Forest City Ratner filed a lawsuit last week demanding the city's Department of Finance and the Tax Commissioner slash their appraisal of one of its Atlantic Yards properties. Reducing the appraisal would drastically cut how much FCR pays to the city in the future as part of a deal to build there.
The land in question is known as block 1129 in the city ledger and encompasses the southern side of the Atlantic Yards project. Currently it serves as a parking lot, but FCR eventually plans to build high-rises on it.
The Finance Department put the block’s market value at $11.2 million for its current fiscal year, which began July 1. But FCR says in a lawsuit filed in Brooklyn Supreme Court that it’s only worth about $1.6 million.
FCR wants the court to lower the Tax Commissioner’s and the Finance Department’s final determination.
The city determines the market value of land as part of its convoluted formula for calculating property taxes. The city collects a property tax of about 10.3 percent of a land’s assessment. An assessment is 45 percent of the determined market value of the land.
FCR would benefit from a lower assessment — but likely not for another 12 years.
Under the complicated deal to build on the Atlantic Yards, FCR leases the block for a nominal fee from the state’s Empire State Development Corporation.
Since the state owns the Atlantic Yards, the land is exempt from property taxes. As a result, FCR currently makes payments in lieu of taxes, or PILOTs, to the city that are also a nominal amount.
However, the ESDC said that, under the deal, FCR will begin paying property taxes to the city in 12 years or when it has finished developing the block — whichever comes first.
Even though it doesn't currently collect property taxes on the block, the Finance Department annually determines how much the land is worth and calculates a potential property tax. This fiscal year the property tax for the block would be nearly $700,000, according to city records.
If the court agrees to lower the city's appraisal, then the FCR will pay less in property taxes when the levy kicks in, according to the ESDC.
FCR acknowledged on Monday that it had challenged the city’s assessments, but said it’s commonplace for real estate firms to try to lower costs.
“As you can imagine, real estate and development companies like Forest City have a fiduciary responsibility to review and question assessments in a timely manner,” FCR spokesman Joe DePlasco told DNAinfo New York.
“This is a standard operating procedure for these types of companies.”
FCR has said the development of the 22-acre Atlantic Yards, which includes the Barclays Center, is expected to cost $4 billion. FCR has received $761 million in subsidies and tax breaks from the city and the state, according to a 2009 report by city watchdog the Independent Budget Office.
Last year DNAinfo reported that FCR had filed a lawsuit claiming the city had overvalued the Barclays Center by $600 million. Three days after the story was published, the developer dropped the lawsuit.
EDITOR'S NOTE: This story has been updated to note a clarification about when Forest City Ratner would benefit if it successfully challenged the city's property assessment of block 1129. An earlier version stated that if FCR won its challenge, its payments in lieu of taxes to the city would decrease. After the story was published, the Empire State Development Corporation clarified the information it had provided. As the story now notes, the challenge would only affect the property taxes that FCR will pay on the land in 12 years. Forest City Ratner also alerted DNAinfo to the issue after the story ran. Before the story was published, the developer's spokesman ignored specific questions about the legal challenge to the city's assessment and only provided a prepared statement.