The Glen Cove Board of Education has been asked to consider taking a smaller percentage of the tax revenue generated from the bonds that will be used to help fund the Garvies Point waterfront development project. Representatives from the city and the project’s developer, RXR Realty, presented information to the board at its Aug. 1 meeting, held at Finley Middle School. The City of Glen Cove is requesting the district’s consent to a reallocation of the schedule of tax payments from the bonds for the development, should the project move forward as planned. After the board gathers information, a vote will be taken at a later date.
“The board is not being asked to vote on the project, it is being asked to consider the reallocation of payment,” said Christopher Venator, the attorney from Ingerman Smith L.L.P representing the board. He also clarified that there is no conflict of interest with two board members also being employed by the City of Glen Cove.
Where the board would otherwise get 62 percent of a normal revenue stream, the city is asking it to take 53 percent of the revenue.
“We have to stop finding reasons to say no to every project that comes before us,” said Mayor Reggie Spinello. “We need new jobs, we need new businesses and we need a new revenue stream to continue providing services that our residents expect and deserve. We need the revitalization of Glen Cove to begin.”
He said the project will reverse the financial hardships the city has been under for the past decade and said that $622 million in new revenue will be distributed to the city, school district, county and library as a result of the project. He said $292 million of that will go to the school district over the term of the bond.
The bond is needed to fund the public amenities portion of the project, which is planned to be completed during phase one. About 28 acres of the Superfund site is slated for public use, including parks, playgrounds, an esplanade and a marina. Without the project, none of the money will exist, said Spinello.
Scott Rechler, president of RXR Realty, spoke about the hardships the school district faces each year in trying to create a budget without impacting services.
“The only way to turn around the downward cycle is to create incremental revenue streams,” said Rechler.
Rechler explained that since the property is a Superfund site, it cannot be built on in its current state. It doesn’t have the amenities, the road or the infrastructure in place.
“The cost to put all that infrastructure in place, which is typically a public responsibility, would have to be borne by the City of Glen Cove,” said Rechler. “Instead of that, we came up with an innovative way to finance this, which is to float bonds based on the future real estate tax revenue from the development we will be building over the next five or six years. The bonds will create more than $95 million into the infrastructure and it creates the basis of our public-private partnership.”
In addition to the bond money, Rechler said RXR is contributing $90 million to the infrastructure costs, as well as covering the cost of developing all of the private component.
“The underwriters are betting on our success of developing on the waterfront and creating that tax revenue by selling the units we will be building,” said Rechler. “I really do believe that this is the project that can transform and help revitalize Glen Cove,” said Rechler. “In your stewardship of the schools, I think you would be comforted by the amount of funds that would flow in that would incrementally enhance the experience that you’re providing the students of Glen Cove.”
Attorney Michael Zarin gave some background from the financial aspect of the project and told the board “time is of the essence.”
“We are truly at the finish line,” Zarin said, noting that federal grant money for the roads needed to be spent or they would lose the money and county loans are also due. He also said the bond is high yield and has a small window before buyers might not be interested.
“We did negotiate something that we think will be a tremendous gain for the city,” said Zarin. “All of the public amenities will be maintained in perpetuity by the developer. We figured that, they’re incentivized to do this; if the public amenities are maintained at a high quality, it supports the value of their buildings.”
Zarin continued, “This property currently generates zero; the schools will receive $292 million during the term of the bond. The only way the project will succeed is if the bondholders buy the bonds. If the project only builds two or three buildings, then there will be less revenue coming in.”
He said in that case, the bondholders or banks will then most likely go out and find another developer because that is the only way they will get paid. The payments to the school would begin in 2017.
“We think the number here is a number that will bring a very real net benefit to the stabilization of the school tax base,” said Zarin. “There is no project if we cannot fund this. The city does not want to build just a residential project.”
Trustee Maria Venuto and others questioned the discrepancy in the number of projected school-aged children who might live in the units on the development. The latest report projects 56 students, which RXR said is based on a localized study, reflecting the numbers of families currently living in similar housing units. The initial report projected more than 200.
Zarin and Rechler said that empty nesters and young professionals are the target market for the development, so a large number of school-aged children is unlikely.
Resident Dave Berg raised concern about the tendency for people without school-aged children to vote down school budgets.
Resident Marsha Silverman, who said she works in finance, said that if the number of students living at the development is higher, the district won’t get the revenue. She accused the city of “bogus” financing and said that every change in the project has been in the best interest of the developer.
“You can take the money or you can leave it,” said Glenn Howard. “But if you leave it, I’ll be asking why.”