ITHACA, N.Y.—With Site Plan Approvals in hand, local firm Visum Development Group is hoping that the Tompkins County Industrial Development Agency will be willing to award it tax abatements for the mixed-use project it has planned for Ithaca’s West End neighborhood.
The development, called “The Citizen” and slated for 602 West Buffalo Street, calls for a five-story building with a combined total gross floor area of 92,800 square feet. The building would contain 80 residential units on the top four floors, while the ground floor would host two commercial retail spaces totaling approximately 2,141 square feet, a community room, and 26 covered parking spaces on the ground floor.
Meanwhile, on the outside, planned amenities include a picnic area at the north end of the parcel away from the busy intersection, street-front retail patios and landscaping. The building is planned to be all-electric in compliance with the Ithaca Green Building Policy.
Being in the heart of the city’s West End neighborhood, “The Citizen” is located in the City of Ithaca’s Density District Boundary and qualifies for the 10-year CIITAP financial need incentive. According to the memo provided by Ithaca Area Economic Development, the project has an estimated build-out cost of $26,371,808, most of which will be covered by conventional bank financing, with $6.3 million coming directly out of Visum’s pockets (a.k.a. cash equity).
Estimates for the value of the tax exemptions ring in at $2,957,552 for the property tax exemption, $758,047 on the sales tax for construction materials, and $50,000 on the mortgage filing tax, for a total savings amount of $3,765,599. Even with the partial property tax exemption, the property would also generate $2,584,322 in new property tax over the next 10 years versus if the site were left as-is. As for jobs, none are stated beyond about 150 construction jobs; the commercial space occupants are “indirect” jobs and cannot be cited in the IDA application.
“Assistance is necessary for the project due to unparalleled pressures on the local housing market and the wider industry, which is experiencing a significant surge in costs in a challenging financial market. […] Rising hard costs, coupled with increasing soft costs of development entitlement and charges imposed by local authorities, make it unlikely for the project to attract private investor capital and bank financing without the CIITAP abatement. The project is expected to achieve a cash-on-cash return of less than 10%,” states Visum Senior Development Manager Julia Bucher in the submission.
Generally speaking, projects need a minimum 10% return on investment (ROI) to be financially attractive enough for conventional construction loans. Without the abatement, “The Citizen” clocks in with a 6.3% ROI, in part because the project has long been planned as mid-market “workforce” housing (80-120% area median income), instead of the usual high-end “brand new luxury” apartments typically delivered onto the Ithaca market.
“Without the financial support provided by this (CIITAP) program, this project will be unfeasible and the City and NYS will be passing on the opportunity for a development that will help advance the so needed West End revitalization,” Bucher added.
Perhaps one of the more curious aspects of the application is that, while the project has long been planned as workforce housing, there’s no plan for low-income units within the building. Application details show that Visum is instead opting instead to pay $528,000 into the Community Housing Development Fund (CHDF), the locally-managed affordable housing fund that helps underwrite the cost and reduce the financial barrier of building new low-and-moderate income housing in Tompkins County.
There has been some controversy lately regarding payments into the CHDF, because only recently have the first payments from developers been received into the fund. During the county Housing and Economic Development Committee last month, legislator Veronica Pillar (D-2nd District) had expressed some consternation with how long it had taken for funds to finally start flowing into the CHDF from developers obligated to do so by their IDA benefits packages.
Specifically with the Citizen, the payment plan into the CHDF would involve an $88,000 payment as soon as they have construction financing in hand, with the remainder split over the first three years in which it is open for occupancy. The current plan is to begin construction this summer for opening in late 2024, translating to about $440,000 in remaining CHDF payments through 2027.
The project and its requests will begin discussion before the IDA’s board at their meeting at 2:30 p.m. on Wednesday, June 14, and livestreamed here. Side note, review of major IDA applications like this one always takes at least one month before decisions are made, so you will have time in the coming weeks to compose your thoughts, spoken or written. Written comments can be sent to IAED’s Ina Arthur at inaa@ithacaareaed.org.