ESDC Fires Back At Stringer On His Criticism Of CityLights

City Comptroller Scott Stringer is demanding that the Empire State Development Corporation (ESDC) and Mayor Bill de Blasio lift the financial burden of the low-income and fixed-income residents of the CityLights housing development in Long Island City.

But The ESDC says that the comptroller’s office has a misrepresentation of the situation.

In three years, the housing development was assessed and received a 100 percent increase in its value leading to a $5.2 million tax increase on its residents, according to Stringer, who is calling on the ESD and the mayor to find a solution that would prevent the residents from being forced to sell their homes.

There are approximately 522 units, a quarter of which have low-income and below residents or a family of three that makes under $69,000, according to the comptroller’s office.

Not only have the residents received a staggering tax bill, they also have to contend with a $500,000 ground lease while other developments only pay $1 for their ground lease, they have to deal with a high building wide mortgage and they have been restricted from how much they could charge on their commercial space, according to Stringer.

In the commercial space is P.S. 78, which pays $17 per-square-foot for its space and that is below market rate, according to the comptroller’s office.

It is unusual for a co-op to have a high building wide mortgage, according to Stringer’s office. In affordable housing co-ops, typically the city or state provides additional equity in the form of grants to reduce the size of the building-wide mortgage and thereby reduce maintenance.

“I remember growing up in Washington Heights during a time when more people were leaving the City than were moving in – but many New Yorkers stayed and created communities just like CityLights residents did over 20 years ago,” said Stringer. “But the residents of CityLights have been blindsided by a massive new tax bill, which threatens to displace working class New Yorkers and sweep away their contributions. It’s wrong on every level.”

Stringer sent a letter to ESDC demanding that CityLights’ ground lease to be consistent with other developments built by the State agency as part of the Queens West Development Corporation (QWDC).

The comptroller wants ESD to correct the mistake of putting a large mortgage on the building, which drives up the monthly maintenance cost, in the form of grants, refinancing, or other assistance opportunities and because CityLights has committed the majority of its retail space to P.S. 78 at a cost that’s half the average rent – a fraction of the market rate value – ESD should find a means to offset the lower rent through either a grant or other means, which recognizes the public benefit of the school that has helped mitigate the potential impacts of developing other projects in the area by ensuring enough school capacity.

Stringer also wrote that the mayor’s inducements that he was willing to give to Amazon could go towards keeping the residents of CityLights in their homes.

The Department of Finance doubled CityLights value from $51.7 million in 2018 to $101.6 million in 2019 as its PILOT (payment in lieu of taxes) program started to phase out, according to Stringer. The mortgage for the development is $86 million, and 1,000 residents of the development are currently paying on average of $1,000 in rent, but are estimated to face another tax hike of $5.8 million when their exemption fully phases out in 2023.

“CityLights residents were sold the promise of affordable homeownership – a community to place their families and put down roots,” said Stringer. “But these buildings were set up to fail. If we want an affordable New York for all New Yorkers, we can prove it, by standing up for CityLights residents and preventing these crushing monthly bills.”

But ESDC spokesperson Jonathan Sterne called Stringer’s letter a Hail Mary attempt to make the state financially responsible for decisions made by CityLights’ developer and board.

“To be clear, ESD did not negotiate CityLights’ mortgage or its lease with the DOE, and the ground lease payments are in exchange for the State’s original remediation and infrastructure work on the site,” said Sterne.

When the co-op was built in the 1970s, a percentage of the apartments were sold below market rate, but there was no agreement to regulate the units as affordable housing so there is no restrictions for the amount that residents could sell their units, according to the ESDC.

Unlike the other surrounding properties, CityLights was erected on a former industrial site that was owned by the Port Authority, so the costs for the ground lease were based on the state’s cost for remediation and infrastructure for gas, water, plumbing and electricity for a residential space and in exchange the state had negotiated a 99-year ground lease for rentals, according to ESD. The other sites were shovel-ready and the developers of those facilities paid for their own groundwork.

ESD’s subsidiary, QWDC, was only named on the mortgage in passing for CityLights in 1996 in order to help provide a tax break called a “Payment in Lieu of Mortgage Recording Tax,” but the developer was responsible for future negotiation terms on the mortgage, according to the development corporation.

ESD was also not a part of the negotiations for P.S. 78, and had no role in negotiating its terms or setting the rental price per square foot and placed no restrictions on the length of the lease or Citylights’ ability to renegotiate the lease, according to the development corporation.

For over 20 years, CityLights paid only $42,000 annually to the city and the PILOT agreement started to expire July 2018, with 20 percent in tax increments annually that will be over five years, according to the ESD, which is the equivalent of its assessed value. The staff of ESD and the board of CityLights have also been in conversation for a decade about the PILOT program expiring and have been working with the city to come up with an income-based solution for the low-income residents.

The PILOT program also needs permission from the city to change the agreement between CityLights, but the city’s DOF has not signed off on any proposals so the income-based solution can’t be implemented and any new development is in the city’s court, according to ESD.

The mayor’s office declined to comment.