Earlier this year, Finger Lakes Economic Development Center (FLEDC) CEO Steve Griffin presented a report on all the current Payment in Lieu of Taxes (PILOT) agreement recipients and where they stand in meeting the number of jobs that were estimated would be created and/or retained for Yates County. After months trying to verify the figures he presented to the board, Griffin has responded to a request by The Chronicle-Express for those figures to be made public.
While the projected targets for employment are only an estimate that can change with circumstances, most of the PILOT contracts met their projection, are close to meeting it, or have been delayed in construction and are still expected to meet their target number of jobs. However, Griffin did highlight glaring exceptions in his report. A total of seven projects have failed to or have not yet met the targets out of the total of 34 projects granted the benefits of a PILOT.
Magnus Ridge Winery
Magnus Ridge owners Matt and Sandy Downey estimated they would create 19 new jobs at their impressive European country estate style tasting room as a “destination winery” on State Rte. 14 in Starkey when they received their PILOT in November 2010. That job figure actually stands at just four jobs today, 15 short of their projection. The Downeys tell Griffin “they cannot find employees.”
Griffin does his best to defend the PILOT in his report. “They did complete the construction of the facility,” he wrote in his report. For that project, Magnus Ridge also received a $233,000 low interest loan from FLEDC in 2010 from the Agriculture Loan Fund which provides funds for organic farming and viticulture, and from the City by City Fund which is reserved for tourism. The $2.9 million Magnus Ridge was allowed a total of $266,527 in tax abatements over the 10-year PILOT term, which is on schedule to end with the 2021 tax year.
In 2015, Krog Corp. of Corning received a PILOT for the Keuka Commons project as a lease-leaseback arrangement with Keuka College. Krog would own the building as a taxable property on land leased from the college by Keuka Commons LLC. The college would then in turn, lease space in Keuka Commons back from Krog for academic offices and campus services.
Griffin stated at that time, the planned two-story 28,000+ square foot building would incorporate retail space on the ground floor, including the college bookstore, the Terrace Café with a planned Tim Horton’s franchise, a fitness center, the campus health office, and 2,000 square feet of space yet to be allocated.
FLEDC agreed to a standard 10-year schedule for payments in lieu of taxes (PILOT) with 0 percent paid the first year, rising to 100 percent by year 10, totaling $422,000 in property tax abatement over the span of the PILOT. The $5,395,000 project also received mortgage tax abatement totaling $37,765, and sales tax abatement of $220,000, mostly for construction materials. The project was expected to bring 55 construction jobs for one year, create 20 new jobs, and retain 66 existing jobs, totalling 86 full-time equivalent employees (FTEs).
In this new report, the job figures for Keuka Commons stand at just 54 FTEs; a shortfall of 32 jobs. Griffin reported he could not actually verify but only estimate the number. “This number is not accurate. It was originally estimated that 20 additional jobs would be added in the building through the addition of retailers. However, Keuka has now taken over the entire facility. So additional jobs have been moved into the facility but have come from other Keuka College locations. HR (Human Resources) at Keuka College did not know how many individuals work at the facility. Keuka College currently has 236 full time equivalent employees.”
Now the news is that the college will buy Keuka Commons from Krog rather than be leasing space, and thus remove it from the taxable property rolls for Yates County, the Penn Yan Central School District, and the Town of Jerusalem.
Responding to questions regarding the shortfall in job creation and the change in taxable status for Keuka Commons, Griffin made the following statements:
“The project is not actually altered. It is a mixed use facility with the café, bookstore and college classrooms and offices, and Keuka has always been the master tenant on the lease.
“As far as the significant loss of tax revenue, the college had always wanted/planned on owning the facility. The use of a developer up front was to overcome initial funding challenges that prevented the college from building it themselves. Had they been able to, then there would have never been a need for the tax incentives as it would have been exempt from the beginning. The college feels they are in a better place today to try to acquire the facility which would be financially advantageous to Keuka College as the annual debt service would be less than current annual rental and maintenance expense. As an example of that higher cost to the college, to date around $58,000 has been paid to the local taxing jurisdictions through the PILOT which the college is responsible for under the terms of their lease. Again, that $58,000 in PILOT payments would have never been made if they could have built the building themselves.”
Griffin goes on, “So the building was built to help the college attract and retain students as the first new building in more than 40 years. The college is simply trying to improve their overall financial position by acquiring the facility prior to the expiration of the lease.”
Griffin says the college is a major economic driver for Yates County, generating more than $110 million in economic activity locally (based on an independent study done for Keuka College). “A recent example of that local impact is the college awarding its $2 million annual facilities contract to Finger Lakes Premier Properties over Sodexo (an International company headquartered in Maryland) in an effort to support the local economy. I would point to the larger picture of the positive impact of the college to those that might focus on a loss of tax revenue that would have never been received if Keuka was able to own it from the outset.”
When asked about consequences for PILOT projects that fail to meet target job numbers, Griffin replied, “Target employment is one of the categories we use along with capital investment. If a company doesn’t meet them then we have the option to terminate the PILOT and the option to ‘clawback’ the incentives received. Many factors would be reviewed before such a decision is made.”