Ithaca Builds

Mapping, photos and information for Ithaca construction and development projects

The Value of Downtowns & Density

February 5, 2014 // by Jason Henderson

I’ve written a bit about this topic before, but just this past Monday Joe Minicozzi of Urban Three came back to Ithaca to deliver his talk at the Downtown Ithaca Alliance Annual Dinner. It’s a powerful presentation and argument on how assessed taxable values of property relate to value in a local economy, and that “smart growth”, density, and especially downtowns typically represent a huge value prospect compared to suburban and commercial strip development. The presentation has evolved since last year to include more information on municipal cost comparisons as well, which compound the importance of the argument, since they’ve uncovered that the municipal costs of sprawl typically outweigh the costs of dense development patterns, implying an inherent subsidy in the property tax system that benefits sprawl over density. (Joe brings up a good point in that we’ve known this to be true since the 1970s, when Richard Nixon commissioned a study called “The Costs of Sprawl“, which was updated again in 2000 and 2005)
Luckily enough for those that missed it, there’s actually quite a good video online of a presentation he’s done in Missoula, Montana (about 68,000 people), so here it is:




Harold’s Square Moves Forward with City CIITAP Process

October 22, 2013 // by James Douglas

Harold’s Square moved closer to fruition as the developer held a public information session, as required by the project’s application for approval under the City of Ithaca’s density tax abatement incentive program (CIITAP).

Relative to the public information sessions for the Marriott and Holiday Inn projects, the Harold’s Square session was sparsely attended. Approximately five members of the public were present, as well first ward common council representative Cynthia Brock. Developer David Lubin fielded questions pertaining to how residential tenants would secure parking, the potential impact of construction on the loading area for adjacent business, and whether the project’s commercial and retail tenants were planning on paying a living wage to their employees. Mr. Lubin indicated that the wages paid by tenants were not under his control.

Council member Brock also asked about the labor Mr. Lubin intended to use for the construction, specifically whether plans had been made to utilize local union laborers, or firms that had apprenticeship programs and/or paid a prevailing wage. Mr. Lubin’s response was that he would attempt to use local labor, as long as the bids were competitive.

As to the general timeline of the project, Mr. Lubin stated that they are still working on bids for site remediation and demolition, and that further construction will be contingent on securing tenants and financing, meaning that an exact start date is still up in the air.

Now that the public information session has been held, the City will approve and forward their recommendation to the Tompkins County Industrial Development Agency for review, and the agency will make a determination on whether to grant the project a seven year partial property tax abatement. Expect a county level public hearing on the matter to be scheduled within the month.



Property Taxes, Exemptions, and Cornell: Some Thoughts and Figures

September 29, 2013 // by Jason Henderson

2013 City Heat Map: Property value assessment per acre

Tompkins County has a lot of property value that is tax-exempt: just over 40% of property value in the county is levied zero property tax. For the purposes of this discussion, I’m focusing on Cornell since this topic is most commonly discussed in regards to Cornell because of its size and influence.

Whenever the exemption is brought up, it always seems to carry a two-sided commentary that goes something like this:

“It’s unfair that Cornell’s monetary contribution to the City under the Memorandum of Understanding is so low, and it forces everyone else to pay higher property tax rates” -OR- “Cornell contributes so much to the community via its payrolls, student population, and programs so the property tax exemption is fair because of those benefits”

Both these viewpoints have merit, and they attempt to answer the same question: do Cornell’s positive externalities justify the gap in the public provision of services for Cornell versus what Cornell pays directly under the MOU?

I don’t know the answer, but my intention is to provide a rough snapshot of the situation in this article. In both cases, the reality is contingent on many complicated factors: even though Cornell only voluntarily pays a small share of the tax burden it would be charged if it weren’t exempt, it wouldn’t be fair to assume that everyone else’s tax rate is exactly higher by the exempted amount. As for the flip-side argument, Cornell’s local positive externalities are hard to measure, and include things that can’t feasibly be measured at all. In addition, Cornell’s full tax burden were it not exempt would be exorbitant, and clearly way beyond the value of public services it consumes.

I ran a basic analysis below with the 2013 Tax Roll GIS data from the Tompkins County Department of Assessment to figure out what Cornell and Ithaca College would have been levied if they weren’t tax exempt. I ran filters for Owners, Roll Section, City/Town parcels, adjusted for duplicate objects, and then used the 2013 rates based on assessment value.


New York’s Real Property Tax Law Section 420-A (RPTL 420-a) defines the property tax exemption for Nonprofit organizations (including educational institutions) at the State level.  At the federal level, income revenue is exempt due to the designation as a 501(c)(3) corporation. The federal not-for-profit status also allows for sales tax exemptions on many types of sales in various states; Cornell has exemptions in 14 states plus DC. The RPTL nonprofit exemption originally dates back to 1799, but the differences then versus now in the nature and practices of many nonprofits, and especially educational institutions are legion. Back then it was highly unlikely to afford the opportunity or the time to go to college, and institutions were small. Nowadays, both private and public universities have grown enormous, and tend to operate like businesses, competing internationally to attract customers to the products in education they offer. Tuition and fees certainly make-up a large portion of the operating revenue, but there are also other major sources (see operating revenue below, in this Year End 2012 financial statement).


For Cornell, tuition and fees accounts for about 28% of total operating revenue (and this most recent fiscal year shows an operating loss of over $158 million, although total net assets show a lesser decline on the consolidated statement further below).  Keeping the tuition proportion low makes sense in order to attract students with financial aid, and also from a business-perspective for a diversified revenue structure. However, non-tuition-based revenues have been a point of contention for local taxpayers at Universities elsewhere.

The revenues from licensing intellectual property have landed Princeton University into another round of disputes with its New Jersey neighbors, and this time, the matter is in a New Jersey Tax Court, with residents claiming suit against both the University and the Town of Princeton.  Cornell’s parcels account for about 60% of the exempt value of property in Tompkins County, and just over 70% of the exempt value in the City.  See below for the exemption summaries in both the County and City.


Cornell University pays about $1.2 million a year to the City of Ithaca under the terms of the MOU (increase pegged to CPI until 2023), and it was about this time last year that Mayor Svante Myrick suggested Cornell increase its payment to $3 million. The same case was made back in 1995 under Mayor Benjamin Nichols, whom went to the extent of holding building permits for Cornell until negotiations progressed (under the premise of inadequate parking due to zoning), and meanwhile over a hundred construction workers demonstrated outside City Hall due to their inability to start work (New York Times articles below). Nichols was able to get an increase from $143,000 the current year to $250,000 the next fiscal year, and an escalation to $1 million to 2007. Taking a different approach, Mayor Alan Cohen negotiated in 2003 for the current 20-year MOU, which bumped-up Cornell’s payments further with the provision that Cornell would be treated equally and fairly under the planning and building approval process.

The long span of the tax exemption has indirectly supported Cornell’s construction of top-notch facilities, since these improvements on their land parcels are not taxed (although Cornell must pay building permit fees for construction, which is .7% of total construction costs).  The long run expectation has been set, so it’s understandable for Cornell to operate very defensively in this regard.  The consolidated statement below shows net land, building and equipment value at just over $3.3 billion as of June 30th, 2012.  This will surely increase further as additional buildings come online (Gates Hall, Klarman Hall), and the future two million square foot Cornell NYC Tech Campus is developed on the 2.5 acres of Roosevelt Island.


One crucial point in this discussion is the consideration of the context in which Cornell operates. Cornell competes vigorously with other education institutions for customers internationally so its stance is naturally much different than the gross majority of businesses in Ithaca that compete regionally and locally. Not to say that Cornell is “above” local politics, but rather the opposite: Ithaca unfortunately has little to offer compared to a major metro area for many students. A commentator on Ithacating’s blog made a great point about this:

“I know many applicants don’t even consider Cornell because of its rural isolation – I definitely had no intention of coming here for college and I only applied for my PhD on the suggestion of an advisor who recommended some of the faculty. I would have never considered it over a school close to a major airport or rail line, even if that school were lower ranked. And it’s not just student preferences for these things that matter – if the school struggles to attract top faculty, that has an effect on student recruitment and selectivity as well.”

Ithaca’s a supremely nice place to live, but as far as major real-world opportunities (especially the sort that can be readily paired with a professional education), Ithaca has difficulty competing. The NYC Tech Campus is a natural and strategic reaction to the reality that proximity and mobility to outside opportunities matter, sometimes even more so than a degree. The Tech Campus will allow Cornell to compete in an environment where technological education paired with work outside of the classroom has become a highly-desired and necessary education program.

To get back to the point at hand though, what does Cornell contribute to the local community that would typically be outside the purview of other types of businesses/institutions?

I don’t have enough information to begin to quantify Cornell’s total positive externalities, but here’s a list of some major considerations:

-Sales tax exemption vs. use of local vendors for both Cornell and students: whatever Cornell cannot do in-house it must purchase from a vendor, and many of these vendors are companies located here. In addition, since Cornell brings a massive student population to town, many retail/service sectors benefit in sales, which are taxed through sales tax and indirectly through property tax on those businesses.

-Student housing: most of Cornell’s customers must actually live here, therefore one could logically count the revenues and pursuant property taxes of off-campus student housing as a positive externality (although this could be treated as a break-even in this context, since off-campus housing consumes public services conceivably equal to the property taxes paid). Not many types of businesses require their customers to relocate to their area of operation, so I think it’s justifiable to count this as an atypical externality when compared to a typical business. On the other hand, Cornell’s employee payrolls and pursuant taxes on their properties, local purchases, etc. don’t seem like a logical externality: most businesses would have their employees live locally anyways, so if Cornell were instead a large manufacturing operation, the same logic would apply.

-Tompkins County Cornell Cooperative Extension: out of an $8.5 million budget in 2012, Cornell contributed nearly $2 million, paired with Federal Sources (chart below)

-Cornell contributes about $829,000 a year to assist in funding TCAT (Tompkins Consolidated Area Transit, a not-for-profit bus operator), which is also equally-matched by the City and County (and Cornell employees and students benefit with a deep transit discount called OmniRide, in addition to free evening rides). The largest revenue chunk (36% of a total $12.7 million budget) comes from NYS taxpayers: the DOT’s State Operating Assistance Fund (STOA)

-Cornell operates its own police force of 54 sworn officers, and a total staff of 70. I’m not sure what it costs Cornell, but the City of Ithaca has 63 sworn officers, and the Ithaca Police Department’s total budget is $11.66 million in 2013.

-Back in 2008, Cornell announced a 10-year $20 million strategy for boosting local housing and transportation infrastructure through their Government and Community Relations Department. There are a number of programs run through this effort, but for the sake of simplicity, we could peg this value at ~$2 million a year.

I’m probably omitting something worth noting, so please correct me if I have. I’m obviously omitting non-local externalities like academic research, tech discoveries, etc., which are far beyond this scope and magnitude.

Given this information, if we were to tally-up the positive externalities above and compare with the gap in public services provided to Cornell minus the MOU, I think we’d end up with an answer showing that the positive externalities far outweigh the public service funding gap, but because of the functioning of the tax exemption, there’s a mismatch in value capture for public service. In an ideal world, the funding for public services should be tied directly to the beneficiaries of those services in the proportion that they benefit. The benefits of these positive externalities don’t necessarily accrue directly to the City and County’s bottom lines- more likely, they may indirectly.

I highly doubt Ithaca and Cornell would ever end up with a situation like that in Princeton, but perhaps the goal should be to follow positive examples elsewhere. Yale and New Haven’s town-gown relations are commonly held up as a cozy relationship, and examples can be drawn from many other places, since almost every other college town has this exact same battle over budgets.

I would ultimately argue that Cornell’s chief concern is not the financial implication of paying more, but that of autonomy. An institution the size of Cornell is probably more concerned with being able to control exactly what is done with its finances, so taxes to a municipality providing services is much less desirable than a situation in which Cornell has the power to either provide those services to itself, or have the ability to closely oversee or control how their tax spending is used.

Any further obligation under an MOU is an agreement that Cornell is signing for which it has zero legal obligation to do so. Given Cornell’s stance, I think a reasonable approach would be to find ways to utilize Cornell’s self-interest to local benefits that are in common. Cornell is concerned with safe housing, transit for employees and students, local student opportunities, attracting the brightest people, etc.- so a firm strategy would be to bring aligned objectives to the table, and start there. City and County services don’t pay for themselves, but without a legal obligation to pay them, Cornell should only have an interest in negotiating through shared objectives.

The utilization of tools like value capture (essentially LVT per marginal increase) could be useful, whereby a municipality creates a new or improved infrastructure service or public program, and the private land that benefits is taxed to account for the increased value of the land. In the case of land already exempt, we’re not talking about a land value tax, but instead, a negotiated agreement to help fund specific projects that would benefit both the City/County, and Cornell’s operations (TCAT is a perfect example). It would help to know Cornell’s share of the current ongoing public service costs, and also how the cost share is determined, which would probably provide another set of complications.

I have no doubt that the perspective of approaching Cornell through shared objectives is the stance of Mayor Myrick and other local officials faced with this reality every day. Local governments in college-towns may have tremendously difficult budget constraints, but also opportunities distinctly unique to those places as well. The proposed 2014 City Budget this next fiscal year has a projected 1.9% gap in expenses to revenues, and Tompkins County Administration has announced a recommended 3.5% property tax hike for next year.

I imagine Cornell will keep the MOU as-is, but it will be interesting to see whether or not this discussion crops up again this year, and how it is received by locals, students, and faculty.


Hart Hotels CIITAP Application

August 19, 2013 // by Jason Henderson

Embedded below is Hart Hotel’s Community Investment Inventive Tax Abatement Program (CIITAP) application for property tax abatements on the value of improvements on the tax parcel through the expansion project. Public meeting is tonight at 5:30pm in Common Council chambers, and I believe the Ithaca Journal’s cover this morning noted that the proceedings will be broadcast on Channel 13.

Hart Hotels, Holiday Inn Project, Taxes

August 13, 2013 // by Jason Henderson


The Ithaca Journal has announced that the City will be hosting a public information session on Hart Hotel’s new tower project, now no longer a Holiday Inn-branded project. Hart Hotels has done mostly Holiday Inn-branded projects, but has several homegrown-branded hotels under management. What’s more, they will be applying for a tax abatement (much like the Hotel Ithaca Marriott project) through the Community Investment Incentive Tax Abatement Program.

One of the factors at play may be mortgage interest rates. This project is going from about 3.5% to a likely 4.2-4.4% within the next year, so for a $17.8 million project, that’s about an extra three million in financing costs over the course of a 30-year mortgage. The seven-year tax abatement program would save about $1.24 million in tax expenses (see chart, not counting inflation), assuming taxable improvement equals project cost, and we hold the total mill rate constant. Since the Marriott got an abatement, Hart Hotels would be wise to go for it.


Taxes are awfully high in the City. If the parcel’s total value at the end of construction is assessed at $25 million and they financed $17.8 million at 4.3% for 30 years, debt service payments would be $1.057 million per year, City + County + BID taxes (22.16985 mill rate) would be about $554,246 per year, and School taxes (16.9534 mill rate) would be $423,835 per year holding current rates constant.

Real Estate Taxes: $978,081 per year
Debt Service: $1,057,000 per year

So for this example, real estate taxes are not far from being equivalent to the 30-year financing costs of this project per year. If taxes were significantly lower, there may not be so much financial pressure to participate in the tax abatement programs.

Land Assessment in Ithaca

May 23, 2013 // by Jason Henderson

I decided to post this since I have a hunch that folks interested in development in the area are also interested in zoning and taxation (I am too). The following post goes nowhere near a full analysis of the situation as far as land taxation in the City of Ithaca, but I hope it will provide some food for thought. It’s largely inspired and replicated from a talk I went to by Joe Minicozzi of Urban3, an urban design/analytics consultancy based in Asheville.

In the past 20 years Ithaca has seen an enormous amount of development happening where “the cars go.” I’m not going to argue the ethical pros and cons of this type of development, but every taxpayer should be aware of some of the incentives at play. One of them is taxation. All across the US, cities generally tax the land of large, strip-mall and suburban-style parcels at less per acre than downtown parcels, but still have to provide the same, or sometimes more infrastructure and public service.

Why land assessment?
Land assessment is synonymous with a “land value tax” or LVT, which is the levy on the land itself. LVT disregards buildings, fixtures, paving, etc., and all other improvements to the land.

This is an important distinction because it establishes an independent economic signal for the ownership of the land, thus a lower land assessment per acre signals a less desirable parcel, but a higher assessment per acre signals a more desirable parcel (if we were to use the assessor’s valuation as the basis for market price).

Many factors affect the land’s actual value, but land assessment can show us how governments view their value. Tompkins County assesses land values separately from the total assessment value, so when we look at our property tax assessment, there are two components: land assessment, and total assessment. Land assessment is lumped-in with total assessment, so if you subtract land assessment from the total, you get the assessed value of everything but the land.

The City and County both tax a flat rate on the total assessment. Unfortunately, it is not a split-rate system. What’s a split-rate? It’s when you shift the tax burden from the building assessment to the land assessment. Why would you do this? If more land is more expensive to hold, and more building is less expensive to hold, then you end up with more building on less land, meaning greater density. Density is important because it’s generally less expensive for cities to provide services to: fire trucks have fewer roads to travel, shorter water and sewer pipes provide more service to a greater number of people, fewer roads mean less potholes to fix, etcetera. Density also pays a greater share of tax revenue per acre. A one-family suburban-style home on one acre will pay less than a 30-unit garden style apartment complex on one acre. Cities rely on density for tax revenue.

From an urban design standpoint, there are also criticisms of taxing the non-land portion, since a higher finish-grade building will get taxed more than a lower finish-grade building since it has a higher value, meaning a higher risk for the developer (in future taxes, marginal construction expenses for higher finish-grade, and possible vacancy due to rent premiums to achieve a return on investment). It leads some developers to go with “run of the mill” designs, less expensive finishes, etc., but that’s another story. Many cities and school districts in Pennsylvania have actually turned to a split-rate system and have seen success- Pittsburgh is a notable example: in the midst of the steel decline, the city still fared quite well.

Henry George, an American writer and political economist from the late 1800s actually proposed that governments need only to establish a single tax on land; however, the idea never really took off in the US, but did in Denmark in 1903, and a few other countries around the world (this economic philosophy is referred to as “Georgism”).

Now the fun part: I have some images I took from a quick GIS analysis I did of Ithaca’s 2011 taxation and zoning. Each map is essentially a “heat map,” one for allowed maximum “zoning density,” and one for land assessment per acre. The zoning density measure is a bit crude- I just used allowed maximum building height multiplied by allowed maximum lot coverage, but it gives a rough idea of what sort of building volume is allowed on each parcel as dictated by 2011 zoning. The “zoning density” map is important to compare to the land assessment per acre map because, in a perfect and predictable world, each parcel (if flat and history and politics didn’t exist) should correlate with how it is zoned i.e., what amount of density is allowed.



There are multitudes of other considerations in deciding land assessment on each parcel and those that take the time to fight their assessment rises probably fare better, but it’s clear that there is some discrepancy. The take-home point here is that regardless of the minor discrepancies in land taxation per acre, look at the parcels where the cars go!

In 2011, Walmart’s parcel (easy target, sorry) had a land assessment of $189,000/acre and consequently paid $3,611/acre in land taxes (if we use the total millage rate in the City of Ithaca for 2011: 19.109240)…. meanwhile, let’s take one of Shortstop Deli’s parcels (the west one) and do a comparison. Shortstop’s parcel’s simple zoning density measure is less than half of Walmart’s, but its land is actually assessed at $463,776/acre, and consequently paid $8,862/acre, more than 2.4 times per acre than Walmart paid.

Unfortunately, similar comparisons yield similar results- take the William Henry Miller Inn for instance: this parcel paid just shy of $11,000/acre, and the office building next door on Aurora? Over $7,200/acre.

Obviously, these are just a few examples, but this analysis begs an important question for long term urban planning in Ithaca, i.e. How can Ithaca better achieve its desired “Smart Growth” if not enough incentives are there to do it? What are the other parts to this equation and what changes need to be made now to create the community that Ithaca wants in the future?