Looking at the ESD's 421-a subsitute plan for Gowanus, a possible template for Atlantic Yards/Pacific Park. The devil's in the details, and the timeline might be flexible.

If a Gowanus-style deal is under consideration for Atlantic Yards/Pacific Park, with the Empire State Development--the state authority that oversees/shepherds the project--re-creating the impact of the 421-a tax benefit (as I wrote), what might that mean?

I wrote last month quoting the press release, Governor Hochul Announces New Executive Action on Housing Crisis to Increase Supply, Create Affordable Housing, and Promote Broader Housing Growth, in which Gov Kathy Hochul:

announced a program aimed at targeting specific benefits and housing obligations in line with the former 421-a(16) program for development proposals currently vested in the expired program in the Gowanus neighborhood in Brooklyn. Proposals would respond to a request for applications administered by Empire State Development. For eligible proposals, Empire State Development would purchase the privately owned properties for a nominal fee, lease the property back to the original owners for a long-term lease term that would parallel the 421-a(16) benefit period, and deed the property back to the original owner at the conclusion of the benefit period. In exchange, the property owner would make payments equivalent to the reduced taxes the property would have paid if it were to complete construction prior to the expired 421-a(16) program completion deadline of June 15, 2026.

This would enable the affordable housing promised by the Gowanus rezoning and involve only buildings "currently vested"--they got foundations in the ground before the start deadline--and contain at least 50 housing units.

Note that the payments equivalent to the reduced property taxes would be considered supplemental rent and referred to as a Payment in Lieu of Tax, or PILOT. 

That's different from PILOTs used, for example, to facilitate sports facility financing on nominally publicly-owned land, since the payments in that case go to pay off tax-exempt bonds.

Concerns raised

The Real Deal warned that the program might have limited impact in Gowanus, given time constraints and transaction costs. 

More recently, on 8/16/23, the Commercial Observer reported Gowanus Developers Have Plenty of Questions on 421a Replacement as Deadline Nears, citing "the state’s shortened timeline, meeting minority- and women-owned business hiring provisions [goals of 30%] and being able to raise rents on market-rate units."

In other words, the devil's in the details, and those details--beyond the overall contours of the re-created tax break--are what could make a developer work financially, or not.

But these are likely less of an issue with Atlantic Yards/Pacific Park. Either the program will be acceptable to developer Greenland USA or not, and the state has incentive to make something work.

From the document

Shortly after the Gowanus announcement, the gubernatorially-controlled ESD of course passed the new program. From the memorandum below, the overview:

To spur development, through a Request for Applications (“RFA”), ESD will accept submissions from developers with shovel ready or near-term ready vested rental Affordable New York sites. A development shall be deemed vested under Affordable New York if it has a Commencement Date on or before June 15, 2022. Commencement shall mean, with respect to any multiple dwelling, the date upon which excavation and construction of initial footings and foundations lawfully begins.

The property to be developed must comply with the site’s zoning regulations and all local building and construction codes and other similar local requirements. To implement the Program, the fee title to the property to be developed would be transferred to ESD (for nominal consideration) for the duration of the site’s involvement with the Program, and the property would be leased back to the site’s developer and would be subject to supplemental rent (such supplemental rent referred to as a “Payment in Lieu of Tax” or “PILOT”), which would require payments at a reduced level that would mirror the residential tax exemption that the site would have received under Affordable New York in exchange for affordable housing requirements that are based on Affordable New York’s options, with the addition that the required affordable housing units be permanently affordable. The applicant would also be required to comply with all other requirements and obligations (including, without limitation, labor) of the Affordable New York Program. ESD would obtain the City’s consent to the PILOT arrangements. At the conclusion of the Program, the lease would terminate, title of the property would revert to the tenant or its designee and the site would become subject to the applicable real estate property taxes at that time.

From the memorandum, regarding eligibility:

1. Located in the Special Gowanus Mixed Use District Plan (New York City Zoning Resolution Article VIII, Chapter 9) (see attached Exhibit 1).

2. Vested under Affordable New York by June 15, 2022. A development shall be deemed vested under Affordable New York if it has a Commencement Date on or before June 15, 2022. Commencement Date shall mean, with respect to any eligible multiple dwelling, the date upon which excavation and construction of initial footings and foundations lawfully begins.

3. Provide for at least 50 rental residential units.

4. All units will be registered as rent stabilized that would have been required to be rent stabilized under Affordable New York. Provided further that all affordable units will comply with Affordable New York except that they shall be permanently affordable.

5. At the time of application submission, the proposed plans for the site must comply with the site’s underlying zoning district regulations, applicable local building and construction codes, and all other regulatory requirements for construction.

6. Not receiving any other residential tax exemption/abatement/credit, except tax credits related to the Brownfield Cleanup Program or any other environmental remediation program.

7. Provide evidence of ownership or path to imminent ownership.

8. Comply with ESD’s Minority- and Women-Owned Business Enterprises contracting requirements.

9. Acceptance of ESD’s lease terms and other contracting requirements, including but not limited to indemnification, insurance, administrative fee, cost agreement and responsibility requirements (including financial and organizational capacity, legal authority, integrity, and previous experience evidencing ability to complete the proposed development).

Note that, while a site "must receive a TCO for all residential units within 48 months of ESD transaction closing," that four-year timeline for receiving a Temporary Certificate of Occupancy "may be extended at the discretion of ESD." 

In other words, the timeline is ultimately flexible. That kind of discretion surely would be welcomed by the developers of Atlantic Yards/Pacific Park.

No environmental review is required in connection with these actions, so that would not add delay.