The buyers of luxury condos at the converted Sacred Heart Church could each receive a tax break worth an average of $36,000 over six years, if a developer’s request is approved.
Jon Chorlian’s application arrived at an unprecedented time for the city, months after construction began on the $3.2 million renovation. Similar tax breaks have typically been granted to get otherwise unviable projects off the ground.
Chorlian, who didn’t respond to a request for comment, hasn’t publicly explained why he needs the relief for the seemingly successful project or why he didn’t apply before he started building.
The tax relief program – known by its chapter in state law, 79-E – would temporarily ignore the enhanced value of the property for taxation purposes. It would amount to a subsidy of more than $350,000.
Relief under 79-E was most recently granted for Remi’s Block because its owner said the project would be financially infeasible without the subsidy. In that case, developer Remi Hinxhia received a five-year benefit that he said was imperative to secure the financing he needed.
Hinxhia’s application – like the five other successful ones before it since 79-E was adopted in 2008 – was approved before he started building.
Matt Walsh, the city official who produced a report detailing Chorlian’s request, noted: “This one for Sacred Heart is a very different animal.” ‘A perk’ for condo buyers
For one thing, the Sacred Heart Church project appears viable without any subsidy.
Its 10 units – ranging from $295,000 to $435,000 – have had buyers for “several months,” according to the report filed March 9 by Walsh, the city’s director of redevelopment, downtown services and special projects.
Additionally, the city expanded eligibility for 79-E last April at Chorlian’s request, making the Sacred Heart Church acceptable as an applicant for the first time.
Chorlian wrote on his application that he began construction Aug. 1, more than three months after eligibility was expanded, but he didn’t apply until Feb. 9. The project is slated to be complete at the beginning of June.
Because the subsidy takes the form of property tax relief, “the benefit runs with the land,” Walsh said, “so when (Chorlian) sells the condos on to the new owners, which would happen in June, the new owners would get the benefit of the 79-E relief.”
So in Hinxhia’s case, he remains the owner of Remi’s Block – and its new apartments and storefronts – and therefore the city’s subsidy stays with him as the developer. But in Chorlian’s case, it will transfer to the condo owners.
In other words, if the application is approved as requested, the taxpayers at large will subsidize the property taxes paid by the buyers of new, luxury condos. The total value would be roughly $357,460 over six years – or an average of $5,960 per unit per year, according to Walsh’s analysis.
“In my opinion, this is just a perk for those folks moving in,” City Councilor Allan Herschlag said. “It becomes unfair to the rest of the folks in the community who are paying their fair share.”
He added: “I don’t understand what the public benefit is in giving Chorlian tax relief at this junction. The project is virtually completed, all the units are sold, people are standing in line to buy these units.”
It’s unclear whether Chorlian told his buyers they could get a sizable tax break.A committee’s recommendation
The Fiscal Policy Advisory Committee, which holds the first hearings for 79-E applications, has already given an initial recommendation to the project – although multiple committee members emphasized in interviews last week that their vetting was at best cursory.
According to the FPAC meeting minutes from Feb. 21, the committee came to a consensus that the city “should favorably consider the application.” Chorlian didn’t attend the meeting.
Three city councilors who attended that meeting said in phone interviews that their approval was based on the fact that Chorlian revived the impressive 1934 church when it could have otherwise become a parking lot. They noted that the property will generate significant tax revenue in the future – for the first time – because it was always tax-exempt. That’s one of the core concepts behind 79-E, they said.
But Councilor Keith Nyhan, the committee’s chairman, said he didn’t realize the magnitude of the tax relief, as Walsh’s analysis was not yet completed.
“It’s a much bigger number than I think anybody anticipated,” Nyhan said. “Fortunately, the whole council has to vote on it.”
He added: “The next step is for the council to look at it from a financial standpoint and say, ‘What does it mean? Did he need tax credits for the project?’ Because it certainly doesn’t look like it.”
Chorlian was required to prove his need by filing a detailed financial analysis of the project with his application, but the city has determined the public is not allowed to view those documents.
City officials declined to cite the exemption in the right-to-know law on which their refusal relies.
Neither did the city councilors who attended the FPAC meeting have a chance to review the project’s financials. Three councilors who responded to requests for comment – Mayor Jim Bouley, Mark Coen and Nyhan – said they hadn’t seen Chorlian’s numbers, which he declared on his application to be “confidential.”
Three other city councilors in attendance didn’t return requests for comment last week.Subsidy could have been larger
In the project narrative supporting his application, Chorlian makes no attempt to describe why the project needs a tax break. Rather, he declares that it does the public good by preserving a historic building and adding new residential units downtown.
He also notes that – even with a tax break – the property would generate significantly more revenue for the city over its former tax-exempt state.
The 79-E law says that any improvements made between the start of construction and the granting of Chorlian’s application would not factor into the tax relief. In other words, if the city council were to approve the application next month, and the church is worth $1.7 million at that time – as estimated – then the value of the property would freeze at that level for the term of the award.
The real value of the 54 Pleasant St. property would continue to rise to an estimated $3.5 million, but the taxes would be abated for six years, if approved as requested.
For the average condo owner, the tax break would mean a savings of $36,000 on their property taxes over six years. That number would have been much larger if Chorlian had applied before he began construction, when the church was worth $725,000.
Walsh, the city official who analyzed the application, noted that his five-page report omitted one thing: a recommendation for or against the tax relief.
“There is not a staff recommendation or a city administration recommendation in this,” Walsh said. “There’s a request from a developer and a public policy decision for the city council to make.”
The application is scheduled for a public hearing before the full council April 10.
(Nick Reid can be reached at 369-3325, firstname.lastname@example.org or on Twitter at @NickBReid.)