Friday, November 01, 2013

Doubly bizarre: Forest City Ratner aims to lower tax assessments on Block 1129 of Atlantic Yards site, but assessments are already way lower than cost and future value of land

This is bizarre on more than one level. First, it's total chutzpah that--as DNAinfo reported yesterday, to wide pick-up--Forest City Ratner is trying to lower the assessment of its properties on Block 1129, the southeast block of the Atlantic Yards project site, in anticipation of payments in lieu of taxes (PILOTs) perhaps a decade away, once the parking lot is covered with four towers.

Second, as has not been reported, the current assessed values are already bizarrely low, so making them lower flies in the face of 1) the amount of money Forest City Ratner paid for the property and 2) value--on a per square foot basis--of the land.

DNAinfo's James Fanelli reported, in Atlantic Yards Builder Sues City in Attempt to Cut 'Tax' Payments:
The Finance Department put the block’s market value at $11.2 million for its current fiscal year, which began July 1. But FCR says in a lawsuit filed in Brooklyn Supreme Court that it’s only worth about $1.6 million.

FCR wants the court to lower the Tax Commissioner’s and the Finance Department’s final determination.
The city determines the market value of land as part of its convoluted formula for calculating property taxes. The city collects a property tax of about 10.3 percent of a land’s assessment. An assessment is 45 percent of the determined market value of the land.
Payments coming later

But wait--isn't the land tax-exempt? DNAinfo reports:
Since the state owns the Atlantic Yards [site], the land is exempt from property taxes. As a result, FCR currently makes payments in lieu of taxes, or PILOTs, to the city that are also a nominal amount. 
However, the ESDC said that, under the deal, FCR will begin paying property taxes to the city in 12 years or when it has finished developing the block — whichever comes first.
Even though it doesn't currently collect property taxes on the block, the Finance Department annually determines how much the land is worth and calculates a potential property tax. This fiscal year the property tax for the block would be nearly $700,000, according to city records.
If the court agrees to lower the city's appraisal, then the FCR will pay less in property taxes when the levy kicks in, according to the ESDC.
DNAinfo notes that neither the ESDC nor Forest City provided accurate information before publication, but later updated the explanation.

Looking more closely: sale

Let's take a look at the largest piece of property, Lot 25, the former Ward Bakery.

The city values the land at $1.5 million, while Forest City thinks it's worth a little more than $500,000.

For Lot 25, as well as a smaller lot nearby, Forest City paid $45 million in 2006, as the document at bottom indicates. (A 2005 Brooklyn Paper article reported $44 million.)

Looking more closely: development rights

However, the development rights for the site are vastly greater than that. Consider I estimated the developable value of Pacific Street between Carlton and Vanderbilt avenues--perhaps vaguely commensurate to lot 25--at more than $46 million.

There's a large margin of error there, and indeed it is apparently not city practice to value property at the value of the development rights.

Still, values like $1.5 million and $500,000 associated with the old Ward Bakery site are completely unrealistic.

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