B.P.C. condo owners try to prevent steep increases
By Julie Shapiro
Pat Smith knew that living in Battery Park City could get expensive, but when he found out that he would have to pay an extra $300 a month for his condo, he decided enough was enough.
“An extra $300 a month is creating an environment where people will be forced to sell en masse,” said Smith, who lives in Battery Pointe at 300 Rector Pl.
The increase is supposed to come in 2012, when the ground rent for Smith’s building is slated to more than double, sharply increasing the amount of money residents will owe the Battery Park City Authority each year. Ground rents are part of the agreements between the authority and the developers who built Battery Park City. The buildings that rose during the 1980s are facing large rent increases in the next several years, which will get passed on to the residents.
At Battery Pointe, for example, the ground rent will jump from $392,000 in 2011 to $838,000 in 2012, Smith said.
“We accept the fact that we chose to live in a beautiful place, and we chose to pay more,” Smith said, but he added that the planned increase is too steep.
Smith recently met with Jim Cavanaugh, president of the Battery Park City Authority, to negotiate a more gradual increase. Both sides are keeping quiet on the negotiations, but Smith said he presented his case and may bring as many as 11 buildings to the bargaining table with him.
The authority is already meeting with the 182-unit Regatta and 294-unit Liberty View buildings, while discussions with the 163-unit Cove Club are on hold, Cavanaugh said.
To Smith, the ground rent increase is just another burden being heaped on the residents of Battery Park City, who already pay far more per square foot in taxes, ground rent and fees than condo owners in other neighborhoods. For example, Battery Pointe residents pay an average of $14.55 per square foot per year, compared to the Manhattan condo average of $5.88 per square foot per year.
The reason for the high fees is that Battery Park City condo owners don’t pay city property taxes directly, but rather make several other payments that more than compensate. First B.P.C. residents pay PILOTs (payments in lieu of taxes), which the authority collects and turns over to the city. The PILOTs are equal to what residents would pay in property taxes if Battery Park City fell under the city’s purview.
Second, residents pay a civic facilities fee, which the authority uses to maintain the neighborhood’s parks and provide services such as trash pickup to Battery Park City residents. For Battery Pointe, a 154-unit building, that fee comes to about $41 a month for a two-bedroom and $29 a month for a one-bedroom. For condos in most buildings, the average monthly fee is around $33.
Finally, residents pay ground rent, some of which the authority turns over to the city. Ground rents are unique to Battery Park City, part of the city and state’s agreement about how to govern and tax the neighborhood. Battery Park City is legally city land, but it is run by the authority, which is controlled by the state. Back when Battery Park City was built, the city and state decided to rent the land, rather than sell it, to developers who wanted to build residential and commercial buildings. The Battery Park City Authority bid out each parcel of land on a competitive basis, and developers submitted proposals for what they wanted to build and how much they would pay the authority in ground rent over a number of years.
The developers wanted to make a profit on public land, and the authority’s job was to protect the public’s interest, Cavanaugh said. Now that residents want to renegotiate those rents, the authority has to reexamine the question that decided the rents 20 years ago: How do you define the public interest?
“It’s not something you would revise lightly,” Cavanaugh said of the agreed-upon ground rents. The authority’s job is to produce revenue for the city, presumably aiding the interest of all New York City residents. But now the authority is also weighing its responsibility to the residents of Battery Park City, who say the sharp increase in ground rent is too big a burden.
Smith dislikes that the ground rent winds up in the city’s pocket, after the Battery Park City Authority hands it over. The city can spend the money anywhere, with no guarantee that B.P.C. residents will receive the benefits. Mayor Bloomberg and City Comptroller William Thompson agreed in 2005 to direct $130 million of the money toward affordable housing, making good on a promise the government made in 1989. So far, the city Department of Housing Preservation and Development has spent about $75 million and plans to spend the rest in fiscal year 2009, said Seth Donlin, a spokesperson for the department.
“It’s not the Battery Park City Authority’s money it’s our money,” Smith told Community Board 1’s B.P.C. Committee last month. “We would like to bring that money back to Battery Park City.”
The board supported Smith, though members acknowledged the difficulties in revising the laws that govern the authority.
Another of the buildings in negotiations with the authority is the Regatta, at S. End Ave. and W. Thames St. This year, the Regatta is paying $1.8 million in ground rent, said Gene Glazer, president of the condo board. In 2009, the rent is scheduled to jump 25 percent, to $2.3 million, and stay there for 15 years. That means an average increase of about $200 a month for each resident.
That’s a big departure from the past 20 years, when ground rent was increasing at a steady 4 percent per year, Glazer told Downtown Express in an e-mail. He hopes the authority will smooth the increase and phase it in over 15 years.
Cavanaugh would not comment on the negotiations with the Regatta, but he sounded optimistic about reaching an agreement with the buildings that have approached the authority.
“There are things you can do to take some of the sting out of the resets while still adhering to the spirit of the original lease agreements,” Cavanaugh said. He is not sure if the city and state would have to approve changes to the ground rents.
Part of the reason for the steep ground rent increases is that some B.P.C. developers got a bargain on their ground rent relative to today’s market. Developers who launched projects in a poor economic climate initially paid less to rent the land from the authority. But after 20 or 25 years, the lease for nearly every building requires the land to be assessed and then bumps the rent up to a percentage of market value.
“We’re aware of the negative effects of that [increase],” Cavanaugh said. He hopes to structure an agreement that both reduces those negative effects and still protects the broader public interest.
C.B. 1’s Battery Park City Committee helped arrange the meeting between Smith and Cavanaugh. Linda Belfer, chairperson of the committee, told Smith she sympathized with his situation based on her ongoing efforts to keep Gateway Plaza affordable. No matter the obstacles to changing laws and established agreements, Belfer advised Smith not to give up.
“Anything done can be undone if there’s a will to do it,” Belfer said.