Mount Vernon and LaPorte Apartments developer tangle over pilot payments

The Mount Vernon Industrial Development Agency has sued a developer that it claims has failed to make payments on a property tax deal for seven years.

The IDA accused Blue Rio LLC, the developer of the LaPorte Apartments in downtown Mount Vernon, of breach of contract, in a complaint filed Dec. 22 in Westchester Supreme Court, for allegedly failing to pay $379,347 as part of a payment in lieu of taxes (pilot) agreement.

But Blue Rio attorney Eric Seltzer says the developer alerted the city this past summer that it had not been billed and offered to immediately pay the bill. Then the city sent bills and “tacked on interest and penalties.”

A pilot agreement exempts a developer from paying a site’s full property taxes for many years, as a financial incentive to build something, but includes a schedule of lesser payments to compensate the local government, county and school district for some of their tax losses.

The LaPorte is a $60 million, 14-story mixed-use structure near the Gramatan Avenue roundabout and Hartley Park. It includes 159 apartments and ground floor retail space.

It was conceived by developer Peter Fine around 2007 as affordable housing that would revitalize a blighted neighborhood and spur redevelopment of the city’s downtown.

Blue Rio’s parent company, Atlantic Development Group in Manhattan, negotiated several pilot agreement for the LaPorte Apartment project in 2014.

The pilot agreement in dispute is for the retail portion of the building, Seltzer said, and Blue Rio had been making payments all along on the residential and parking garage pilot deals.

Semi-annual pilot payments on the retail portion of the project were to begin in January 2016, according to the complaint, but “Blue Rio has failed to make any pilot payments.”

The IDA says it demanded full payment by letter and formal notice in December, and Blue Rio rejected the demands.

Seltzer said the city claimed that the developer knew it had to make payments on the retail pilot deal. But the agreement, he said, requires the city to calculate the payments based on a formula and to bill Blue Rio.

“It’s absurd,” Seltzer said, “to not send a bill and then demand interest.”