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BID assessments raising questions.

The McAlpin, a rent stabilized former hotel building at the corner of 34th Street and Broadway, is trying to reduce its assessment from the 34th Street Partnership, a powerful local Business Improvement District (BID). While the McAlpin is only one of three residential properties in the BID, the issue is problematic for other BIDs in formation, including the 86th Street BID.

The essence of such a district is to improve an area's business climate, and its dollars are spent on items that make the area better for residential living as well as for business. But for rent-regulated buildings like the McAlpin, which cannot pass along costs to tenants, the BID assessments can be overwhelming and can be the difference between having some bottom line profit or none at all.

Without relief, the building's portion would go up to approximately $181,343 under a recent recalculation of its square footage and a 9 percent budget increase by the BID. The McAlpin's management is asking to pay at a rate that would drop its bill to $99,630.

Grenadier Management, the management firm, says the property's owners, unlike commercial owners, cannot pass along this assessment to its rent regulated, stabilized tenants.

The BID, on the other hand, whose chair is owner Peter L. Malkin, an attorney with Wien Malkin & Bettex, claims the large building is central to the BID, is not fully occupied, and is obtaining benefits from the increased security, lighting and cleanliness in the area that will lead to more tenants and higher rents.

That it can obtain higher rents is being disputed by rent regulation experts, who point to the in-elastic structure of the Rent Guidelines Board increases. Malkin does not own any rent regulated buildings.

The City Council Finance Committee has already postponed once the vote on the Partnership's request for the 9 percent increase in hopes that the parties would work out the dispute on their own. Such an increase would bring the BID's current $5.775 million budget to $6.317 million. At deadline, the item had been rescheduled for the agenda of the Finance Committee meeting on Aug. 4th.

The McAlpin was purchased in the 1980s by a syndicate put together through Lehman Bros. and led by Oded Abouida, who is a Time/Warner consultant.

The saga started when the 34th Street Partnership came into being on Jan. 1, 1992. Although a tenant of the McAlpin, Cynthia Auman, landed on the BID board, the building did not pay its BID assessment and began negotiating for a refund the BID money.

Two other BIDS headed by nearly the same team of people - Daniel Biederman and Malkin - the Grand Central Partnership and the Bryant Park Restoration Association - also caluculate on the basis of square-footage, as does the 14th Street BID. The Zeckendorf Towers, a huge mixed-use complex in the center of that BID, pays full rate for its residential portion. The Fashion Centre BID that Malkin founded calculates on tax assessments, while the Times Square BID calculates on square-footage and actually exempts the district's theaters. Macy's even receives a discount for some of it's huge basement space from 34th Street.

"At 34th Street, rather than using assessments," noted Strasburg, "the residential ends up overly-subsidizing the BID. If you are going to charge people, exclude as much of the residential as possible," he implored. "Most BIDs can't carve out the residential properties from the district and they can't opt out, so they should make sure the charges are reasonable."

Messinger observed, "One of the huge problems of residential properties - and they've said that at RGB meetings - is that changes in building expenses are not reflected in the increases."

Joel Mitofsky, a partner in the law firm of Mitofsky & Shapiro, who represents owners of rent-regulated apartment houses, said it is virtually impossible to raise rents of tenants already in place to market rates.

If they are paying under-market rents, owners are subject to small increases dictated by the Rent Guidelines Board. If a tenant is allowed a "preferential rent," i.e. a lower rent because the legal stabilized rent is more than the market will bear, Mitofsky explained, the owner must continue to give that tenant a preferential rent as long as they are in tenancy.

Strasburg noted that BIDs are being formed all over the city, and as time passes this issue will become of more concern to residential owners.

The fledgling 86th Street BID organizers are even now debating the issue, so that its residential properties can be fairly treated.

Mary Ann Rothman, executive director of the Council of New York Cooperatives said, "I applaud the vast majority of BIDs that charge a $1 a year to the residential buildings. And I think that if there is commercial space, it be treated like every other commercial property. But I was very distressed that the 34th Street BID is charging the residential properties the same as other commercial properties."

From the very beginning, Auman, a rental resident from the McAlpin, has been a part of the BID at the suggestion of the owner. "But as a rental tenant you can participate in making decisions the owner might make differently," noted Rothman.

Should the parties come to an agreement, the earliest the McAlpin could see a drop in its BID assessment would be for the Jan. 1, 1995 billing. If the City Council approves the BID's increase in budget, a mid-cycle bill would go out to all the district's property owners.

This issue is also expected to be raised at a BID meeting on Oct. 25 organized by the New York City Partnership and hosted by James Schiro, vice chair of Price Waterhouse, who leads the Partnership's Task Force on BIDs.

"We want people who are interested in BIDs and we want people who are interested in sharing information on BIDs," explained the Partnership's Director of Economic Development, Jolie Andler Milstein. "We also expect to roll out some of the new things like the BID handbook." For more information on the BID meeting, contact Ray Tukin at 212-493-7491.
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Title Annotation:Business Improvement District
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Aug 3, 1994
Words:1009
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