WIRE: Rivercross Surcharge & Maintenance Hike

According to an email report by the Main Street WIRE

:

"DHCR Plans Hike in Rivercross Surcharge

DHCR plans to order an increase in the Rivercross surcharge, levied on residents whose income exceeds the maximum allowed in a building, from 20% to 30%, according to an e-mail from DHCR Commissioner Deborah van Amerongen to Assemblymember Micah Kellner.

Van Amerongen said that DHCR staff called the building's managing agent today with the news. In addition, DHCR has approved an increase in maintenance charges which, if levied in one step, would be $7.45 per room (about 2.5%) per month (or $4.97/room/month if levied in two steps).

With regard to the surcharge increase, van Amerongen wrote, "...the [Rivercross] Board will be informed of our decision sometime today. If they decide to challenge this that is of course their right, we will argue the case in court.""

Quick Updates: Rivercross Votes to Begin Privatization

According to one unofficial report the tenants of the Rivercross building have voted to initiate the privatization process and exit the NYS Mitchell-Lama program. Supposedly the voting results closely mirrored that of the Dec 2007 vote voided by DHCR. In that vote, according to the Dec 15, 2007 Main Street WIRE, approximately 84% of the voting tenants voted Yes to begin the privatization process. Yesterday's vote would authorize the Rivercross Board of Directors to file the appropriate paperwork with the DHCR of their intention to exit Mitchell-Lama.

It is unclear still what percentage of apartments voted in this process or how many apartments could not vote due to the fact that their owners were out of town and not allowed to vote due to the DHCR rule that “first” votes are not allowed to include votes by proxy. I am guessing the official results will be posted by tomorrow and slipped under each tenant’s door.

UPDATE from the Main Street WIRE:

From: Dick Lutz / The Main Street WIRE
To: wire-bulletin@nyc10044.com
Sent: Wednesday, January 30, 2008 9:41 PM
Subject: Rivercross Votes to Pursue Privatization

"Rivercross shareholders voted today to move ahead on privatization in the first of three required votes. With about 80% of the apartments in the building voting, there were 229 yes votes, and 58 no votes. This first vote in the series of three is a restart of the process, implemented after DHCR disqualified, as the first vote, a vote taken in 1996. The second vote is now expected within a couple of months -- probably in March, according to building Treasurer Steve Kaufman. "

Rivercross Tenants Re-Take First Vote Today Towards Privatization

Today from 7:00 am through 8:30 pm this evening, Rivercross Tenants are being asked to take the first step towards Privatization of their cooperative building and to leave the Mitchell-Lama program. This vote is now the official first vote in the process after DHCR cancelled the earlier December 2007 “second” vote claiming the 1996 “first” vote was stale . The Coop Board is actively behind this vote and all signage distributed to tenants strongly urges a positive vote authorizing the Board to notify the DHCR that the building is taking the first steps towards investigating “privatization”.

There are tenants on both sides of the issue whether privatization is the right course for the building at this time. I will admit, as a Rivercross resident shareholder, I can see arguments on both sides and I will also admit but for the Mitchell-Lama status of the building I could not afford to buy into the building at FMV prices.



If the vote is positive the Board will begin the process to put together a business plan (the "black book") with all financial data as to how the conversion would be effected and how the building would be supported once it leaves Mitchell-Lama. A second vote is then required on this plan and this is what the Board states is the "real vote" as that vote would be to officially privatize or not. Tenants are fully aware that this process of even getting to the second vote is not a cheap one and the Board will incur substantial fees before such vote takes place. These costs are another issue of contention between the resident factions in the building.

Major issues to be addressed by the "Black Book" include coverage of the FMV tax equivalency bills which would now be imposed fully by the ESDC as well as the negotiation to extend the ground lease on the building which currently only extends out only 20 years.

ESDC / DHCR: No FMV Tax Bills if Continuation of Mitchell-Lama Status

According to RIOC President Steve Shane, the NYS Division of Housing and Community Renewal and the Empire State Development Corporation have jointly indicated that the Fair Market Value Tax Equivalency Bills issued earlier this Winter (to Westview, Island House, and Rivercross) will be rescinded so long as each building that received them stays within the Mitchell-Lama affordable housing program. Mr. Shane made this announcement informally following his attendance at the Community Board 8 Roosevelt Island Committee meeting held yesterday evening, January 22nd, at the Church of the Good Shepherd.

Once a building exits the Mitchell-Lama program the FMV bills will again be issued. Until that point each building would continue to be responsible for the subsidized tax equivalency bills they have been enjoying all these years. No word when each building is to be formally informed of this development, by either the DHCR or the ESDC, or if they already have been.

It is assumed that the Privatization Committee at Rivercross will continue to push for privatization as they had been prior to the ESDC FMV tax bill debacle claiming that knowing what the FMV tax bills will be gives them one more number for their exit calculations.

Could the City Reclaim or Threaten to Reclaim Roosevelt Island to Force the ESDC to Withdraw FMV Tax Bills?

This afternoon it was announced that New York City has reclaimed South Brother Island and that it will probably be left untouched as a sanctuary for birds and other wildlife that live there. Could New York City reclaim its title to another island in the East River and remove the fears of its residents that Empire State Developement Corporation FMV tax equivalency bills will destroy their homes?

With the issuance of full value bills for tax equivalency payments issued to three of Roosevelt Island’s four Mitchell-Lama properties could New York City reclaim Roosevelt Island citing the destruction of affordable housing as a reason to break its lease of the Island to New York State?

Certainly there are too many other factors involved which would prevent this from happening including the transition of services currently provided by RIOC to the equivalent City agencies.

But if the Island was no longer under State control than perhaps the 2005 City Council Resolution (#388) extending Mitchell-Lama tax benefits 50 years would apply as then the buildings would owe actual taxes and not “payments in lieu of taxes” which seems to be part of the current controversy whether the state intended to give the City Council the ability to affect taxes other than payments intended to go to City coffers.

Eventually when the current State-City lease runs out the fact is the Island will revert to City control and by that time it is expected each Mitchell-Lama property will have successfully exited the program. In the mean time can the City put a little pressure on Albany and remind them that the landlord does not like it when its tenant, NYS, is scarring its subtenants. Can NYC as landlord remind NYS that ultimately it holds jurisdiction over the Island and that to impose the FMV ESDC tax bills in some form violates that jurisdiction when their issuance is contrary to the well being of those residents?

WIRE: 2005 City Council Resolution Extending Exemption DOES NOT Apply to Roosevelt Island Mitchell-Lama Buildings

A review of back issues of the Main Street Wire from 2005 yielded the following articles and texts. Ultimatelty it appears that the WIRE concluded that the City Council resolution extending the tax exemptions did not apply to Roosevelt Island.

If this is true the issuance this week of the tax equivalency bills by the Empire State Development Corporation to Westview, Island House and Rivercross could prove disastrous for the residents who expected that the 50 year additional exemption applied to their buildings.

What I don't understand is why then if the WIRE reported the conclusions reached by the State and City officials back in 2005 was the issuance of the bill to Rivercross something so unexpected as indicated in the flyer posted in Rivercross and distributed to their residents.

As reported in the Main Street Wire on February 19, 2004:

“At press time, attorneys for the City's Department of Housing Preservation and Development (HPD) and the State's Division of Housing and Community Renewal (DHCR) had still reached no conclusion about exactly what the action could mean on Roosevelt Island, which is unique in the State's constellation of Mitchell-Lama developments because the Island,while owned by the City, is leased to the State for development (to 2068),and the PILOT payments - which substitute for "real" taxes - go to the State, not the City. A key question: Did the State Legislature, in amending the PHFL, intend to give the City Council the authority to forgive payments in lieu of taxes (PILOTs) to the State? That issue was raised when a WIRE question was relayed by Lappin to HPD and DHCR. Lappin said HPD and DHCR would have to be consulted. On Thursday, however, a DHCR spokesman said, "That's really a question for the City Council."

While the Island's PILOT payments would normally be passed through to the City, they are not. That's because the Urban Development Corporation (UDC) has substantial "credits" with the City by virtue of its original development of the Island. The PILOT income stops in the State's coffers.”

After several issues of the Main Street Wire offering nothing substantive other than resident commentaries, Dick Lutz in the May 14, 2005 Main Street Wire states that the Resolution has no applicability to the Roosevelt Island Mitchell-Lama buildings:

"It may be a technicality of sorts, but Roosevelt Island buildings will not get the 50-year extension of tax abatements the State Legislature authorized the New York City Council to grant to Mitchell-Lama apartment buildings.

"The [Legislature's] bill itself refers to taxes," said Jessica Lappin, an aide to Council Speaker Gifford Miller, "and the buildings on Roosevelt Island don't technically pay taxes. They look and smell and feel like taxes, but they're not technically taxes."

When the City Council granted the tax-abatement extensions earlier this year, materials accompanying the Council resolution specifically listed Westview, Island House, Rivercross, and Eastwood. It held out the possibility of a Mitchell-Lama future with tax costs remaining low. But that was a mistake.

What "look and smell and feel like taxes" for Roosevelt Island are PILOTs - "payments in lieu of taxes" - made to the State. For those who pay them, they are the functional equivalent of taxes, and for the Island's Mitchell-Lama buildings, they are scheduled to rise significantly over the next couple of years - a provision of the ground leases under which the buildings were placed on land owned by the City, but leased from the City by the State.

The WIRE raised questions about the Island's eligibility for the abatement extensions in February in a report on the City Council's action, and again in April in a commentary written by Tim Johns, an Island House resident who has kept close tabs on the laws, leases, and regulations that apply to the Island's Mitchell-Lama buildings. As a result, State and City lawyers looked into the matter and realized that earlier statements affirming applicability to the Roosevelt Island buildings were incorrect."

Roosevelt Island Mitchell-Lama Buildings Receive FMV Tax Equivalency Bills from State Despite City Resolution Extending Exemptions

This week just prior to its 30th anniversary the Rivercross Building on Roosevelt Island received a tax equivalency bill from the Empire State Development Corporation which could potentially increase monthly costs to each tenant by 45%. In addition to the Rivercross building both the Island House and the Westview buildings received similar tax equivalency bills. Such increases would destroy the affordability of these buildings to many of their tenants especially those on fixed incomes.

According to a flyer posted in its lobby, the Rivercross Board of Directors announced that if the tax bill stands it could force maintenance charges to increase by approximately 45% to cover this added cost to their building. Of the four original Mitchell-Lama buildings Rivercross is the only co-op building.

The ground lease issued to the Rivercross building provided that payments in lieu of real estate taxes would extend through 2007 the thirtieth anniversary of the issuance of the building’s certificate of occupancy. The ESDC is the successor in interest to the NYS Urban Development Corporation.

The tax bill received by Rivercross this week stated that the 30 year period had ended and that effective September 15, 2007, the buildings tax equivalency payments were increased to approximately $3.6 million per year.

The New York City Council in 2005 had passed Resolution 388-A granting real property tax exemptions for an additional 50 year period to private housing companies, including Mitchell-Lama buildings. According to the Rivercross flyer the list of applicable housing companies attached to the resolution included Rivercross. The resolution linked to here does not include that list. There had been some concern whether the City resolution applied to the Roosevelt Island buildings but in each building’s case local politician assured the buildings that as long as they stayed in the Mitchell-Lama program the resolution would be applicable to them and protect their tax status.

As reported in the most recent issue of the Main Street Wire, the Rivercross building announced its intent to formally notify the DHCR that it intended to leave the Mitchell-Lama program but no such filings have been made to date. As of today Rivercross still exists as a Mitchell-Lama property.