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The Costco Development Can Come Back to Bite Ya!

I am not against the COSTCO, but people should have a realistic view. If they expect some serious Tax relief, and that is the sole reason for their support, you may be disappointed.

The Costco proposal is getting a lot of buzz on this site. The developer and his attorney bandy about large sums of taxes and a lot of jobs flowing into community. This is what a developer, and if he has a good attorney does. Several years ago someone did an analysis of what the net amount of tax revenue a project actually returns to the community. It seems the county and the state takes their cut, in fact the state takes a double cut, I wish I still had a copy, but it was a very modest sum.

I am not against the Costco, but people should have a realistic view. If they expect some serious tax relief, and that is the sole reason for their support, you may be disappointed. I am sure Costco does not pay higher wages than the other big retailers, so enriching the population of the community is probably not going to happen.  

I would rather see Costco than a high density housing complex on the site, which can really inflate a school budget.

One of the big dangers of large developments is that many times their property tax assessments are too high. In the beginning they will accept almost any number the town calculates, they have no downside in doing this as you will see in a moment. The parties representing a project want a quick approval, making a fuss over taxes, kind of takes away one of their value propositions. They have time, plenty of time, so they wait.

In time they usually hire a specialized law firm and file a tax certiorari. Expert commercial appraisers submit their opinion on behalf of the owner and a Judge makes a decision. The decision is usually against the municipality and a figure is set. Here is one example reported here today:  

The Riverwoods condominium development is set to get almost $1.4 million in property tax refunds, under the terms of a settlement approved by the New Castle Town Board.

The agreement, which was unanimously approved by the board at its Tuesday meeting, includes a total refund of $1,392,494.81.

Looking at each tax collecting entity's share of the payout, the agreement calls for the town giving a refund of $219,996.47 for 2009, 2010 and 2011 property taxes. Westchester County will refund $237,493.28 for that time period. The Chappaqua school district will have the largest share, at $935,005.06. The 2011 school tax refund will be accomplished through a tax cut for the 2012-13 school year, rather than a straight payment.”

As you can see the school district takes the biggest hit in this proceeding. Chappaqua maybe wealthier than Yorktown, but I am sure it hurts. Yorktown has had its share if large hits over the years.

Does this mean I feel the development should not move forward? No, I would suggest that the town bring in the same level of appraisers used in these actions. Appraising a large commercial development is far more complex than single family homes. In this way, an unpleasant surprise may be avoided.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Francis T McVetty July 27, 2012 at 06:54 PM
Bob, all those tax reversals, tell me someone in government was NOT doing their job, as usual. How does a town access values. What person does that? I don't expect a tax windfall from Costco. But I do expect that they will add to the tax rolls and even employee some of our residents. That is 100% better than the property is now doing, isn't it?
Bob Rohr July 27, 2012 at 11:53 PM
Frank, it is not about someone not doing their job. This is a specialized field and the local people do not do a lot of it. Your General Physician will sometimes ask you to see a specialist, because they simply don't have as much experience as a specialist does. I was just suggesting the Town hire a specialist in commercial property appraisal to consult with our local folks and guide them through the twists and turns. No blame, just good business.
Bill July 28, 2012 at 01:00 AM
Costco DOES pay higher salaries than other retailers. It's been posted in the other threads here and you can find info online. It's not a huge amount of money but on average, cashiers get $15/hour. And they have benefits. I'm not sure that comparing this to the housing complex in Chappaqua is reasonable. Housing prices have taken a dive and presumably the value has gone down quite a bit. And it's much larger than this, which despite all the comments is not really all that large. Is it appropriate for the town to get some agreement not to file a tax certiorari for some number of years as part of the approval process? I don't know, but it could be something to consider.
Bob Rohr July 28, 2012 at 02:00 AM
Bill. I really was not talking about what COSTCO pays. The story of the Complex in Chappaqua is a perfect example of what happens across America every day. This has nothing to do with housing prices, your taxes don't go up and down with the market. I was trying to say is that large projects have a tendency to file these tax certioraris as a part of doing business. You do not want them to wait years since the amount rises. The IBM Research Center did it. Indian Point did it and almost wiped out Buchannan. All I advised is that the Town get some experts in here to avoid the problem if possible. Properly appraising commercial property is very complex.
Bill July 28, 2012 at 02:04 AM
But tax certioraris are based on a reduced value compared to what the property is assessed at and being taxed on, aren't they? No different than when individual taxpayers filed to have their assessment lowered. Or am I wrong?
Bob Rohr July 28, 2012 at 02:17 AM
Not really, but homeowners can do that also. That would be a few thousand bucks. What we are talking about is a claim they have been overcharged and they want a refund for the years they paid too much. As you can see from the recent case in Chappaqua it can run into millions. You have a problem with bringing in experts to protect the Town?
Bill July 28, 2012 at 02:33 AM
I agree that if there is some way to prevent that from happening in the future, it is worth doing. The question is, what can you really do, short of trying to get an agreement that they won't do it for some period of time?
Bob Rohr July 28, 2012 at 02:59 AM
What you do Bill is make sure they can't make a case since everything is done correctly. There is no agreement. If they find they have no case you have no problem. Anybody can sue anybody, but suing does not mean you will win.
Robert Surabian July 28, 2012 at 01:00 PM
Bob, you indeed WERE talking about what Costco pays. In the copy of the blog I received this is a quote: " I am sure Costco does not pay higher wages than the other big retailers, so enriching the population of the community is probably not going to happen." Are you still sure? Once one of your arguments is dismissed yes it is very easy to say this is not what I was talking about. Such tactics might work on a middle school debating team but not here in the rarefied air of the Patch.
Robert Surabian July 28, 2012 at 01:53 PM
For those who do not want Costco, what would you prefer there? To keep it empty, or perhaps to populate it with a nice locally run gift shoppe selling candles, picture frames - all very nicely scented with strawberry incense as soon as you walk in, how about a much needed complex of banks ( In fact as I write this I am drawing up a proposal for the town board for a variance to have a local bank branch in my backyard. ) or even better than more banks how about a pizza parlor, a nail salon or maybe a copy store, a bar whoops I mean a Winery? I think Costco supporters just want a place to shop, sick and tired of living in this shopping backwater. For many their only recreation aside form TV is shopping. As for taxes I contend, all Latin phraseology aside, you could have the top 100 Forbes companies with a serious presence here in Y’town with no effect whatsoever on taxes.
Bob Rohr July 28, 2012 at 02:21 PM
Oh Robert. You have some mistaken belief I am against COSTCO, I am not, you did not read down enough. When all the shouting is over, you and I will probably be shopping in the same aisle at some point. Now please read on and I will explain. I was raised around Politics, one of my best friends Father's was a County Judge and very big in the Republican Party in the State. When my friend passed away suddenly the Judge took his closest friends under his wing. He taught us how things work. Keep reading please. I am was simply informing people not to have unrealistic expectations about certain things. COSTCO will file a Tax grievance at some point down the road, they all do. This is a regular business practice and it will happen. I was simply advising the Town to bring in some outside experts to help our local people on this particular project to be sure when it does happen, the impact is minimal. When your School District has to fork over almost $1M, your will taxes will have to go up and you will be angry, That Robert is all I was saying.
Robert Surabian July 28, 2012 at 02:38 PM
Bob, I do not suffer from ADD so enough with your poorly disguised and executed condescension and was able to read all your article at first attempt. While getting to the end I came across problems: COSTCO is one of the more enlightened employers on the playing field, nuff said. And as far as your tax concerns I for one believe that it is a Universal Law that they always go up and when they do I for one am not angry. I leave that to my betters. In other words, I don't care. And as far as bumping into each other in a COSTCO aisle - not very likely.
Bob Rohr July 28, 2012 at 06:32 PM
I actually did some research and COSTCO is a fairly ethical employer. They do pay higher than average for the industry and offer decent benefits. This employee centered approach seems to bother Wall Street, but that indicates they are actually doing the right thing.
Evan Bray July 29, 2012 at 12:44 AM
Bob, I think that was a well written post. I like that it pointed out a fact that hasn't received much attention. The developer's team will exaggerate the tax benefits, which are nominal in reality. You're just pointing out that it'd be smart for Yorktown to make sure the development (if approved) is assessed at a level that will not leave the door open for a tax cert later that would leave taxpayers footing a refund to Costco. I appreciate your apolitical angle and think it's a great suggestion. I believe it's the fiscally responsible thing to do. Keep up the good work.
Bob Rohr July 29, 2012 at 01:35 AM
Evan, thanks for the kind words. A developer does just that, they develop. A developer sees an open piece of land and they see a business opportunity. An open space advocate looks at the same piece of land and they see a different type of opportunity. Both of them are right from different points of view. The developer hires the best local Lawyer he can find to work their way through the process, and he is bound to to do the best job for their client. The Sales Tax numbers are correct, however people believe the Town gets a bag of money every week, They are simply unaware the Sate and County get a sizable piece of the action. The Town and School District will see a fraction of the gross taxes collected. This is fine as long as people understand that. The Town Officials are charged with protecting the Town as best they can, I made a simple suggestion based on having Tax Certs put in front of me when we had barely enough money to keep the District afloat. Politics has nothing to do with it. Running a Public entity is running a business.
Adam M July 30, 2012 at 11:33 AM
How do we know this property hasn't been thoroughly assessed already?? To my understanding I also know Costco will be providing our school system with a mass amount of money, which I'm sure no one can argue with the fact that it's much needed. It doesn't matter what store is placed in this location- the state and county will get a "sizable piece of the action" regardless.
Bob Rohr July 30, 2012 at 01:47 PM
Well Adam, that would be hard since it has not been built yet. I am sure they are paying taxes now on the site as it exists. When the property is finished they will assess it. The School District will be receiving some of the Tax money and i know they do need it. Some people in the UTY did the numbers on similar project some years ago. It was really shocking how much the County and State take, and how little comes back to the Town and School District. As I said in the second paragraph of what I originally wrote. I am not against COSTCO. I just would like people not to have unrealistic expectations. If something else commercial was built there we run the same risk of having a Tax Cert. It is not unique to COSTCO or Yorktown.
Bill July 30, 2012 at 02:21 PM
I think you're referring to sales tax not property tax when you talk about the state and county taking most of it. That is certainly true. The town and school districts get very little of the sales tax revenue. However as I'm sure you know from looking at your property tax bill (which is what's being discussed here, since sales tax is simply based on their sales and cannot be disputed), the largest piece goes to the school district. Sadly the next largest piece seems to go to the county and then the town. It's possible that commercial real estate is taxed differently, but I'd be somewhat surprised if it is. I don't think any of your property tax bill goes to the state. Perhaps the UTY people were confused?
Bob Rohr July 30, 2012 at 04:47 PM
Bill, they were talking about Sales Tax, which is always a big number with a big outfit like COSTCO. It is the property Tax which can become a bear trap. As I pointed out up in the beginning. Yes commercial property is taxed differenly, it can also be more complex which is why it is challenged more often. If you read the aedvertisements for some of the law firms that challengie taxes as their main practice, for some clients they do ia challenges yearly. That is why I suggested the Town engage a experts to assitist out local people. it is preventavie medicine.
Bill July 31, 2012 at 01:38 AM
So, since there are comanies that specialize in filing certioraris, are there also companies that specialize in how to protect yourself from this? Is there any evidence that you actually can?
Bob Rohr July 31, 2012 at 03:59 PM
Bill, I am not sure. I do know this if you don't look you will never find them. There are Appraisers that specialize in commercial development. You sound either timid or have another agenda.
Bill July 31, 2012 at 05:05 PM
Definitely do not have another agenda. I am just wondering if this is something that can actually be done. Is the solution to appraise it so low from the start that they can't come back and argue that the assessment is too high? I don't know the answer.
Bob Rohr July 31, 2012 at 06:50 PM
Bill, I will say this again. The idea is to appraise it properly from the start so that it does not come back to bite you. Not low not high, but as close to right as you can using industry standards. This is a speciaty.

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