New money, new downtown

The Sagamore on East is a luxury condominium building at the corner of East Avenue and Scio Street. PHOTO BY MATT DETURCK

DEVELOPMENT | BY CHRISTINE CARRIE FIEN

There are those who believe that the American suburbs are a post World War II experiment that will eventually and inevitably run their course. That end is being hastened, they say, by a convergence of factors, including economic pressures linked to fuel prices, and the renewed appeal of an urban lifestyle.

But we’re not there yet.

Mayor Tom Richards says a program that gives a substantial tax break to people who buy a home in downtown Rochester will help stabilize and revitalize the center city. The program delays full taxation on the property for nine years, with homeowners getting a 90 percent property tax abatement the first year. The program applies to both new construction and renovated properties.

“The reason the city does that is it wants to encourage single-family ownership downtown, which helps to build a much more stable base than all apartments,” Richards says. “We want a mix of people downtown.”

The abatement program, which was set to expire this year, just received a five-year extension from City Council.

Critics of the abatement say it’s a giveaway to the wealthy. Downtown condos cost anywhere from about $130,000 to approximately $800,000 or $900,000 for the best of the best, says Heidi Zimmer-Meyer, executive director of the Rochester Downtown Development Corporation. If you’re living in a $500,000 condo, you can afford your taxes, critics say.

Zimmer-Meyer includes part of Corn Hill, High Falls, and the Upper East End-lower Monroe area in her definition of downtown. The real-estate market is “self identifying” those areas as downtown property, she says. Traditionally, downtown has been defined as everything within the Inner Loop.

There are a total of about 160 units of owner occupancy downtown, which is only a tiny fraction of that housing market, Zimmer-Meyer says.

There are older owner-occupied units in the Corn Hill and Grove Place neighborhoods. There’s the very high end Sagamore on East, and mixed-range Capron Lofts on South Avenue, west of Geva Theatre. Across from Hochstein on West Main is the North Plymouth Terrace project, with units starting at $225,000. Midtown Tower has been talked about as a mix of rental and condos, and Sibley Tower might be a good place for more reasonably priced units, Zimmer-Meyer says.

There are also “homestead properties” — three units or less — between Alexander Street and the Inner Loop, she says, adding that the RDDC’s inventory may not include all of the available units downtown.

Zimmer-Meyer says the units don’t stay on the market for long.

“Stop and think about that: $500,000. You have got to be kidding me,” she says. “That’s ridiculous. But they’re sold. They seem to be snapped up immediately or very close to it. We sort of suspend our normal market assessment when we look at downtown condos.”

Zimmer-Meyer says there’s pent-up demand for owner-occupancy units. Developers are cautious, she says, because building downtown is expensive and complicated.

“You’ve got more contamination, you’ve got more complicated buildings and structures, the sites are more difficult to do construction on, equipment is more costly,” Zimmer-Meyer says. “This is not an easy environment.”

The tax abatement provides just enough incentive to overcome the challenges of building downtown, she says.

But representatives of some neighborhood groups say the program is inherently unfair. If you look at it in terms of the tax levy — the total amount the city needs to collect in taxes — the well-off are getting this break on the backs of the not-as-fortunate, say some neighborhood leaders.

“They’re right,” says City Council member Adam McFadden. “But that doesn’t mean that we haven’t subsidized housing for poor people, because we have.”

McFadden questioned the abatement program when it came to Council for renewal. He said that in the South District — the district he represents — people are tired of hearing about programs that help downtown. He did end up voting for the renewal, however.

“Maybe I’m not completely there, but my colleague [Council member] Matt Haag reminded me that downtown is a neighborhood, also,” McFadden says.

McFadden and the RDDC’s Zimmer-Meyer say that to look at the abatement program through the lens of poor versus rich is to take a narrow view. And Zimmer-Meyer takes issue with calling the abatement a subsidy because, she says, there’s no cash out of pocket for the city.

“It’s very easy to two-dimensionalize it and say, ‘Oh, you’re just subsidizing rich people,’” she says. “In fact, you’re not subsidizing anyone. You’re allowing a situation that encourages investment and people with money to move back in after a lot of people have fled. We have lost out of this city a huge number of middle-class and upper-middle-class and upper-income people. And the city’s become very unbalanced as a result.”

“Let me tell you this: if you didn’t do it, [these projects] wouldn’t get built,” Zimmer-Meyer says. “So then there’s no levy. This way, at least you get it. You’re just going to wait a few more years until it starts coming in.”

About 50,000 people work downtown, and approximately 5 million people visit each year, Zimmer-Meyer says. Total downtown population is 5,057, according to a 2011 RDDC report.

National retail experts say you need between 5,000 and 10,000 residents to start attracting retail to the center city, Zimmer-Meyer says. She says she’s not aware of a magic ratio of renters versus homeowners, but that homeowners are typically more invested in their property and make for a more stable city.

“You’ll come to a meeting to talk about what’s going on in the street in your section of downtown or whatever,” Zimmer-Meyer says, “whereas a renter might be less inclined.”

Mayor Richards says that the abatement program has brought people downtown. Since the program began about five years ago, 20 owner-occupied units have been built, he says.

“It has created some number of private homes downtown which, by the way, is more than any time in the past,” he says. “Downtown will fail if everybody is low income — just as it will fail if nobody is. So the fact that we have that mix and that we’re encouraging it through this process is the kind of thing that’s going to build a successful downtown.”

 

 

 

 

One comment

  1. RocCityGuy · · Reply

    I feel that a tax abatement is very different than a subsidy. Subsidies typically come in the form of real dollars that a municipality, or government agency, puts into a project to help get it developed. The tax abatement program that the City offers costs them nothing to do, it’s more of an incentive for development than anything else. It gives a developer an extra tool to help them market and sell units. The Sagamore, for example, was constructed on a City owned lot, that therefore, was not on the tax rolls. By offering the tax abatement program, the City didn’t have to put up any money, and it helped the developer to sell very high end units in a completely unknown market for downtown Rochester. It was a risk for those that bought into that premise, so while the residents may be better off than some, these are people that have invested considerably in downtown. Now they are stakeholders, not just renters. The abatement offered to the Sagamore will be expiring very soon, and the City will be reaping the benefits of a multi-million dollar property coming onto the tax rolls.

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