We are approaching the scary time of the year. No, I don’t mean Halloween. Rather, our village board is about to select a real estate developer to redevelop the village-owned Freightway site. Sadly, the village board has structured this process to virtually guarantee the Freightway project will be another train wreck, like the catastrophic Ryan revaluation. Although my repeated warnings to the village board about Ryan’s runaway train went unheeded, I will try to save us from a Freightway debacle.
The existing Freightway site is an eyesore, but it provides needed commuter parking, and generates substantial profits for the village of about $500,000 per year. The Freightway garage, if properly maintained, will last for another 20 years. By then, with the rapid development of driverless cars, our need for commuter parking will be dramatically reduced. There’s absolutely no urgency to do anything at this time.
However, if redeveloped, Freightway will alter the core of our village for the next 100 years. This project should be undertaken only if it makes economic sense to the property owners of Scarsdale, who mostly live in single-family residences (94.2% of all Scarsdale housing units). Therefore, this project, if built, must reduce the pro rata property taxes of those homeowners. If it does not, there’s no point in doing the project.
But the way this board has structured the bidding process, it’s nearly certain the economic outcome will be that Freightway will increase our property taxes to subsidize the new residents who will live there.
Here’s why. This board has limited the bidders to firms that had submitted proposals last year. Only seven firms did so. The board then decided to protect those firms from competition from any other firms. There are many valid reasons firms may not have sent proposals. They may have been tied up on other projects; they may not have known about the project; they may not have formed a real estate development group at that time; or perhaps they may not have had the capital. The bottom line is, it’s simply irresponsible for our village board to protect a limited number of favored bidders on a public project. But it has.
The board rejected one and has only allowed six of the seven developers to submit bids. The board then permitted two of the six to join forces in a single bid, bringing the cohort down to five. Two firms decided not to bid. That has left three firms. The board plans on selecting two finalists.
This cohort of three bidders is too small from which to select an appropriate developer The board’s efforts to protect the initial bidders have foreclosed the village from tapping into the full market of qualified developers, and prevented residents from obtaining the full benefit of competitive bids. This alone warrants re-opening the bidding process.
Second, the board remains highly opaque in its disclosure of information about the project. Virtually all discussions are held behind closed doors in executive session. The three bidders submitted their bids on Sept. 16 and the board has since released no information other than to announce there are three bidders. Who are the three bidders? We know nothing about their proposals. This is a public bid, so why all the secrecy?
What type of housing does each of the bidders propose and, most importantly, what will be the ownership structure of the housing? I expect, based on the seven earlier responses, that all of the proposals will be for rental housing. If that’s the case, this project fails economically from the outset because rental apartments receive incredibly favorable property tax treatment under New York law as compared to single-family residences. Rental apartments pay about one-third of the property tax compared to the fair market values used to assess single-family homes. Thus, if rental apartments are constructed at Freightway, nearly all other Scarsdale residents will be subsidizing the property taxes of the new residents who live in those luxury apartments.
This is grossly unfair to existing Scarsdale residents. New residents use our village and school services and should pay for those services at the same rate as residents who live in single-family residences. We don’t need to develop Freightway to increase our own property taxes. That’s especially true now that the 2017 federal tax law caps the state and local tax (SALT) deductions from the federal income tax at $10,000. The SALT cap has devastated the Scarsdale real estate market over the past two years because of our high property tax burden, which is now largely nondeductible. Our residents cannot afford a misguided project that subsidizes newcomers’ luxury rental apartments on our tax backs.
— Robert Berg lives on Tisdale Road.