Beacon Developer Asks for Tax Break

A rendering from 2020 shows the developer’s vision for the former Craig House.

A rendering from 2020 shows the developer’s vision for the former Craig House.

Craig House owners want reduction for 15 years

Mirbeau Inn & Spa Beacon, which owns and plans to redevelop the historic estate on Route 9D that includes the former Craig House psychiatric facility, has asked the city and the Beacon school district to support a plan that would substantially reduce the property taxes on the 64-acre property over 15 years. 

The developers would benefit from an agreement known as payment in lieu of taxes, or PILOT, a tool used to promote job creation and economic development. The Dutchess County Industrial Development Agency (IDA) would determine if the project provides enough benefit to qualify.

While the IDA will approve or deny Mirbeau’s request, the city and school district can influence the decision, said Sarah Lee, the executive director of the agency. 

“It will give the [IDA] board some pause if one or more affected taxing jurisdictions does not put forth its support,” Lee said. “However, the board also considers other factors, such as the direct, indirect and induced benefits to the county.” 

Mirbeau, a chain with luxury hotels and spas in Rhinebeck, Albany and Skaneateles (in Onondaga County), bought the property in February for $10 million. It has said it expects to spend another $45 million on the project.

The Beacon Planning Board has nearly completed its review of the first phase of the firm’s plans to restore the parcel with a 75-room inn and spa, a 110-seat restaurant, elaborate gardens and cottage rentals. Future development phases are expected to include resort cottages, a micro-farm and the restoration of the former Tioronda School building.

Under a typical PILOT agreement, which usually lasts 10 years, a company makes an annual payment to a municipality or school district instead of paying property taxes. There are two PILOTs in effect in Beacon: a 10-year agreement for 23-28 Creek Drive, which will be the U.S. headquarters for Docuware, a German document management firm, and a 30-year agreement for the Davies South Terrace affordable housing complex. 

Mirbeau is seeking an “enhanced” PILOT, which is more complex. If its request is approved, the property would be assessed once construction is complete (it’s currently assessed at $3 million) and regularly thereafter, like other residential and commercial parcels in Beacon. Mirbeau would pay the property tax it was paying before construction, plus 50 percent of the difference between that initial, or base, assessment and its new assessed value in Year 1.

It would then pay an incrementally increasing percentage of the difference, peaking at 95 percent in Year 15. 

City Administrator Chris White and the City Council, including Mayor Lee Kyriacou, discussed Mirbeau’s request for a letter of support during a closed session following the council’s Nov. 14 meeting. There were no objections, and the city has drafted the letter, White said. 

“The deal is really good from a financial perspective for the city, school district and county,” he said, noting that Mirbeau’s proposed terms “far exceed what we get today” in property taxes from the site, which has been vacant since the hospital closed in 1999. 

Once Mirbeau is up and running, White predicted that weddings at the Roundhouse, for example, would generate a steady stream of rentals at the inn while providing “a shot in the arm for the businesses on Main Street.”

The city administrator also mentioned job creation and other public benefits involved with the project as factors in the city’s support. For instance, Mirbeau has agreed to construct a sidewalk on nearby Grandview Avenue and build a pedestrian crosswalk at the entrance to the University Settlement Camp on Route 9D.

The Beacon school board considered the request for more than an hour at its Nov. 21 meeting but reached no decision. The discussion will continue on Dec. 12. 

Hotels are generally considered risky investments by lenders, and PILOTs are often used to help projects qualify for financing, Lee said. 

“In most cases, if it wasn’t for a PILOT, the project would not be able to go forward,” she said. The intent behind property tax abatement “is to allow businesses to ramp up their customer base to be able to eventually make the full tax payment.”

10 thoughts on “Beacon Developer Asks for Tax Break

  1. I’d like to know what The Current’s position on the two pilot tax abatements currently in Beacon, whether it believes it’s equitable for everyone in the city paying taxes, especially when the “Docuware” isn’t a hotel. Maybe when a company gets an abatement, the discount should be distributed to all business and residents, so it is equitable, and all business and residents already give “Main Street a shot in the arm.”

  2. How’s the math look with and without? Is it a deal breaker? It sounds like the value in economic benefits outweighs initial public investment within a short enough period. There’s precedent. [via Facebook]

    • We plan to address the implications of payment-in-lieu-of-taxes (PILOT) agreements, but there are many unknowns at this point, so it’s not easy to calculate. The biggest unknown is whether the project would proceed without PILOT benefits. The Dutchess County Industrial Development Agency says that most PILOT proposals would not. If the agreement is approved, other factors, such as future property assessments and the city’s commercial tax rate, which could both change every year, will influence how much the developer pays.

      • The city estimated increasing assessments of the property — peaking at $25 million — and then used the current commercial tax rate to get numbers for what Mirbeau would normally pay versus the abated numbers if the PILOT is approved. The estimates for the assessments are, obviously, estimates. And the tax rate will undoubtedly change, but there’s no way to ballpark that.

        The chart shows a gap between what Mirbeau would pay normally and the abated amounts, but then you have the possibility that the project may not proceed without the PILOT, so the “what they would have paid” is sort of a fantasy number.

        • I was only responding to Brett Miller’s question of “How’s the math look with and without?,” which is a question I had been asking myself throughout this process. Obviously the estimates in the PILOT Analysis table do not represent the total economic reality of the project, but these numbers were generated by the city, and did factor into its decision to submit a letter of support for the Mirbeau PILOT to the IDA. I created the chart simply to provide a comprehensible visualization of the data in the PILOT Analysis table, which conspicuously lacked a sum total for the “full tax bill” column. Our community would likely benefit from being provided more expressive, visual representations of complex data.

  3. Mirbeau should pay its fair share, just as its neighbors do. The company charges as much as $640 per night at its Rhinebeck inn and spa. Who do we expect will be staying in the Beacon site? [via Facebook]

  4. Will they throw a few hundred bucks at the schools and get whatever they want? Can we stop being jerked around, Mr. Mayor? [via Instagram]

  5. City Administrator Chris White’s observation that “the deal is really good from a financial perspective for the city, school district and county” is valid; the plot will bring more economic value and, as a hotel in a supply-strained market, it’s likely a luxury property will attract folks who patronize our businesses on Main Street.

    Is it the community’s “highest and best use”? Likely no. I’ve run a number of highest-and-best-use studies for developers and run hotel operator selection (though overseas) with a prominent real estate multinational and as a consultant. What I know is that the developer created a financial model before their investment. I’d like to know if (1) the city is able to inspect the financial model, and (2) if metrics of the financial model can be made public or inspected by a committee to learn if the incentive proposed is warranted.

    Are we unnecessarily giving up tax revenue considering the already present draw of Main Street and our surrounding attractions? [via Facebook]

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