ITHACA, N.Y. — Developers want to transform a vacant 95-acre former industrial site on top of Ithaca’s South Hill into a thriving neighborhood, complete with commercial and retail space, natural areas and hundreds of new housing units.The project has been dubbed SouthWorks, previously known as ChainWorks. It’s estimated to cost around $588 million to construct and will likely take over 30 years to complete, but developers say they need a substantial local tax break in order to get shovels in the ground.The estimated value of that tax break is currently $85 million realized over the course of 20 years if SouthWorks was built all at once. But critics argue the tax breaks the project could receive are excessive, and will likely be larger than projections show since SouthWorks will be gradually built over the course of 15 years.SouthWorks has been billed as possibly the largest single investment in Tompkins County’s history. If it is developed, it would eventually introduce millions in new tax revenue to the local economy.Proponents of the project see it as an opportunity to redevelop a decaying former industrial site located on prime real estate in Ithaca. The SouthWorks site is off of South Aurora Street and straddles the border of the town and city of Ithaca. Supporters of the project fear that without a local tax break, the already-approved project won’t be built, and the site will remain vacant. The Tompkins County Industrial Development Agency (IDA), the body with the power to authorize local tax breaks, could make a decision on the matter at its next meeting on Oct. 9. A public hearing on the incentive was held on Tuesday. SouthWorks is the brainchild of local businessman and developer David Lubin. Lubin’s company, L-Enterprises, is attached to the project along with Philadelphia-based SHIFT Capital, US Ceiling Corp, and Xylem Projects. The project would transform the former site of Emerson Power Transmission, an automotive parts manufacturer that closed down its operations in Ithaca in 2011, into a neighborhood-scale development with 183 affordable housing units, 732 market-rate units, and around 600,000 square feet of commercial, office, manufacturing and industrial space.A graphic of what developers envision for the SouthWorks development. Credit: ProvidedThe IDA’s seven-member board of directors has discussed SouthWorks’ application for a local tax break for months. The estimated $85 million tax break Southworks could receive consists of a $20 million sales tax break and a $1.7 million mortgage recording tax break, but much of the controversy rests with what’s been estimated as a $63 million property tax break that would normally be paid to the Ithaca City School District, Tompkins County, and the Town and City of Ithaca. The proposed terms of the property tax incentive SouthWorks’ could receive are complicated, and greatly differ from what the agency’s standard property tax abatement looks like, drawing the ire of some local observers. Peter Wissoker, who holds a Ph.D. in real estate finance and is a regular speaker at the IDA’s public hearings, said he considers SouthWorks a “pretty good” project, but he thought the size of the tax breaks are “egregious.”He called the estimated $63 million property tax break a “misleading” figure since the projections are calculated as if the entire project would be built all at once under a single property tax abatement agreement. Developers are planning to construct SouthWorks gradually over the course of about 15 years and have requested a complicated arrangement of property abatements that would be applied to numerous subprojects on the site as they are able to build them.According to a memo that outlines the PILOT’s proposed terms, subprojects, also known as sub-areas, are defined as “one or more buildings.” Members of the IDA and a representative of the SouthWorks development team confirmed that there is an undetermined number of subprojects at this time. As a result, Wissoker believes the actual value of the property tax break is likely much higher. An op-ed published in The Ithaca Times, co-written by Wissoker, called on the IDA to make its SouthWorks decision only after more thorough modeling was done to estimate the actual size of the tax break.Members of the IDA’s Board of Directors have discussed how the project’s property tax break is based on imperfect modeling, but Tompkins County Legislator Rich John, a Democrat who chairs the IDA’s Board of Directors, pushed back on the idea that the projection is misleading. He called concerns around the estimated size of the property tax breaks “legitimate,” but deemed the figures the IDA is considering a “best effort” and that he was comfortable voting to approve the tax break for SouthWorks.Asked what he thought of the demand to wait for better modeling, John said the property tax break estimate “doesn’t have to be perfect. If we wait for perfect, we don’t do this project.”The SouthWorks site, filled now with empty buildings still waiting to be converted or demolished as part of the project, currently generates about $103,000 of property tax revenue each year.If the project were built all at once, as the IDA’s projections are calculated, SouthWorks would generate an estimated $44 million in new property taxes over the next 20 years, despite the sizable tax abatement being considered for it. Without the abatement, the IDA’s projections show SouthWorks would generate over $107 million in new property taxes over 20 years.How the property tax incentive is structuredAs SouthWorks is being built out, the proposed tax incentive agreement would freeze the 95-acre parcel at its current assessed value of around $3.5 million for 10 years — with the possibility of a five-year extension — through a payment in lieu of taxes, or PILOT, agreement. The expectation is that the SouthWorks site’s value would grow as parts of the project are constructed. Keeping the site’s value at $3.5 million would protect developers from the pressure of rising property taxes that would come as a result of growing property values. As different subprojects at SouthWorks are developed and completed, developers would be able to ask the IDA to discontinue the 10-year PILOT on the area that’s being developed, and for a 20-year PILOT to cover the area of a given subproject instead. This is a key part of the proposed property tax incentive. Under the 20-year PILOT, the developers would see 90% of the property taxes they would pay on the value of the subproject abated for five years of the agreement, and then 80% of the property taxes of a subproject abated for three years after that. Under the agreement, the tax abatement would decrease by 10% every two years until the full amount of taxes on the subproject are being paid after 20 years have passed. In the proposed agreement, the IDA has set benchmarks for SouthWorks in order for the project to continue to receive 20-year PILOTs for its subprojects. At first, the developers would be able to receive a 20-year PILOT for five years on subprojects, but in order to continue to be eligible for the 20-year PILOT after those five years, developers would need to meet the following criteria:At least 244 market-rate housing units have received a building permit, are under construction, or have received a certificate of occupancyAt least 61 affordable housing units have received a building permit, are under construction, or have received a certificate of occupancyAt least 200,000 square feet of commercial, office, manufacturing, or industrial space received a building permit, are under construction, or have received a certificate of occupancyThe IDA has set similar benchmarks that developers would need to meet in order for the agency to continue offering 20-year PILOT agreements for an additional five years after that, as well as extend the site-wide PILOT from 10 to 15 years long. However, the IDA does not intend to make the terms of these benchmarks binding. According to a memo outlining the terms of the proposed agreement, “the failure to meet one or more requirements or deadlines shall not result in a denial of any extension request” if the IDA finds that developers are “working diligently” and in “good faith” under the economic conditions at the time. John, the chair of the IDAs board of directors, said that flexibility was meant to allow SouthWorks to develop “organically” as well as permit future iterations of the IDA’s board of directors to use their discretion as the project progresses. He said flexibility in the agreement is important due to the many cost variables — like inflation or labor — that can’t be easily predicted. “If the overall goal is to get this project done, a future IDA might give greater incentives, [or] they might say, ‘You don’t need these incentives,’” John said.SHIFT Capital’s SouthWorks Development Project Manager Robert Lewis said he thought the IDA gained a lot of power over the project as a result of the PILOT agreement. Lewis, an Ithaca resident who was a member of the city’s planning board for over eight years while SouthWorks was undergoing its project review process, said it was hard to imagine “a better deal for Ithaca and Tompkins County” when it came to the tax break agreement the IDA is considering. “The IDA has set goals for us to hit. We intend to hit them, and whether or not we hit them, the IDA still holds on to a lot of discretion,” Lewis said. “It’s hard for me to look at that structure and think that suddenly we’ve gained a lot of power.”But the lack of binding requirements gives developers a degree of flexibility that some critics feel is too great. “It’s entirely reasonable that there be firm benchmarks with consequences,” said Greg LeRoy, founder and executive director of the subsidy watchdog group Good Jobs First.He said by not having firm benchmarks, the IDA was “creating a system to be gamed.”“I don’t dispute anybody’s motives here and putting financing together to do revitalization projects in urban areas can be expensive,” LeRoy said, but he added that if the IDA was going to grant such a large tax break it “has the right to insist on greater clarity about when the revenue is going to appear and how much is going to appear.”The post A once-in-a-generation project could receive a once-in-a-generation local tax break appeared first on The Ithaca Voice.First published by The Ithaca Voice.