Ulster County Legislature to Question Industrial Development Agency

The petty thief is imprisoned but the big thief becomes a feudal lord —  Zhuangzi

March 1, 2021

[Ed. Note: This story was updated March 24 to correct an oversight about census tract numbers.]

Kingston, NY – Better late than never, the Ulster County Legislature is set to question Ulster County’s Industrial Development Agency about its January approval of a gigantic tax break for developers of the proposed Kingstonian mixed use luxury housing project.

A Potemkin show of oversight, or finally, a little courage?

The Legislature, which itself voted for the giveaway on Nov. 17, could ask just enough questions to whitewash irregularities surrounding the tax break. This would come as no surprise: to date, local government has treated the approval process as a series of tactical skirmishes designed to deter tax break opponents and fool supporters into believing fairy tales about the project’s benefits.

But the meeting, scheduled for Tuesday 6 p.m., could also provide an opening for legislators to probe the many improprieties clouding the $28 million payment-in-lieu-of-taxes (PILOT) that the IDA approved on Jan. 20.

Legislators have indicated they wish to question the IDA about its hasty change of housing policy.

Background: The Kingstonian is a proposed $55 million market rate multi-use housing project consisting of 143 apartments, boutique hotel, garage and retail space to be developed by Brad Jordan and Joseph Bonura and their unidentified investors, who are rumored to include elected officials and perhaps a Wall Street investor. The project is funded on the public dime to the tune of 60.15% through New York State grants and a property tax break that will deprive Kingston, Ulster County, and the Kingston School District of $28 million. Upon sale, the investors will pay no capital gains tax because the project lies within an Opportunity Zone and they will pocket at least $100 million if they hold for ten years — not bad, considering their cash investment is $6 million. Fueled by false narratives and grossly overblown economic projections, this vote is one more reason for Americans to lose faith in their institutions.

The developers’ application is littered with lies and contradictions in addition to buzzwords designed to satisfy the IDA statute’s requirements such as reducing unemployment and fighting economic deterioration. Please see §859(a)(4) and §859(a)(4)(i) pertaining to standards of honesty on the application. Here are some questions the legislators might ask if they are inclined to break with local government’s tradition of acting as cheerleaders in this long-running spectacle of grift.

Wrong Census Tract

The developers wrote on p.9 of their application that the project falls within Census Tract 9520. It doesn’t. The correct Census Tract is 9524. An email was sent to Census dot org asking whether the tract numbers were changed recently, but there was no reply. According to this and this map, the Census Tract that contains Brad Jordan’s property is and has been 9524 since 2010.

Why does this matter, and why would the developers lie? Under certain conditions, PILOTs require that the areas be labeled economically distressed, and that means high unemployment and poverty rates. For years 2014-2019, Census Tract 9520 had rates higher than 20%, while Census Tract 9524 did not. Since then, Census Tract 9524, which contains much of the Uptown Stockade District, has been gentrifying at a dizzying pace.

The IDA knew about the mislabeled Census Tract, because someone corrected the number in the resolution approving the PILOT.

However, IDA law allows certain projects to proceed if they take place in a “distressed” area, and that includes census tracts that themselves may be flourishing but that are contiguous to census tracts with high poverty rates. Data from the 2020 census will be released in April 2021. The question then expands to whether the use of contiguous census tracts is a way to game the law in violation of its intent.

NAICS number

The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments. On p.3 of  the application, the developers listed the Kingstonian as 812930, which stands for garages.

As a reminder, the developers originally said the rents were going to pay for the costs of the garage. Then, they said they needed the PILOT because of the garage. Then, beginning in August, in co-ordination with a change in IDA policy to favor a third narrative, they tried to argue that the Kingstonian is a commercial project under the definition allowed by IDA law. But a garage does not satisfy those conditions.

So which is it? A garage, or a commercial project? Or anything you can think of to justify sucking up an extra $28 million off the backs of Kingston taxpayers and schoolchildren?

True value of subsidies

According to the application, public funds will subsidize 60.15% of the Kingstonian, or about $33 million of the $55 million cost. That alone ought to shock the Legislature, but it’s not even close to the real number. The developers failed to disclose the capital gains tax exemption offered by Opportunity Zone status. If the developers sell in ten years, $12 million needs to be tacked on, for a total of $45 million in subsidies, or 82% of the $55 million cost. If they hold for 20 years, the entire project will have been built courtesy of the taxpayer, while the entire profit will go into the hands of the investors. A perfect example of socialization of loss, privatization of profit.

Many job projections

The developers wrote on p.9 of their latest application, dated January 2021, that the project would create 153 permanent direct and indirect jobs. But on p.13 of the same application, the developers project 40 permanent jobs. And on Sept. 9, the developers told the IDA the project itself would be employing 14 people, of whom 13 would be paid about $15 an hour. Please see this clip where lawmakers and experts discuss how job creation projections fail to materialize.

Recent noteworthy developments

Today, former French President Nicolas Sarkozy received a prison sentence for corruption. To the south of Kingston, the Orange County IDA is under investigation. In Albany, the governor is being called on to resign. Also in Albany, state lawmakers have proposed legislation to bring Opportunity Zones to heel.

In his masterpiece Capital in the Twenty First Century, economist Thomas Piketty wrote that extreme inequality can be sustained politically only through an “apparatus of justification.” Just as the housing/financial crisis of 2007-2009 was the nation’s largest heist in a century, so is the Kingstonian PILOT to our small city. The tide is turning against corruption and boondoggles, and we can only hope it is not too late in Kingston.

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