By Julie Shapiro
FINANCIAL DISTRICT — State Attorney General Andrew Cuomo has a simple message for the Southbridge Towers residents who want to go private: Be careful what you wish for.
Southbridge Towers, a 1,651-unit mega-complex, is now protected under the state’s Mitchell-Lama affordability program. If Southbridge goes private, residents could sell their own apartments at market rates, which could yield hundreds of thousands of dollars in profit.
While that sounds like a windfall, Cuomo said it was the duty of his office to caution residents that there were substantial risks in the proposed undertaking.
The Attorney General's warning is focused on the provisions of a 605-page privatization proposal, which he said failed to emphasize such matters as the possibility that under privatization, senior citizens on fixed incomes would face sharp increases in their monthly maintenance charges.
Another concern, Cuomo's office said, s the question of whether going private will obligate Southbridge to pay state and city property transfer taxes. That could cost residents up to $30 million, opponents of privatization say.
Victor Papa, a Southbridge resident who opposes privatization, said that every renter should be able to review a document that is "fully transparent, whether one agrees with privatization or not.”
After the privatization proposal was made public last year, Papa and others raised a slew of objections. Cuomo is now echoing some of those concerns.
In two lengthy letters to residents,, Cuomo’s office listed 318 problems with Southbridge’s privatization proposal. While some of the problems were minor, like skewed punctuation, Cuomo also demanded more detail on the financial risks residents could face.
The proposal estimated the taxes on the transactions at just $4 million, and questioned whether those taxes would have to be paid at all.
But Cuomo’s office now says that this may be a major miscalculation on the transfer taxes, and warned that residents could be liable for $24 million at the city level alone.
Cuomo's office also asked for more detail on how Southbridge would pay for operating and capital expenses after going private. The proposal is geared to flip taxes: The first time each apartment is sold, the seller has to give Southbridge 25 percent.
But Cuomo’s office pointed out that the privatization advocates are using sale figures from 2008, and the apartments might not bring in so much money today.
“Market conditions have changed dramatically since that time and…the projections are stale,” one of the AG’s letters stated.
The letters are dated March 31 and April 16 and total 40 pages.
Stuart Saft, the lawyer representing the residents who want to go private, is now preparing his response to the Attorney General. Given Southbridge’s size and complexity, Saft said he was not surprised that Cuomo had so many concerns.
Saft said he expects another round or two of changes before Cuomo approves the proposal, which could occur by the end of the year.
At that point, the proposal will become a “black book,” and will be submitted go to Southbridge residents for a vote. Two-thirds of the apartments would have to support privatization for it to go into effect.
Until the black book is released, Cuomo has placed Southbridge’s board of directors under a gag order, which means the pro-privatization voice has largely been silenced.
Cuomo’s office declined to comment or release the letters. Residents who filed a freedom of information request to obtain the letters shared them with DNAinfo.