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Ford: iStar may seek $87 million tax break

Long Beach Superblock developer may sue city if IDA rejects third PILOT request

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Nassau County Legislator Denise Ford says that the developer looking to build luxury apartments on the Superblock will make a third attempt to secure a tax abatement to move forward with the project — and may sue the city if it is denied again.

The company, iStar Financial Inc., may seek approval from the Nassau County Industrial Development Agency for an $87 million payment in lieu of taxes, or PILOT, program, over a 20-year period, according to Ford, who said that iStar has yet to submit a formal request.

“We’re waiting to see what the actual request is going to be,” Ford said.

The previous PILOT proposal, which the IDA rejected last July, called for $109 million in tax breaks over 20 years, and while it had the support of labor unions — and iStar claimed that the project would generate millions of dollars’ worth of economic activity and tax revenue — many residents criticized the deal, saying that Long Beach would lose out on the full tax benefits of such a development.

“It would automatically be a higher payment starting in the first year, from what I gather,” Ford said, adding that iStar representatives told her about the potential request about six weeks ago. “Looking at this, starting in year one, the [property tax] payment would be greater than it was originally. It looks like it’s a little bit more upfront, and starting in the beginning, we’d realize more money and get a greater payment sooner, as opposed to the old payment structure.”

Ford also said that under the new proposal, iStar would pay more if its profits exceeded 8 percent. “The other thing they said was … they would give back anything in excess of 8 percent,” she said, “and that would reduce the PILOT by tens of millions of dollars.”

The city will hold a public forum at City Hall on May 9, at 6:30 p.m., to update residents on the new request. The meeting will be overseen by special counsel retained by the city, attorney Robert Spolzino, and Comptroller Kristie Hansen-Hightower, and residents will have the opportunity to ask questions. Representatives of iStar are not expected to speak.

“It is unclear whether the IDA needs to hold a public meeting in connection with this new application,” the city said on its website last week. “Therefore, the city feels it is imperative that the residents be provided with the details of this application, and an analysis of its short-term and long-range effects on the city. Residents will also have an opportunity to ask questions regarding this topic of critical concern to the community."

Neither iStar’s executive vice president, Karl Frey, nor representatives of the IDA returned calls seeking comment. One person with knowledge of iStar’s new PILOT request said that it is now less than $87 million.

A statement from the city said only, “An analysis of the actual numbers will be detailed at next week’s information session.”

The new request comes nearly a year after the IDA voted 3-2 to deny iStar’s request for $109 million in tax breaks to build two oceanfront towers. City officials announced last week that they learned that the Manhattan-based developer would soon submit “a third and final application for tax abatements.”

The Superblock has been vacant for 30 years, and the $336 million project envisions twin 15-story luxury apartment buildings with 522 units overlooking the boardwalk between Long Beach and Riverside boulevards.

In 2014, the city’s Zoning Board of Appeals gave the developer approval to move forward with the project, which includes 11,500 square feet of retail space for shops along the boardwalk. Representatives of iStar said at the time that the project would generate $4.8 million per year in property tax revenue for the city and its school district, and told trustees and residents that it had the financial wherewithal to fund the project.

The IDA rejected iStar’s application for a $129 million PILOT over 25 years in 2015. The developer subsequently sought a 20-year PILOT, claiming it would not build without it. The IDA’s rejection of the proposal last July followed two heated public hearings at which former U.S. Sen. Al D’Amato and many residents expressed vehement opposition to the proposed tax breaks.

Ford, who also opposed them, said that she would call on the IDA to hold another hearing.

In 2014, the City Council voted to settle the city’s lawsuit against iStar Financial, which owns the Superblock property, for $5.25 million, the terms of which included the city’s support for a PILOT, albeit for an unspecified term. The council also approved a community host agreement in 2015, in which iStar would pay the city $4.1 million to mitigate the project’s impact.

City officials had declined comment on both tax abatement requests, citing potential litigation. Council President Len Torres told the Herald last October that he was disappointed with iStar for originally claiming it had the money to fund the project, and then seeking a large tax break.

In an op-ed in this week’s Herald, D’Amato again blasted both the developer and city officials, writing that the city had sold out residents and claiming that both parties agreed to keep the terms of the city’s 2014 settlement with iStar a secret. D’Amato contended that the deal was orchestrated by former Long Beach Democratic Committee Chairman Michael Zapson and City Manager Jack Schnirman, “who were able to persuade their cronies on the City Council to support the secret settlement.”

D’Amato wrote, “iStar is still trying to make a run at it, and is being aided by an administration in Long Beach that has violated every conceivable standard of honesty by not telling people that it secretly agreed in a court settlement to support iStar’s application to the IDA for tax relief.”

The Herald obtained a copy of the settlement from the city through a Freedom of Information Law request, and those with knowledge of the agreement said that the city has routinely disclosed the settlement in response to such FOIL requests.

“This is a baseless political attack to deflect attention away from the issues now confronting the city, namely iStar,” read a statement from the city.

Ford said that iStar informed her that if it were denied a third PILOT request, the real estate investment trust would consider legal action against the city.

According to several people with knowledge of the proposal, iStar has indicated that it intends to file suit if the city does not express its support in a letter to the IDA and the request is rejected.

“Potential litigation will be addressed at next week’s information session,” the city said in a statement.