Ulster County Leaders Struggle to Rein in Real Estate Tax Breaks

The county is ready to restart real estate subsidies after a two-year pause. Residents fear it won’t fix their housing crisis.

Arabella Saunders   ·   February 8, 2024
An overhead view shows streets, buildings, trees, and a river in the forested town of Kingston, New York, the Ulster County seat.
In 2020, the Ulster County IDA granted millions of dollars in tax breaks to a proposed luxury development in downtown Kingston. The deal sparked public outcry. | Chris Boswell

Tim Rogers wouldn’t lose any sleep if someone told him the Ulster County Industrial Development Agency had ceased to exist.

For a decade, the village of New Paltz mayor has railed against tax breaks the agency doles out to businesses and real estate developers. Rogers penned his eighth letter on the subject in December, when the agency lifted its 27-month moratorium on subsidies for housing projects.

The industrial development agency had a history of handing out subsidies that were unpopular with residents. The moratorium was meant to buy the IDA time to develop a housing policy that better aligned with community needs, which many residents say includes affordable housing. The process was underway — agency board members had started drafting after a year of studying the policies of other IDAs — when the moratorium was suddenly lifted. Soon after, two board members, both of whom were in favor of ending subsidies to market rate housing developers, resigned.

The board had lost anti-housing subsidy members before. Before the moratorium, the chair of the board at the time had attempted to rein in market rate housing subsidies — and got ousted in the process.

The more than 100 IDAs spattered across the state are tasked with using tax breaks to lure large-scale industrial and manufacturing operations to their localities to create jobs. They’re a frequent target of good government groups, and they’ve recently come under fire from major unions. But the Ulster County IDA’s drawn-out battle over its housing policy forebodes just how difficult it might be for lawmakers and regulators to rein in the agencies’ power statewide.

“From 20,000 feet, their intentions are good, in that the role of the IDA is to figure out ways to encourage economic development and spur job creation,” Rogers said. “There are many unintended consequences in terms of how that gets done.”

The Ulster ida’s 2021 housing policy, which was reinstated after the moratorium was lifted in December, allows tax breaks for retirement homes and “workforce housing” projects, in theory meant to support affordable housing. But the policy does not define “workforce housing” or specify target income levels.

“So right now, developers can come in and say, ‘Yeah, yeah, we have workforce housing,’ and have the rest of it be a luxury housing development, and then that would be approved,” said board member Rashida Tyler, who voted against lifting the moratorium.

That’s exactly what happened in 2020, when developers of the Kingstonian — a proposed downtown Kingston development featuring luxury apartments, plus a boutique hotel, retail space, and parking garage — sought $25 million in tax breaks over 25 years. Only 10 percent of the project’s 143 units would be affordable “workforce” units. The agreement would result in the Kingston City School District missing out on $16 million in property tax revenue.

The proposal sparked public outcry. Residents packed IDA board meetings and public hearings related to the development, begging officials to focus on affordable housing instead. At the time, approximately 30 percent of renters in Ulster County were spending over half of their total income on rent. One group of residents hired a lawyer to write a letter urging the IDA to reject the proposal because “the applicant has not demonstrated a public benefit.”

IDA policy required the Kingstonian’s subsidy application to be voted on by each of the affected tax jurisdictions — in this case, that included the Ulster County Legislature, the Kingston City Council, and the Kingston City School District’s Board of Education. But there was a big caveat: The IDA could override the outcome of a vote.

The Ulster County Legislature and the Kingston City Council voted to approve the deal. The board of education rejected it 6–3, citing its negative impact on school funding.

The IDA approved the $25 million tax break anyway.

Three years later, the project has yet to break ground due to multiple lawsuits, one of which challenged the IDA tax breaks. (A state appellate court dismissed the case against the IDA in November of last year.)

In September 2021, after eight months of public debate over its decision to greenlight the deal, the county IDA enacted the moratorium.

“The moratorium was originally put in place because we wanted to find out exactly how we were going to be a part of the process,” said IDA board chair Mike Ham. “We’ve always said it as a group from day one: Although we’re not the entity that solves the housing crisis here in Ulster County, we do want to do our part to help.”

“This is a twist of the arm.”

—Lynn Archer, former Ulster IDA board member

When Tyler joined the board in June 2022, she said, members were charged with three main tasks: hiring the agency’s first executive director, developing a new housing policy, and mending the agency’s relationship with residents, which had soured after the Kingstonian fight.

Board members spent the next year studying IDA housing policies across the state, gravitating toward those that offered tiered incentives — for instance, offering larger subsidies to affordable housing projects or those that included green space. By last fall, the board had gotten closer to drafting a new policy for public feedback.

But that chance never materialized. At a November meeting, Ham suggested the board vote the following month on sunsetting the moratorium.

“We were trying to get something moving here,” Ham said of sunsetting the moratorium. “It lights a fire under everybody to come up with a better policy.”

Ham, along with board members Kaustubh Wahal and Steven Kelley, argued that the board could develop a policy on the fly as new housing subsidy applications rolled in. On the other side was Lynn Archer, who argued that the board should wait until a new policy was complete.

“This is a twist of the arm,” Archer said to Ham after he introduced the motion to vote on the moratorium at the next meeting.

“It doesn’t create jobs. You have people who are building the facility, and then after that, it’s not jobs.” 

—Randall Leverette, former Ulster County IDA board chair

On December 20, the board voted 4–3 to lift the moratorium. Two weeks later, Archer and Diane Eynon, who both voted no alongside Tyler, resigned from the IDA board. (They officially cited “personal reasons,” according to the agency’s executive director, Hillary Nichols.)

“It was like we didn’t even care about the people, the public, or anything,” Tyler said of the decision to lift the moratorium. “There was just this moment where it was like, ‘This is what we’re doing.’”

It’s not the first time the board has lost anti-housing subsidy members. In 2020, Randall Leverette, then the board chair and an opponent of tax breaks for market rate housing developers, was fired after county legislators received almost two dozen letters criticizing the agency for not lending to small business owners during the pandemic — even though at the time, IDAs could not grant business loans. The letters, many of which contained identical or nearly identical sentences and structures, were sent as part of a letter-writing campaign by a group called Team Kingstonian.

At the center of residents’ pushback against the Kingstonian tax break was a desire for more affordable housing in the county. A 2023 study by Hudson Valley Pattern for Progress found that the average Ulster County renter earns approximately $30,000 a year — $16,000 less than what’s needed to afford a one-bedroom unit there. The study also found that, based on average wages, Ulster County renters would need to work 61 hours per week to afford a one-bedroom.

“The affordability here is gone,” Tyler said. “A lot of people from New York City moved up, a lot of short-term rentals, a lot of LLCs moved in and are holding property. There’s hardly any apartments available.”

Samuel Stein, a senior housing policy analyst at the Community Service Society of New York, a research and advocacy nonprofit focused on urban poverty, contends that IDA subsidies are an ineffective vehicle for trying to address a housing crisis, and can in fact exacerbate it.

“Probably the best thing for use of funds and for long-term affordability would be to build social housing all over the state,” Stein said. “Not just give preferential tax benefits to private developers to build market-rate housing.” (Social housing includes affordability, insulation from market forces, and democratic management components — all of which are conspicuously absent from the Kingstonian plans.)

Whether IDAs can subsidize housing at all is a legal gray area. Policy experts and lawmakers argue state law doesn’t permit it. But the only time the state has ever weighed in on the issue was in 1985, when, in response to an IDA housing controversy in Portchester, the comptroller set two standards: that a project should promote “employment opportunities” and prevent “economic deterioration.” The comptroller otherwise punted the interpretation of the law back to IDAs. (The state does explicitly ban New York City’s IDA from supporting housing, routing those subsidies through other programs instead.)

They have, in turn, interpreted the law in different ways. Some don’t support housing projects at all. Others, like in Erie County, primarily use housing subsidies to convert old commercial buildings into apartments or condos. Yet others, including those in Niagara and Nassau counties, subsidize new build housing, as New York Focus and Investigative Post reported in December.

Last year, the Economic Development Council, a trade group representing IDAs, surveyed 80 of them, finding that between 2018 and 2022, the agencies had granted subsidies to 425 projects with a housing element. Those projects included 39,625 units, a quarter of which were marked as affordable.

Opponents of the subsidies point out that the projects create temporary construction work, but few permanent positions.

“It doesn’t create jobs,” Leverette said of housing subsidies. “You have people who are building the facility, and then after that, it’s not jobs. People like to argue, ‘But the people who live there will have jobs.’ And it’s like, well, no. That’s not the purpose of the IDA, to provide housing for people.”

At the state level, some legislators are looking to rein in IDAs. Senator Sean Ryan, former chair of the economic development committee, has introduced legislation barring IDAs from abating property taxes that would otherwise go to schools. In a September statement Senator James Skoufis and Jeffrey Pearlman, director of the state IDA watchdog Authorities Budget Office, called IDAs subsidizing housing a “sham.”

“I don’t think IDAs are allowed to subsidize housing under their current law,” Ryan said. “It’s not a housing development authority. It’s an industrial development authority, designed to promote economies, make jobs, get investment.”

In 2020, Ulster County legislator Joe Maloney introduced legislation to have the county IDA dissolved. The bill failed to make it out of committee, but in 2024, in light of the Ulster County IDA’s increased interest in housing projects, he’s planning on reintroducing the legislation to do away with the agency.

“I think there’s one project I’ve seen from our IDA that even makes any sense,” Maloney said. “Everything else is an absolute disaster.”

“I want Ulster County to thrive again.” 

—Rashida Tyler, Ulster County IDA board member

Nichols said the agency will still work toward drafting a new housing policy while accepting housing project applications, but she doesn’t know when that policy will be complete. Ham said the agency has not received any housing project applications since lifting the moratorium.

Ham added that the current language in the housing policy from 2021 “isn’t perfect.” Without a new policy in place, he said, the board will have to go over the subsidy applications “with a fine tooth comb and see what’s best for the community benefits and how we can help.” Ham admits he doesn’t believe incentivizing market rate housing is the best idea, but he also knows the county “needs movement” when it comes to building more housing.

As for Tyler, after the board voted to lift the moratorium, she debated resigning but decided to “stay and fight.”

“I want Ulster County to thrive again,” Tyler said.

Arabella Saunders is a Report for America corps member covering economic development for New York Focus. Her reporting has also appeared in Vice, HuffPost, DCReport, and The Assembly NC.
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