Possible Hotel Tax Breaks Criticized

By Stephanie Mariel Petrellese

A public hearing held on May 6th by the Town of Hempstead Industrial Development Agency regarding proposed financial assistance in the acquisition of the Garden City Hotel has come under fire by Nassau County Tax Assessor Harvey Levinson.

The Town of Hempstead Industrial Development Agency is a non-profit public benefit corporation authorized by New York State to promote economic development with financial assistance and tax relief. In this case, the IDA is looking to purchase the hotel and lease or sell it to a developer pursuant to a lease or installment sale agreement. The potential buyer has been reported to be Woodmere-based developer Allen Rosenberg.

Rosenberg is planning to make significant improvements to the hotel, including an upgrade of all rooms, banquet and dining facilities. To assist him in this regard, the IDA is offering abatement of real property taxes on the increased assessment resulting from the improvements, as well as sales tax exemptions and exemptions from the mortgage recording tax if required.

Once the developer enters into a contract, he will continue to pay the assessed level of property taxes on the present building. In 2007-08, the hotel will pay a total of $1.246 million in school, county and town taxes. From June 1, 2007 until May 31, 2008, the hotel will pay a total of $519,199.20 in Village taxes.

During the lease period when the developer is receiving the IDA tax benefits, he will make payments in lieu of taxes, otherwise known as PILOTs. These payments, which will be less than if the developer was paying taxes on the fully assessed value of the improved property, will be distributed to local tax jurisdictions.

Albert Chase, assistant superintendent of business and finance for the Garden City School District, said the district is monitoring the situation but believes it is "problematic for the community" since the hotel, for the period of time the IDA incentives are in effect, would not be subject to regular annual tax increases. Tax increases, he explained, are usually shared proportionally. If the IDA deal is approved, other parts of the community will have to pick up the tab. Since Garden City has very little commercial property, residential homeowners will most likely shoulder the burden.

In a letter published in the Garden City News last week, Levinson presented Frederick Parola, IDA executive director and CEO, with two problems he has with the proposed deal. He claims that the agency made no real effort to notify the public and called upon Parola to schedule another hearing. Levinson also questioned why the IDA should even consider giving tax breaks to a reportedly well-financed operation willing to spend a reported $91 million to purchase the hotel.

In a letter appearing in this week's Letters to the Editor section of the Garden City News, Parola says Rosenberg would have trouble completing the deal without the tax benefits. Parola also refutes Levinson's position that adequate public notice was not given and says time will not allow for a new hearing since a closing date is imminent. He said a notice was "conspicuously published" in Newsday on April 4th and posted on the IDA Web site and in two locations in Town Hall.

In addition, the notice was mailed to all Village trustees and Mayor Peter Bee. The Board has been criticized for not mentioning the hearing at any one of three Board of Trustees meeting held between the time they were notified and the actual hearing. No residents reportedly attended the hearing.

"As far as we know, the Town of Hempstead IDA fully complied with the law in giving public notice of its hearing," Mayor Bee told the Garden City News. "Our village attended the hearing through our Village Administrator and Village Attorney, and our concerns and questions were voiced. We will continue to monitor Hempstead IDA actions on the hotel property, and encourage individual citizens to do the same."

According to a May 2006 report from New York State Comptroller Alan Hevesi focusing on IDAs, the purpose of the agency is to "attract, retain and expand businesses within their jurisdictions through the provision of financial incentives to private entities." There is no requirement that the business be in an economically distressed area. Parola said jobs for construction workers will be created during the hotel improvement phase. Jobs will also be retained as a renovated hotel will likely cause the number of hotel guests to increase.

Levinson told the Garden City News in response to Parola's letter that a postcard should be mailed to every person in the school district to alert them to IDA hearings. He again called upon Parola to hold another hearing. "The whole IDA process needs transparency and some sunshine," he said.

The deal must be approved by a majority of the six-member IDA board at a public meeting. Parola said he will share any comments he receives from the public concerning this issue with the IDA board prior to their vote. He can be reached at (516) 812-3134.

Patrick S. Smalley, the hotel's executive vice president, said it is company policy not to comment on business transactions, but offered the following statement: "Since the death of Myron Nelkin, the Nelkin family patriarch, in July 2007, there has been a great deal of interest in the Garden City Hotel by hoteliers and investors from around the world. We are humbled by the extraordinary interest we have received. It's a reflection of the fine reputation of this historic and iconic property. Today, however, we continue to do what we enjoy most and that is to operate Long Island's leading hotel and create lasting and memorable experiences for our guests. For 130 years, the Garden City Hotel has been the gold standard in hospitality on Long Island and in the New York region and it will continue to be so for many, many years to come regardless of any change in ownership that could occur in the future."