Melissa Bailey Photo
$82 million. Not $186 million.
That is now the official assessed value of the eco-friendly 32-story apartment tower at State and Chapel Streets, the DeStefano administration agreed — ending one last piece of rancorous unfinished business in its final days in office.
Officials announced Tuesday afternoon that they reached an agreement on that $82 million figure with Multi-Employer Property Trust (MEPT), a union pension fund-backed outfit that owns the skyscraper that opened in 2010.
The agreement brings to a close a politically-tinged dispute over how much benefit taxpayers will reap from the deal to allow construction of the state’s largest residential tower.
The fight began in 2011 when the Destefano administration presented a tax bill based on assessing the tower at $186 million. After a five-year phase-in, that would mean MEPT would pay $5.7 million a year in taxes — four times as much as expected.
That startled MEPT. The company cried foul. When they originally promoted the deal to sell downtown land to MEPT to build the tower, administration officials had originally estimated about MEPT would pay about $1.4 million in taxes. MEPT threatened to sue the city unless the assessment could be changed. It noted that this was the first time in history the city based an assessment on how much it cost to construct a building — rather than based on a market assessment of what comparable properties earn.
Thus began a public-relations and legal war: Mayor John DeStefano, running for reelection, accused the developer of trying to short the taxpayers. His critics said he was sending a dangerous signal to people considering doing business with the city. Some questioned whether the surprise assessment resulted from the fact that 360 State developer architect Bruce Becker had declined to contribute money to the mayor’s reelection campaign or bundle contributions from relatives or coworkers; or that he resisted a personal demand from the mayor that 360 State’s new food market accept a union without an election. The mayor vehemently denied the accusation. Then MEPT played politics itself. It hired a politically connected attorney, Democratic National Committeeman Anthony Avallone, to try to persuade the Board of Aldermen to “fix” the assessment through a special bill. That failed.
In the end, the matter landed in court, and both sides chose to negotiate a compromise. They submitted the final compromise to a court Monday afternoon, according to city Corporation Counsel Victor Bolden. The compromise sets the assessed value of the property at $82 million.
That means 360 State will get a credit for paying too much in taxes this last fiscal year. It was charged $1.08 million; under its new assessment, it will have owed only $512,008.
Similarly, it was scheduled to pay $2.18 million in taxes for the current fiscal year. Now it will owe only $988,449. That means a $1.19 million difference over the two years, according to Bolden.
Fortunately, that will not create a new hole in the budget, according to Board of Aldermen President Jorge Perez.
“We never counted on collecting the full amount,” he said.
Though officials didn’t advertise the fact at the time, the aldermen passed this year’s budget based on a revised grand list that estimated that the assessment for 360 State would drop approximately $100 million when the court case ends, Perez said.
“I’m happy that we reached an agreement. I thought the city was wrong in using the cost method — we don’t use that for any other property,” Perez said. And, he said, the developer was “misleading” when it claimed the city had reneged on a tax deal based on the original prediction assessment; that original was just an estimate, not a signed document.
“Neither side was a straightforward as they could have been,” Perez remarked. “I’m happy that reasonable minds reached an agreement, one that is fair to be both sides.”
360 State will produce $2.3 million a year in taxes, based on the current mill rate, once its five-year tax phase-in expires in fiscal year 2017, according to Bolden.
Bolden rebutted a suggestion that City Hall may have waited until the slow-news Christmas Eve period to release news of the settlement.
“The basic outlines and the contours of this deal were actually done in November. There was back and forth between the lawyers on both sides. The final stipulation was filed with the court yesterday evening right before 5 o’clock,” Bolden said Tuesday afternoon.
The deal also calls for using an “agreed-upon methodology” to revisit the property’s assessment when the next revaluation cycle comes around, according to MEPT spokeswoman Diana C. Pisciotta. She said MEPT remains “hopeful” that the new tax bill coming out of that process will come even closer to the original $1.4 million the company anticipated. MEPT is “gratified” with Monday’s settlement, she said.