resident backlash to its tax relief grab, I-Star has a new ploy up its sleeve — agreeing to use union labor, so that it can get union support, including from Long Beach’s union residents. The use of union labor is on a project of limited duration. It is not a manufacturing plant or large service facility that will provide union jobs for the next 20-30-40 years. The project is expected to take 3 years. No doubt it will provide good jobs for those 3 years, but how in the world would that justify Long Beach taxpayers paying $100 million for it?
In a nutshell, the IDA should deny the tax break because:
1. I-Star should pay its fair share of taxes; just like everyone else.
2. I-Star’s variance application – the lynchpin to its project — not only made NO mention of the “required” tax break, but, to the contrary, referred to the tax benefits of the project at full tax level; the IDA should see through this.
3. The project will add tremendous infrastructure pressure — fire, police, administrative, sewer, water, parking — that is not being paid for.
4. The City needs the tax revenue desperately — the current City bond debt is higher by multiples than ever and now includes a huge amount for the “Haberman suit”.
5. The I-Star project simply does not satisfy the reasons for a typical IDA tax break— which involve recovery and rehab of brown fields/blighted areas, encouraging manufacturing, long term employment development, etc.
6. Avalon, Allegria and Aqua were built on the Long Beach oceanfront with no IDA tax breaks.
In sum, in our opinion the I-Star tax request is a terrible deal for Long Beach. If you don’t want to be paying I-Star’s taxes, let the IDA know by emailing them care of the address below and showing up to the IDA public session next week, February 24 @ 6:30PM at Long Beach City Hall. If you don’t spend some time now, you will be spending a long time paying I-Star’s taxes.
Timothy Williams, John Coumatos, Gary Weiss, Christopher Fusco, Michael Rodin
c/o Joseph J. Kearney, Executive Director, firstname.lastname@example.org