Binghamton City Council Set to Approve (Another) $11+ Million Tax Break for (More) Downtown, Market Rate Luxury Housing

At the June 5, 2023 Binghamton City Council work session, Mayor Jared Kraham requested City Council approve a massive tax break for another wealthy developer to build more downtown luxury housing, even though Binghamton continues to suffer from a crushing shortage of quality, affordable housing and folks experiencing housing insecurity and homelessness are on the rise.

The proposed $48 million development project at the site of the demolished Water Street parking ramp is a public-private partnership and involves building five floors of privately-owned luxury apartments ($23 M)  atop five floors of a newly-built, publicly-owned parking garage ($25 M).

According to the Mayor’s presentation and documents provided to City Council, the request is to grant the developer a 28-year tax break (known as a Payment in Lieu of Taxes, or PILOT) that, over the entire term, reduces the private firm’s local tax payments by more than 50%.  That will amount to about $11,500,000 in savings for the developer, and in losses in tax revenue for the City, the Binghamton School District, and Broome County.

To view the Mayor’s presentation, see the Council work session video here (starts at 3m and continues to about 44m).

As with most PILOTs, the developer’s tax bill starts small and increases incrementally over the full term (in this case, 28 years). However, this is an unusual PILOT, unlike any Binghamton has passed in the last 15 years or more.

The municipal entity involved in this project, the Binghamton Local Development Corporation (which is run and managed by the City of Binghamton, and thus a redevelopment tool of the sitting Mayor), has agreed to borrow about $4.5 million (through a 30-year bond) to pay for structural enhancements to the garage that will allow five more levels of housing to be placed atop the parking levels.

What’s different with this PILOT is that Mayor Kraham is proposing that most of the already reduced tax payments made by the developer are passed through to the Binghamton Local Development Corporation (BLDC) to cover the annual repayments of the 30-year bond.

For example, according to the PILOT and bond repayment schedule provided to City Council (available here, see page 6), the developer’s annual tax obligations to the City, School District, and County without the PILOT would total $812,171. With the PILOT, the developer will only pay $243,651 annually the first ten years. But almost all of that will go to the BLDC to repay bond payments.

The result? The developer of a $23 million luxury housing project in downtown Binghamton, likely bringing in a minimum of $2 million a year in rent payments, will pay the City of Binghamton exactly $507 in property taxes a year for the first ten years.

Put another way: Over ten years, this wealthy real estate development firm will pay a total of only $5,070 in City taxes. That’s less than some senior homeowners on fixed incomes pay every year.

There’s something else unique about this PILOT. All the prior PILOTs for housing projects assumed a small increase in the local tax rate over the 28+year term. This PILOT does not, and freezes the tax rate for the developer to the 2022 rate.

If City Council does approve this tax-break handout to another wealthy developer, it should at least include a 1 or 2% annual increase in the tax rate to maintain precedent with prior PILOT agreements.

It appears Mayor Kraham knows the optics aren’t great here, so he offered a crumb to please all the housing justice advocates: 6 of the 120 rental units will be priced “affordably” to help with the housing crisis. Six.

But he should know better. Optics only matter if there is an active local press conducting journalism that matters.

Those days are long gone.

Case in point: this is the only reporting you’ll find on this major policy decision. And the eighteen readers don’t necessarily present a civic rebellion threat (though I appreciate each and every one of you).

Carry on with business as usual, Mayor. Nobody’s watching.

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