Mixed Reactions to AvalonBay’s $9 Million Payment for New Rochelle

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NEW ROCHELLE, NY — While the City of New Rochelle will be receiving $9 million as payment for the land the AvalonBay complex is using, there were many residents who felt it was a “sour” deal. The money that will be paid early is part of the projected $18 million that would be due in 2029 and 2035. There is potential for additional payments should Avalon’s income grow more than expected. Council member Marianne Sussman who also sits on the City’s Industrial Development Agency (IDA) which presently owns the land, was credited with helping to formulate the agreement.

This $9 million offer came after Council member Lou Trangucci had asked the AvalonBay  Company for additional contributions to the City because of  recent budget shortfalls. Trangucci had previously emphasized that the payments in lieu of taxes this company makes do not include any city, school or county taxes until 2028. The payments that AvalonBay does make to New Rochelle consist of a small percent of the two buildings’ income or about $650,000 per year.   When contacted by the Westchester Herald Council member Trangucci was not happy with the deal because of the tax abatement. He is happy with the $9 million in payments now instead of in 20 years or more because the money is needed now but he cautioned there is no payment above and beyond what they owe the city. However, he added that in the future the Industrial Development Agency (IDA) should not be allowed to structure any deal like this one. “In general the IDA has allowed these arrangements to continue and it is not fair to the residents.”

Anthony Galletta received the following information about the two Avalon buildings from Melissa Mendez of the City of New Rochelle’s Assessor’s office. The current assessed value of the buildings is $4,161,150. Multiply each of the following tax rates by 4,161.15 to get the actual taxes for this property that would be paid with an IDA abatement. The current tax rate per thousand would be:  City – $160,866, County – $154,625, School – $588,412 and Library- 12,889. This would translate to school taxes of $2,448,470.60, City tax – $669,387.56, County taxes- 643,417.82 and Library tax of $53,633l.06 for a total of $3,814,909.04.

These figures highlight how the original IDA contract with the developer has unfairly burdened the future of New Rochelle. The advance payments for the land presently owned by the IDA are only the tip of the iceberg, especially when AvalonBay Company’s plan to sell one building is considered. Many questions have been raised by residents. David Lacher, a School Board and IDA member, feels the sale of one building using the original contract overlooks the changes in IDA regulations which require that more tax money be paid to the schools. Lorraine Pierce, Secretary to the New Rochelle Citizens Reform Club, stated that her club had advocated for a change in IDA regulations and the City of New Rochelle had agreed that the IDA must hold public hearings before IDA benefits were granted. This was not required when the original contract was signed.

Elaine Waltz, President of the South End Civic League summed up, “If Avalon is getting $100 million for the sale of one building, then I think it’s pretty sad that we have to wait five years for $9 million.”

2 thoughts on “Mixed Reactions to AvalonBay’s $9 Million Payment for New Rochelle”

  1. Kind of Like Borrowing From Your IRA
    When you really need the money you’ll do what you have to do. HOWEVER, that doesn’t make it a good deal. Poorly crafted and out of desperation, the city gets the dirty end of the stick, again. The Journal News gums up the reporting, as usual, touting developer will “pay 9M ahead of schedule”http://www.lohud.com/apps/pbcs.dll/article?AID=20102090328. Sounds good until you realize the developer is paying 50 cents on the dollar and still getting all of the abatements. Oh yeah, the developer graciously turned over 38 parking spaces to the city. Such a deal! Still no money to the school district, nothing to offset the 911 calls, and for this we borrow from the “retirement fund”. Can’t wait to see what they come up with next.

    1. Avalon Payment
      John D I am going to to have to disagree with your comments. The 19 year and 25 year present values of the cash flows (on a libor based curve) are 37 and 30 cents on the dollar. The city doing this deal at 50 cents on the dollar is quite respectable. If the City were to invest the $9mn payment in 2029 and 2035 zero coupon US Treasury strips the funds returned would be roughly $27mn. Unfortunately, Bransom and Strome, much like a heroin addicts, cannot control themselves. Rather then invest the proceeds they will choose to squander them. This is truly unfortunate, and is an example of what happens when a community chooses to be led by a individuals who have no practical business experience.

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