Rally Today Will Focus On Possible Fiscal Cataclysm Facing Battery Park City Condo Owners
Above: Battery Park City.
Below: Justine Cuccia, a co-founder of Democracy for Battery Park City (shown here leading a 2017 rally for the rights of residents) says, “the BPCA collected $338 million from residents of this community in 2020. Any talk of further increases is simply unconscionable and unacceptable.”
Today (Friday, April 23) at 3pm, a “Rally to Save BPC Homeowners” will be held online and in-person to voice concerns among Battery Park City residents who own condominiums that their homes will soon become catastrophically expensive to own, and that the value of their property will decline to zero in the foreseeable future. Residents who are able to attend the event in-person are invited to gather on the Esplanade Plaza (overlooking North Cove Marina, at the foot of Liberty Street) at 3:00 pm. People who wish to participate online can attend by browsing this link: https://zoom.us/j/97820951073#success
These worries are driven by the exotic nature of property ownership in Battery Park City, where homeowners, landlords, and developers do not own outright the acreage they occupy, but instead lease the space (through the year 2069) from a government agency—the Battery Park City Authority (BPCA)—in exchange for yearly remittances of “ground rent,” as well as so-called “payments in lieu of taxes” (PILOT). The latter category of payments is determined by municipal tax assessors and passed directly to the City by the BPCA.
Discussions between the Authority and the Battery Park City Homeowners Coalition (which represents condominium owners) have been ongoing for several years. These negotiations are complicated by the fact that the BPCA does not have Authority, on its own, to commit to reductions in ground rent or PILOT, because the ultimate recipient of these funds, the City Hall, must also consent.
Concerns about the financial hazards of owning a home in Battery Park City have grown acute in recent years, as more residents have come to realize that, under the current terms of the ground lease and absent any change, their homes will disappear in 48 years, as ownership of all the real estate in Battery Park City reverts to the Authority. For condominium owners, this will mean that their property is effectively confiscated, while renters will face the prospect of eviction.
But condominium owners have an even more pressing concern in the short term: Ground leases for several of these buildings contain “reset” clauses, slated for the near future, under which their payments will jump to six percent of the fair market value of the land on which these buildings sit. For most buildings, this amount is likely to be appraised as running into many tens of millions of dollars—in some cases more than $100 million. Unless modified, this codicil will cause ground rents at some buildings to jump by several million dollars per year, which (in turn) will cause common charges to rise by thousands of dollars per month for each apartment in such buildings. Such a circumstance can be expected to lead to personal insolvency (in many cases, bankruptcy) for thousands of Battery Park City homeowners, who will be unable to pay these soaring common charges, and at the same time, unable to sell apartments for which the resale value will have plunged.
Today’s rally is being co-hosted by Democracy for Battery Park City (D4BPC), a grassroots organization that lobbies for priorities such as affordability, resilience, and an increased voice for residents in Battery Park City governance. Justine Cuccia, a cofounder of the group, says, “the BPCA collected $338 million in ground rent, PILOT, and other fees from residents of this community in 2020. That is already too much. Any talk of further increases is simply unconscionable and unacceptable. We need legislation that not only allows, but requires the BPCA to roll back the amount of money they collect from the condominium owners in this neighborhood, so that residents can remain in the community they helped to build.”
Also co-sponsoring the event is City Council candidate Christopher Marte, who says, “today’s rally is crucial for the fate of affordability in Battery Park City. Homeowners have no certainty about the value of their homes, whether the ground lease will ever be extended, and by what percentage their ground rents will increase. For many residents, this investment is their only asset for retirement. As leaders of this community, we are asking the BPCA to begin good-faith negotiations with these homeowners.”
Another partner in today’s rally is the Battery Alliance—a new grassroots organization that seeks to organize residents to lobby for reform of the financial relationship between the Authority and condominium owners. John Dellaportas, a co-founder of the Battery Alliance (which can be found online at SaveBPC.org, and contacted via email at Info@savebpc.org), adds that, “we are already at a point where common charges for condominiums are exceeding what those apartments would fetch on the rental market. This effectively reduces that value of that ownership interest to zero.”
A fourth backer of today’s gathering is the Downtown Independent Democrats (DID) political club. DID president Richard Corman says the group, “is committed to help our friends and neighbors throughout our district have the ability remain in their homes, to continue to live here, in the communities they helped build. But that ability is under increasing threat for so many, from public housing, through low- and middle-income renters and homeowners alike. We are supporting Battery Park City homeowners as they continue to experience both unaffordable increases in taxes and uncertainty in the future of their homes. Their demand is simple: BPCA should come to the table to negotiate this future in good faith.”
Also leading this afternoon’s rally will be Vittoria Fariello, an elected District Leader representing Battery Park City. She notes that, “housing security is fundamental to the stability of our neighborhood and the financial health of our neighbors. The BPCA can help deliver this by simply sitting down at the table with homeowners to start the conversation in earnest. The time is now.”
At the April 7 meeting of the Battery Park City Committee of Community Board 1 (CB1), longtime resident Bob Schneck said, “I really want to express a deep concern. I have felt for some time that 2069 is Year Zero, because that’s when everything in Battery Park City comes apart. The resets are going up and up, up and up. If you take that to its logical end, nobody can survive those terms, which were unrealistic from the get-go. But no one has really taken an axe to them in a way that fundamentally stops it.”
“So if I were to sell my apartment today,” Mr. Schneck continued, “I would have to admit to possible buyers who were looking at it that, as they get closer and closer to 2069, this could really make some trouble for them. Especially if they wanted to give that apartment to their kids. So how are we going to handle resets in the way that avoids bankruptcy?”
“How can we handle the end of the ground lease in 2069,” Mr. Schneck asked, “in the way that, after I’ve invested 30, 40, or 50 years of paying ground rent and PILOT here, and having met my commitments for all that time, I don’t end up with this massive liability of the loss of my apartment? I never understood that this was possible. But now I see that it is possible.”
BPCA president B.J. Jones replied, “that angle is certainly the worst-case scenario. If this issue went unaddressed until 2069, and the Authority of the future decided to exercise every fair-market-value reset as currently structured in the lease, it would be untenable. And in 2069, if the Authority decided not to do anything about that and take possession of the condos, that would be terrible.”
He added, “I think we at the Authority agree with people who are concerned about the fair-market-value reset formula, that it’s untenable, and we do want to address it. Even though 2069 feels far off, we also recognize that it’s not that far off. And the Authority shouldn’t kick that can down the road longer than it needs to. We believe that there is a path forward to address that and potentially extend the ground lease.”
“The only way this intolerable situation will be resolved is for State Senator Brian Kavanagh and other elected officials to get involved, as they did in the successful 2009-11 negotiations, and convince the BPCA to enter direct good-faith negotiations with the Homeowners Coalition,” says Pat Smith, president of the Battery Pointe condominium board, and a member of the Homeowner’s Coalition.
The BPCA’s most recent effort to address these concerns was a December proposal, which would eliminate ground rent resets based on the fair market value of the land, but instead impose flat-rate increases of three percent per year on the ground rent charged to each condominium owner through 2069. The same plan would assess “flip taxes” on all future sales of condo units, amounting to eight percent for the first transaction after such an agreement is concluded, and one percent on all subsequent sales, also through 2069. This proposal would additionally mandate “sustainability targets” for all condominiums, which would levy an as-yet-unknown cost on each building.
Concerns cited by multiple community leaders about negotiations between the BPCA and condominium owners being direct and held in good faith are references to the fact that, rather than negotiating in-person with condominium representatives, the Authority has hired (at a cost of $500,000) HR&A, a real estate and economic development consulting firm, to bargain on its behalf.
While these indirect talks continue, costs for people who have purchased an apartment in Battery Park City are spiraling. A 2011 deal negotiated by the Coalition (representing a dozen condominiums) capped ground rent increases through 2042 at three percent per year, after initial step-ups (in some cases amounting to millions of dollars) that varied between buildings. (This is the baseline and precedent that the BPCA’s most recent proposal contemplates extending.) But such a deal would mean that a hypothetical condominium owner now paying $24,000 in annual ground rent (which is billed monthly, as a component of common charges) will be paying $32,254 per year a decade from now, and $44,647 per year in 2042. And after 2042, the “protected” condominium owners will face costs that could increase by orders of magnitude, as their leases once again revert to the original terms of fair-market-value resets. Even if such a unit owner were to retain the three-percent cap on ground rent increases after 2042 (as the BPCA proposes), by the time of the lease expiration in 2069, he or she would be paying $99,175 per year, just in ground rent. All of these amounts will be in addition to taxes, mortgage payments, and other costs.
A further illustration of how these forces are converging to squeeze homeowners was provided by Bob Zack, a leader of the Homeowners Coalition, at a 2020 meeting of CB1’s Battery Park City Committee. Mr. Zack announced the result of financial projections he had tabulated, showing that, “if present trends continue, and I am still alive in the 2060s, the common charges on my apartment will come to more than $100,000 per month. And that doesn’t include a mortgage payment. Those numbers assume that I own my unit free and clear.”
Perspective on this dilemma was recently shared by apartment owner Daniel Akkerman—a resident of Hudson View West, where he serves on that condo’s board. Mr. Akkerman, who is a co-founder of the Battery Alliance, says, “I moved here eight years ago, and since then I have become very concerned. My building’s common charges have not increased during that period, but government-related fees—PILOT and ground lease—have increased by 50 percent. We need to go to our elected officials, because they not only represent us as citizens, but the government, which they are members of, is our landlord.”
Mr. Dellaportas adds that, “the obligations contained in the original leases between condominium owners and the BPCA are never going to be paid, under any circumstances. Not because residents will refuse to do so, but because it is financially impossible. The only choice facing the Authority is whether they want to force thousands of homeowners into default, and then evict them through foreclosure. Or whether they want to renegotiate those leases under more realistic terms.”
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