The developer of the Sandford Terrace subsidized apartments for the elderly in Mount Vernon has been granted a new tax abatement deal to fix a financial crunch.
Mountco Construction and Development Corp. believed it had a 30-year tax abatement deal, company officials told the Mount Vernon Industrial Development Agency, until 2017, when after 15 years the building was put back on the tax roll.
Mountco’s finances had been based on a 30-year PILOT (payment in lieu of taxes) deal, and without the continuing tax break, officials told the IDA, the project was not financially feasible.
The IDA approved a new 15-year PILOT on April 23.
“The judgment call was to work within the renewal PILOT,” Mayor Richard Thomas, chairman of the IDA board, said after the meeting, “so that housing for our seniors would be preserved.”
Sandford Terrace, a 7-story, 55-unit apartment building at the corner of South Fifth Avenue and Sandford Boulevard, opened in 2002.
The tenants must be at least 55 years old, according to an agreement with the state Homes and Community Renewal agency, and their incomes must be at or below 50 percent of the area median income.
Mountco built Sandford Terrace for $8.5 million. The state agency gave the developer federal income tax credits and a $1.8 million, 30-year loan at 1 percent interest.
The IDA took control of the property and leased it back to the developer, and it granted a 15-year, $146,053 PILOT agreement.
Sandford Terrace LLC was paying more than $10,000 a year near the end of the PILOT term. Then in 2017, the property went back on the tax rolls at about $90,000.
Joel B. Mounty, president of Mountco and sole owner of the Sandford project, told the IDA in October that a new PILOT deal was vital because the project’s cash flow was running at a negative $100,000 a year.
The developer also could not increase rents, because of constraints in its state low-income housing financing.
The full tax bill, Mountco official John Madeo said at an April 10 public hearing, “put quite a strain on the economics of the project.”
Before Sandford Terrace was built, he said, the land was vacant and property taxes were about $5,000 a year. Under the pilot agreement, payments began at $7,354 and escalated to $10,392.
Without a new deal, he said, the developer might have to sell or give away the building to a nonprofit organization. The nonprofit could then apply for a total property tax exemption.
The new PILOT will begin in 2020 at $29,016, increase by 2.5 percent a year, and culminate in 2034 at $43,898.
“People understand that senior housing is an important asset,” Thomas said after the meeting. “And this is one of those buildings that have become a part of the fabric or our community.”
The new deal is not Mountco’s first do-over in Mount Vernon. In 2015, according to a letter sent to Mounty by a former IDA executive director, Sandford Terrace had not paid the annual rents. The developer was in arrears, including 18 percent interest, by $292,373.
The debt actually applied to Mountco’s Grace Plaza on South Fifth Avenue and to Grace Towers on East Third Street, a former IDA spokeswoman told the Business Journal last year, and not to Sandford Terrace.
In September, the IDA approved a resolution to settle the debt with the Mountco affiliates for $221,993, “to avoid litigation and to bring the rent payments current.”