I was asked to share the following: Concerning iStar Tax Relief Request

May 19, 2016

Nassau County Industrial Development Agency
Theodore Roosevelt Executive & Legislative Building
1550 Franklin Ave., Suite 235
Mineola, NY 11501

Dear Chairman Kearney and IDA Members:

I write with respect to the iStar tax relief request and specifically the recently released economic impact analysis performed by Camoin Associates (the “Camoin Report”) for the Nassau IDA. In short, the Camoin Report is fatally flawed as an information source because it limits its analysis to a paradigm where there are only two options: iStar builds or iStar does not build. By limiting its analysis this way, the Report so narrows its field of vision that it is like a racehorse wearing blinders to force it down a narrow path.

The County did not need to spend taxpayer dollars on a report that does not nothing but state the obvious: jobs, economic activity and tax revenues will be generated if the property is developed. And, it’s not a big surprise to argue that’s better than no jobs, economic activity and tax revenues.

According to the Report:

The schedule of payments [(for a 20 year period)] to be made by the Applicant under the draft PILOT agreement would be $17.9 million [(for a total of $30.5 million)] more than the property tax payments otherwise applicable to the Site if the Project were not to occur. In other words, the PILOT represents a property tax benefit to the affected tax jurisdictions [(the County, City and School District)] averaging $896,062 per year. (Parentheticals added.)

What the Report fails to do is any comparison to what iStar would pay if it paid the full anticipated taxes on the proposed project (i.e., not less than $110 million more over the 20 year period), or to acknowledge that if the project is not undertaken by iStar, iStar (as it is on record saying, and as any publicly-owned company would do lest it be sued by its shareholders) would sell the property and someone else could develop it and would pay taxes on its project as developed, or to even question iStar’s profit calculations (to the extent that should be a relevant consideration (obviously, iStar says that is THE consideration here)).

Notably, too, the Report’s conclusions fail to point out (although the numbers are included in its charts), that even as proposed the bulk of the “increase” in taxes comes in the years 19 and 20, so the $896,062 average per year is misleading. Either way, these amounts are astronomically off the $5 million or more that iStar would be paying in taxes without the IDA tax break. (1)

In any event, the IDA’s decision surely can’t rest on a property owner saying it won’t develop if it does not get a huge tax break. If that’s the basis for the IDA decision, every property owner would say exactly the same thing.

In prior communications to you, including my March 11 letter, attached hereto, I set out the key reasons to deny this unconscionable request, so I will not repeat them here. However, it does bear repeating here that the brunt of this request will be felt by Long Beach alone, and therefore the IDA must be even more careful in exercising its fiduciary duties with respect to this minority.

As a final note, Wittek Development and Sackman Enterprises are proposing to develop the former Hebrew Academy of Long Beach, which is oceanfront property, and to build two 15 story towers (sound familiar?). Apparently they advised the West End Neighbors Association that they will not seek tax relief and will expect to pay about $3 million a year in taxes. If the IDA approves the iStar tax grab, though, how could one reasonably expect that they also won’t ask for a huge tax break? And if they don’t, that also sends an equally compelling message —- that huge tax breaks are not necessary for development of oceanfront property in Long Beach.

In sum, the request is outrageous, the Report does not answer the relevant questions, and if the IDA hands out this record-setting tax break, it justifies all the concerns that have been expressed about IDAs.

Very truly yours,

John [name withheld]

(1) And that is what iStar said it would be paying when it asked the Long Beach Zoning Board of Appeals to grant radical building variances. See attached March 11, 2016 letter to you, which includes specific quotes and citations to iStar’s own materials and statements.

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