Proposal to expand tax breaks for new housing in Onondaga County receives pushback

Syracuse, N.Y. — A proposal to expand tax breaks for new rental housing developments in Onondaga County has run into opposition from the county’s biggest town — and a government watchdog says the plan is not legal.

The county Industrial Development Agency has scheduled a special meeting for Thursday to consider changing its tax exemption policy to allow the granting of property tax exemptions for market rate and low-income multi-unit housing, and senior “lifestyle” communities.

Currently, the agency’s policy says only that it will consider tax breaks for apartment projects “based on the need in our community for affordable housing,” but that has not stopped it from approving exemptions in the past for market-rate housing.

The proposed exemptions would cut the amount of property taxes paid by the developers of new multifamily housing to schools, towns, villages and the county. It would leave other property taxpayers to cover the breaks.

The proposed change is being driven by County Executive Ryan McMahon, who has called for more housing construction to get ready for the thousands of people who are expected to come to the county to work at Micron Technology Inc.’s planned semiconductor plant in Clay or one of the multiple supply chain companies it would attract.

Micron has said the project would create up to 9,000 jobs over the next 20 years and more than 40,000 additional jobs at associated companies drawn to the area.

But McMahon said that without tax incentives, developers will be reluctant to make major investments to build housing until Micron’s plant is up and running in a couple of years.

“When you look at workforce housing, senior housing, mixed-use housing, the stuff that’s going to last generations, really significant architectural development, you’re going to have to incentivize it,” he said. “If we want to get ourselves prepared for the housing piece, you need to be more aggressive.”

He acknowledged the tax breaks may not be needed once Micron opens its first memory chip fabrication facility.

“Will we need to do this in five years?” he said. “Maybe not, because then you have the market drivers already here. But people aren’t here yet to go sign up for leases.”

The county agency’s governance committee discussed the proposed changes at a meeting Jan. 18. An agenda posted on the agency’s website listed “possible changes” to the agency’s uniform tax exemption policy for discussion, but a copy of those changes was not included in the meeting materials posted on the site.

The agency sent a copy of the 17-page document (the changes start on Page 10) to local taxing jurisdictions for comment following the governance committee meeting. But as of Friday, the proposed changes still had not been posted on the agency’s website for the public to see.

Officials in Clay, the county’s most populous town and the municipality where Micron plans to build its giant plant, are opposing the change.

Town Supervisor Damian Ulatowski said the Clay Town Board supports the construction of new housing to meet current needs and the expected rise in the town’s population after Micron’s arrival.

However, he said the town strongly opposes giving property tax exemptions to housing developments because they reduce the revenue needed to pay for the increase in infrastructure and school costs typically associated with new housing.

“Our position is tax incentives for industrial and commercial projects, which create employment, can be justified, but we don’t support it for housing,” he said.

If there is enough demand for new housing units, developers will build them with or without tax breaks, he said.

Clay recently commissioned a land use study to recommend the best types of new housing to encourage builders to construct and the best places to put it. The study is expected to be completed in April.

Some of the county’s other big towns are not backing the proposed tax breaks, either.

The Cicero Town Board held a special meeting last Wednesday at which members expressed similar concerns to those of Clay officials.

The DeWitt Town Board is expected to discuss the proposal tonight. But DeWitt Deputy Town Supervisor Kerry Mannion isn’t waiting. He sent a letter to the industrial development agency Thursday opposing full property tax exemptions, even temporary ones, for housing developments.

Mannion told syracuse.com he does not object to less-generous tax deals — starting at no more than, say, 75% — or housing projects.

“I don’t think it ever makes sense to give a 100% exemption for residential,” he said. “If a company is going to create a thousand jobs, OK, maybe. But I don’t think 100% is necessary for residential.”

The proposed move by the county agency is part of a trend among industrial development agencies around the state to grant subsidies to housing developments. IDAs generally give property tax breaks to job-creating projects.

But John Kaehny, executive director of Reinvent Albany, a government watchdog group, said it is not only bad policy for industrial development agencies to give out tax exemptions for housing, it’s flat-out illegal.

Kaehny said the state law that created industrial development agencies in 1969 grants them no authority to subsidize housing, only industrial and commercial developments. And the state constitution specifically forbids public authorities from granting subsidies to housing projects other than those exclusively for low-income tenants, he said.

“They shouldn’t be doing it,” he said. “They act like it’s free money, but it’s not — because these projects increase costs for infrastructure and schools. And what one doesn’t pay, everyone else has to pay.”

He said there are plenty of federal, state and local government agencies that are authorized to support low-income housing with tax credits. There is no need for industrial development agencies to do so as well, he said.

Nevertheless, many industrial development agencies — supported by political leaders eager to have their pictures taken at a ribbon-cutting ceremonies — have long granted tax deals for housing projects, knowing it is often too expensive for opponents to launch long court challenges to stop the deals, he said.

The trend among industrial development agencies has been growing lately as Gov. Kathy Hochul has frequently called for local governments to make it easier for developers to build housing. Hochul has not suggested that industrial development agencies provide tax exemptions for housing, but Kaehny said the agencies view her calls as a green light.

On Friday, Reinvent Albany issued a memo opposing legislation proposed by state Sen. Monica Martinez, D-Brentwood, to change state law to allow industrial development agencies to give tax breaks to promote the construction of new housing.

Besides being unconstitutional, the proposed legislation is a tacit admission that state law does not now allow the agencies to subsidize housing, Kaehny said. Representatives from Martinez’s office did not immediately respond to a request for comment Friday.

Under the proposed changes, the agency could grant differing levels of exemptions on a case-by-case basis to the developers of new multi-unit housing:

• Market rate housing — apartments priced at the current rental rate for the area — could receive three-year deals, with a 75% property tax exemption in the first year, a 50% exemption the second year and a 25% exemption the third year.
• “Workforce” housing — apartment developments with at least 10-15% of their units affordable for tenants making 80% of the area’s household average median income — could receive 10- to 12-year deals with exemptions starting at 100% and then declining after one to three years.
• Senior “lifestyle” communities — described as housing for individuals 55 and older that contain amenities such as pools, community rooms, fitness centers and pickleball courts — would be eligible for 12-year exemptions starting at 100% for the first three years and declining after that. There would be no income limits.

The agency has granted tax breaks to apartment projects in the recent past.

In 2015, it approved $600,000 in property, sales and mortgage recording tax exemptions for an expansion of a high-end apartment home complex in Lysander’s Radisson community.

In 2020, it granted nearly $1.6 million in property, sales and mortgage tax breaks for an apartment and retail complex now under construction on the former site of Le Moyne Manor in Salina.

In 2021, it gave $2.4 million in the same type of tax exemptions for a project that will turn the old Will & Baumer candle factory in Salina into apartments.

And last summer, it handed out $1.5 million in sales and mortgage tax breaks for a 96-unit apartment project in Clay that also includes commercial space.

In June last year, the developers of a proposed upscale apartment complex in Radisson withdrew their request for $3 million in tax breaks after facing strong public opposition.

Agency Chairman Pat Hogan, who is also a Syracuse common councilor, said he was not aware of any legal restrictions on industrial development agencies’ ability to grant tax breaks for housing, noting that the Syracuse Industrial Development Agency has routinely approved them for downtown apartment projects for many years. He said both agencies’ attorneys review the tax deals before they are approved.

Hogan said he supports the proposed policy change because it spells out more clearly the kinds of housing the agency wants to incentivize in light of Micron’s expected impact on the county.

“We’re going to need all sorts of…